Figure 1: Proportion of deals with a gender focus by blending archetype (Source: Convergence database)
Our latest data brief considers how blended finance approaches have been deployed to achieve gender equality. It analyzes 100 blended finance deals from Convergence’s database that have targeted – in full or in part – gender objectives, aligned with SDG 5 (Gender Equality).
These deals (“gender-related deals”) represent 25% of the total number of blended finance deals we’ve captured in our database, but only 8% of the aggregate value of all blended finance deals to date - accounting for $11.4 billion in total capital invested
Design funding supports early-stage blended finance vehicles to become catalytic by providing grants for feasibility testing or establishing proof-of-concept, and has been an important instrument for blended finance deals that address gender equality. Gender-related deals have been more likely relative to all blended finance deals to use design-stage funding, whether gender is a principal focus (7%) or a partial focus (24%).
While design funding has been deployed to blended finance deals across sectors and SDGs as a tool to crowd-in private sector capital, it may be specifically useful for integrating a gender-lens in blended finance deals.
Here are four ways design funding can be instrumental in supporting gender-related blended finance deals:
1. Prioritizing gender from the outset with properly aligned incentives
Design funding can be used to integrate a gender lens into blended finance deals from the outset, increasing the potential for impact and aligning incentives for a continued gender focus. For example, the Utkrisht Impact Bond (UIB), which aims to reduce maternal and newborn deaths by improving the quality of care in private healthcare facilities in Rajasthan, India, leveraged concessional funding from Convergence’s Design Funding program to structure the bond. This funding ensured there was a central focus on improving the quality of healthcare for women and girls by linking the successful achievement of gender outcomes to financial returns provided to investors and services providers.
2. Building a good investment pipeline
Design funding has also been used to build a strong pipeline of investment-ready investees for gender-related deals. For example, the Women’s Livelihood Bond (WLB), which lends to enterprises focused on empowering women in Southeast Asia, leveraged design-stage grants provided by the Rockefeller Foundation’s Zero Gap Portfolio to identify and conduct due diligence on a strong pipeline of underlying women-led and women-focused social enterprises.
Building pipeline can be particularly resource-intensive for gender-related deals due to their relatively smaller deal (and often ticket) size – the average size of a blended finance deal is $320 million, while the average gender-related blended finance deal is $114 million. Design funding can be an important source of capital for these transactions, where the cost and time to source and perform due diligence are high relative to the ticket size. Smaller deal size may also indicate new deal sponsors and companies, who could benefit from design-stage capital to improve their investment readiness.
3. Developing a comprehensive gender methodology
While developing a comprehensive gender methodology is key to assessing gender gaps and achieving impact, it can also be cost- and time-intensive. Early catalytic capital, such as design-stage funding, can play a critical role by covering the costs of developing meaningful gender targets throughout the investment process, from pre-investment activities to post-deal monitoring. For example, Women’s World Banking leveraged Convergence’s Design Funding to develop its Gender Assessment Methodology, which assesses gender gaps among the staff and client base of the companies it invests in.
4. Supporting blended finance transactions in regions with a low gender focus
Given the benefits outlined above, design funding may also support blended finance transactions in regions where alignment with SDG 5 has been low, namely Sub-Saharan Africa. For example, only 13% of deals targeting Sub-Saharan Africa have included either a partial or principal focus on gender, compared to 30% of deals in South Asia and 26% of deals in East Asia and the Pacific. Increasing design funding for transactions in Sub-Saharan Africa may lead to an increase in gender-related blended finance deals, which could play a role in bolstering gender equality in the region.
More design funding is needed for blended finance for gender equality
Blended finance has demonstrated the ability to mobilize additional financing for gender equality, but to date blended finance deals have not mainstreamed gender in a comprehensive or standardized way.
Design funding can play an important role by integrating gender throughout transaction design by aligning incentives, sourcing better investment opportunities, and developing meaningful evaluation methodologies.