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06 Mar 20

Blended Finance and Gender-Lens Investing

Blended Finance and Gender-Lens Investing

This year, the theme for International Women’s Day (March 8) is #EachforEqual. It will kick off a year-long campaign to raise awareness on how each individual can mobilize collective action to advance gender equality. Ten years away from our goal to realize the UN’s Sustainable Development Goals (SDGs), 2020 symbolizes a seminal time in human history as we take stock of women’s rights since the adoption of the Beijing Platform for Action 25 years ago and build urgency for innovative policies and practices to bridge the gender divide. This year, the team at Convergence took time to reflect on the state of gender-lens investing in blended finance, identifying recent initiatives in the field, and areas for further action. What steps has blended finance taken to ensure gender equality goes mainstream in this defining decade of impact?

Blended Finance and Gender Equality to date

This year at Davos, a coalition of public and private sector partners launched SDG500, a first-of- its-kind $500 million investment platform to promote the SDGs, offering investors access to six different funds, each managed by Bamboo Capital Partners (BCP). Each fund follows a blended finance approach in partnership with a specific UN agency, development finance institution or international NGO. Capitalised by catalytic layers of first-loss capital, these funds will use debt and equity to back businesses at the seed, series A, and series B stages, focusing on companies operating within agriculture, energy, finance, and healthcare across developing markets. While the platform has a general gender-lens focus, some of its funds will prioritise enterprises empowering women.

For example, BCP will partner with CARE Enterprises (CEI), a for-profit subsidiary of CARE USA, and the International Trade Centre to launch CARE SheTrades, a gender-lens fund that will invest debt and equity into businesses in Asia that promote women’s entrepreneurship, gender- responsive products, and gender equality in the workplace and in supply chains. This follows a strategic partnership announced in 2018 between CEI and BCP, in which they committed to invest in early-stage companies in South and Southeast Asia that advance workplace equality practices, promote women’s access to finance, and expand access to goods and services that help incorporate women within the formal economy.

Next, the Government of Canada launched a ground-breaking endeavour in 2018, inviting investors and members of the development community to create a partnership that would provide flexible funding and technical assistance to women’s organizations and initiatives that promote gender equality in developing countries, committing up to C$300 million to this initiative. Dubbed the Equality Fund, this initiative has secured an additional $100 million in commitments from outside funders, and now looks to secure and deploy $1 billion over the next 15 years. Calvert Impact Capital is leading the private debt strategy for the Equality Fund, helping to develop a pipeline of deals across different geographies and sectors by applying a gender lens to C$75 million of private loans, deployed mainly through funds and intermediaries, with the goal of mainstreaming gender-lens investing.

Investors have also begun to develop toolkits for the assessment of gender-related factors on investment. For example, Pacific RISE and the Criterion Institute have developed the world’s first investment due-diligence tool for gender-based violence. Focusing on the Pacific region, the tool assesses how gender-based violence impacts four due-diligence categories: political, regulatory, operational, and reputational risk. Similarly, in 2020, the Sasakawa Peace Foundation and Frontier Incubators Program launched the Gender Lens Incubation and Acceleration (GLIA) Toolkit, which looks to help incubators and accelerators in Southeast Asia to create their own unique gender strategies, providing guidelines, case studies, and strategic frameworks with the aim of building a gender-smart entrepreneurial regional ecosystem.

There is more progress to note. The Ilu Women’s Empowerment Fund, for example, backs businesses in Latin America and the Caribbean that promote women in leadership and governance, products and services that meet the needs of women and girls, gender-sensitive value chains, and workplace equity. Having closed its first round of fundraising from catalytic investors, it is currently planning a second round to raise another $10 million, targeting a fund size of $35 million overall. Elsewhere, Athena Global Alliance launched BIDUK in 2019, a lending platform that seeks to show the suitability of flexible, commercially priced debt products for underserved, women-led SMEs in Indonesia. Finally, Affirmative Finance Action for Women in Africa (AFAWA), a joint initiative launched by the African Development Bank and the African Guarantee Fund in 2019, looks to encourage lending to women in Africa by providing partial guarantees to financial institutions, thereby helping to tackle the $42 billion financing gap between male and female entrepreneurs on the continent.

Moving forward: Blended Finance and Gender Equality

Blended finance has demonstrated the ability to mobilize additional financing for gender-focused projects and companies that advantage women and narrow the gender gap, with a quarter of all blended transactions demonstrating alignment with SDG 5 (Gender Equality) to date. However, there is room for considerably more deliberate action to mainstream gender in blended finance going forward. We have previously identified several ways in which gender can be mainstreamed to achieve Blended Finance 2.0, including:

• Focusing on the legal, political and societal barriers that women face

• Mandating gender-disaggregated reporting to monitor whether women are benefitting,and;

• Instituting comprehensive feedback systems within projects and programs

Design funding can also play an important role in achieving gender equality, by:

  1. Integrating gender throughout the process of transaction design, and properly aligning incentives
  2. Sourcing better investment opportunities through building out more inclusive deal pipelines and assessing gender-related risks in prospective investments, and;
  3. Developing meaningful evaluation methodologies

There is positive momentum for achieving gender equality in the decade ahead. The year 2020 represents an unmissable opportunity to mobilize global action for gender equality and the human rights of all women and girls. Mainstreaming gender in blended finance offers an important avenue to realizing SDG 5 – achieving gender equality and empowering all women and girls.

About the Author
Andrew Apampa, CFA

As a Manager, Andrew is responsible for developing Convergence’s data and research activities, including building out Convergence’s database of historical blended finance transactions and developing blended finance trends analysis and benchmarks. Prior to joining Convergence, Andrew worked at the African Private Equity & Venture Capital Association (AVCA) as a Research Associate. While there, Andrew inaugurated the Special Report series, publishing in-depth studies on thematic issues within African private equity, such as political and currency risk in African PE, and the rise of the private credit industry in Africa. Prior to joining AVCA, Andrew worked at HSBC as an Emerging Markets Equity Strategist, where he published reports focused on investing in frontier equity markets. During his time at HSBC, he also worked on the European Equity Strategy team and the Global Research Marketing team. Prior to his time at HSBC, Andrew was at the University of Cambridge, where he completed his master’s thesis on protest and mobilization in Sub-Saharan Africa. He is a CFA charterholder.