If you’re concerned about gender equality, you may wonder how you can incorporate this theme into your impact investing strategy.
This approach is often referred to as gender lens investing.
What is Gender Lens Investing?
It can can take many different forms.
Some gender lens impact investments focus on women-owned or women-led companies or in businesses that promote workplace equity.
Others invest in companies that provide products or services that improve women’s lives.
Another approach is to loan funds to non-profits involved with functions such as education and microfinance that promote gender equality and empowerment.
One of the challenges of gender impact investing is how diverse it is. Different funds and managers have different philosophies about how to seek gender impact, and you’ll want to read their materials carefully to make sure their ideas align with yours.
Asset Classes for Gender Lens Investing
Like other forms of social impact investing, gender lens investing can also focus on different asset classes.
For instance, a micro-enterprise fund structured to provide small amounts of capital to women who want to start businesses might be structured as either a private debt or private equity vehicle.
Private Debt. The MicroVest Short Duration Fund, for example, provides financing to low-income financial institutions in emerging markets. These institutions, in turn, lend money to individuals and businesses in developing markets, where small and medium-sized businesses drive nearly 40% of GDP and 70% of new job creation.
Since its founding, MicroVest has disbursed over $1 billion in loans, helping build the infrastructure for economic growth in underserved and unserved communities.
A large percentage of these loans go directly to women or to women-owned and led businesses. The fund generates regular interest payments and is relatively uncorrelated to movements in the larger stock and bond markets. This may make it attractive to investors seeking a combination of income, diversification, and impact, but it is only available to large investors.
Some long-standing non-profits, such as Friendship Bridge and Calvert Impact Capital borrow money directly from investors to help finance their micro-finance, women’s empowerment, and other programs. These loans are typically available in much smaller amounts. The loans can be for varying periods of time and may offer either market-rate or below-market-rate yields.
Private Equity. For investors seeking higher returns – and who have longer time horizons – social impact gender lens investments might take the form of venture capital. These types of funds invest directly in women-owned start-ups which offer strong long-term growth potential.
For instance, the Plum Alley Venture Fund invests in companies led by female founders in science, technology, engineering, and mathematics.
Women-owned companies attracted just 2.3% of all venture capital funding in 2020, down from an already anemic 2.8% level in 2019, according to Crunchbase. Plum Alley’s fund aims to narrow this gender gap, while funding innovation in the environment, health, next-generation enterprise, and inclusive growth sectors.
Since 2015, Plum Alley has invested $35 million in 24 women-led businesses, including Einride, an electric and autonomous trucking company, Openwater, a developer of low-cost laser-based internal body imaging technology, and Mammoth Biosciences, the first CRISPR-based platform for disease detection in healthcare as well as across agriculture, manufacturing, forensics, and more.
Public Equity. And finally, for investors who want the convenience, diversification, and liquidity of a mutual fund, there are a number of options focused on gender equality.
Pax Ellevate Global Women’s Leadership Fund is one of the oldest and largest of these funds.
Beginning with a pool of the 1,600 companies in the MSCI World Index, it invests in 400 global companies that outperform according to a variety of “women’s leadership” metrics, including representation of women on the board of directors and among top executives.
These are just a few examples of the impact investing initiatives now available in the market that promote gender equality. Your financial advisor can help you choose the ones that align not just with your values, but with your investment objectives and risk tolerance.
For more information, or to start incorporating gender lens impact investing into your portfolio, contact Colorado Capital Management.