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08 Mar 21

Gender Equality is Coming to the Fore in Blended Finance

Gender Equality is Coming to the Fore in Blended Finance

Today, we celebrate International Women’s Day. March 8th is a day on which we take stock of the achievements to advance gender equality, acknowledge what remains unrealized, and call to action leaders across industry for improved governance, dialogue, and principles to accelerate opportunities that empower women and girls in society and the market.

As a field builder, Convergence developed its own Gender Strategy in 2020 to weave gender equality into the fabric of how the firm works and supports capital providers and deal sponsors. We took this step with support from the Government of Australia, inspired by a workshop delivered by Criterion Institute. The groundwork we did internally enabled the team to start having deeper conversations with participants in the field around how they apply a gender lens to their investment mandate and deal structuring activities. By proactively bringing up gender in conversations with all our stakeholders, we identified several trends and insights that we share with you today.

1. Donors are vanguards of gender mainstreaming in blended finance

Concessional capital providers have made considerable progress in mainstreaming gender throughout their grant giving and investment processes. These funders are increasingly encouraging deal sponsors to integrate gender equality as a core consideration in the design process of new financial vehicles, rather than treating it as another checkbox on due diligence requirements.

Funders such as the Government of Australia (DFAT), USAID, and the Bill & Melinda Gates Foundation, incentivize intermediaries to apply a gender lens by offering technical assistance grants to draft gender assessments, gender frameworks and gender action plans, and for gender awareness trainings. Reinier Musters, founder and CEO of Impact Credit Solutions, a Singapore-based fintech enabling small business lending in Southeast Asia, and Convergence member, shared with us, “The United States International Development Finance Corporation and DFAT supported us in designing a gender assessment framework for our Indonesian Resilience Fund. As part of this process, we completed a training program led by the Financial Alliance for Women, where we discovered the huge and untapped opportunity to launch a women-focused lending program in Indonesia. We hope our pilot project will help us further understand the need and opportunity in this critical segment.”

Beyond incentivizing deal sponsors to adopt a gender lens, catalytic capital providers and investors are collaborating more strategically to improve how gender impacts of investments are measured. They have published several new toolkits that offer guidance on current benchmarks and indicators. In discussions with deal sponsors to date, the two most referenced resources on measuring gender are “How to measure the gender impact of investments,” a joint publication by the CDC Group, the Global Impact Investing Network (GIIN) and the 2X Challenge, and the Gender Assessment Methodology, a tool developed by Women’s World Banking.

2. Being gender smart is good for business

We know gender smart investment yields both social and financial returns. Over the past year, many Convergence members, among them Global Affairs Canada, SME Nigeria, AiiM Partners, Calvert Impact Capital, and Developing World Markets, have taken the stance that adopting a gender lens yields greater social impact, improves decision-making processes, attracts more talent to organizations and businesses, and can be a strategy for financial outperformance.

Convergence’s design funding grant recipient, Women’s World Banking Asset Management (WAM), is a good example of the commercial benefits of gender lens investing. In 2017, WAM launched the world’s first private equity fund (WWB), raising over USD 50 million from investors to deploy capital exclusively to women-focused financial providers. After demonstrating a solid track record, WAM launched a follow-on fund called Women’s World Banking Capital Partners II (WWBCP II), that uses blended finance to reach investees in lower-income countries with more diverse products and services. WWBCP II achieved a first close of USD 75 million in 2020. With Convergence’s support, the fund developed a public gender assessment methodology to help investees apply a gender lens to their operations.

Given that adopting a gender lens makes financial sense, we expect more deal sponsors and investors – whether public or private – to strengthen their commitments to gender equality.

3. Design stage funding proves crucial to advance gender smart solutions

Design funding helps early stage blended finance vehicles reach the market by providing grants for feasibility testing or establishing proof of concept. Convergence’s experience through its Design Funding Program further substantiates that it is easier to adopt a gender smart approach in the early development stages than to apply a gender lens or include gender specific process metrics in the later stages of designing a blended finance intervention. In recent years, Convergence has also witnessed greater interest from funders in gender, and an increase in the number of design funding proposals targeting gender equality outcomes. With the field still emerging, donors and investors should continue to prioritize a gender lens through early stage grant support to aid market acceleration and increase the size and scale of projects that are focused on gender.

For more information about our experience providing design stage grants to support gender smart blended finance solutions, please email us at [email protected].

4. Gender-based violence is still uncharted territory in blended finance

While increasing women’s financial independence and their participation in decision-making processes are becoming common goals among blended finance vehicles, few explicitly focus on combatting gender-based violence (GBV). With that said, a growing number of actors are making the case for investing in the reduction of GBV. Criterion Institute, in partnership with superannuation fund Christian Super, recently published a new framework for screening portfolios for risks posed by GBV. The publication states the underexplored links between culture change and market risk that could markedly change how investors of all types assess market risk.

Our bottom line: Gender equality is coming to the fore in blended finance

In blended finance, gender equality has evolved from a ‘nice-to-have’ social impact target to a goal in and of itself. For a growing number of organizations, applying a gender lens is no longer the exclusive responsibility of the impact team instead gender equality is a shared consideration across teams responsible for financial structuring, business development, and fundraising. RENEW, an impact investment and advisory firm operating out of Addis Ababa, Ethiopia, is an example of one such organization. Ask any member of RENEW’s team about how RENEW promotes gender equality and gender-smart policies, and you will get an extensive answer, propped up with readily available gender-disaggregated data. Can you say the same about your colleagues?

Institutional investors are also thinking critically about advancing gender equality. Société Générale, Deutsche Bank, and Bank of America have all invested in multiple blended finance transactions with a focus on gender. Others have taken steps forward on another important dimension of gender equality; diversity in the workplace. For example, over 300 financial services firms have signed the Women in Finance Charter. Banks, pension funds, and insurance companies should assess how integrating a gender analysis in their financial decision-making could improve their financial performance.

We look forward to continuing our efforts to remind investors and those seeking capital to use a gender lens to spot risks and opportunities that otherwise may go unobserved, and to the many more conversations with our network around how to advance gender equality through blended finance.

For more insights on blended finance and gender, read our blog series.

About the Author
Joan M. Larrea

Joan M. Larrea is an expert in catalyzing investment in places that need it most and brings with her close to 30 years of experience in emerging markets investing. Joan has led Convergence since its inception, establishing it as the leading independent authority on blended finance. She serves on the Global Environment Facility Advisory Group for Non-Grant Instruments, the Advisory Council for FinDev Canada, and the Advisory Council for the U.S. Millennium Challenge Corporation. Prior to joining Convergence, she led the U.S. Overseas Private Investment Corporation's (OPIC) efforts to partner with philanthropic and private investors to increase capital flows to OPIC's target markets. While there, she also directed a pilot program to finance smaller, high impact, and innovative funds, many of which drew on blended finance structures. Previously, Joan served as a managing director on the emerging markets team at Global Environment Fund, an asset manager dedicated to the energy, environmental, and natural resource sectors. She began her career as an investment officer at International Finance Corporation, the private sector arm of the World Bank Group, where she concluded pioneering transactions in a variety of infrastructure and manufacturing sectors across Asia.