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Debunking myths


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Investing with a gender lens isn’t just socially right, it’s financially savvy


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Investing with a gender lens isn’t just socially right, it’s financially savvy


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By Christina Juhasz and Stephen O'Driscoll

Over the past decade, gender-lens investing has justifiably garnered interest among investors seeking to promote gender equality and women’s empowerment. But such strategies are about more than advancing the social good. Investing in gender-diverse organisations, women-owned businesses, and companies catering to women’s preferences and needs has been shown to yield considerable financial returns.

This dual outcome represents a rich opportunity for all types of investors – not just those focusing on social impact. But myths and misconceptions continue to limit the growth of gender lens investing, despite evidence from the past decade that clearly shows investing in women as clients and workforce assets is good for businesses and the economy.

Five investing myths

Among the five most common myths, the first one is that women’s inclusion and empowerment is merely a social cause, rather than an economic issue.

  • McKinsey & Company estimated in 2015 that if women were to “play an identical role in labor markets to that of men,” $12 trillion could be added to annual global gross domestic product (GDP) by 2025.

  • BNY Mellon and the United Nations Foundation projected in 2018 that closing the global gap in women’s access to financial products and services could unlock $330 billion in annual revenues.
  • Women’s World Banking, a global network of microfinance institutions and banks, found in 2020 that portfolio companies with the most women borrowers experienced 6% higher growth in earnings and assets and 3% higher returns on equity, on average, relative to those with the fewest female borrowers.

The second myth is that a gender-lens strategy will not return market rates to private investors. Again, a growing body of evidence points to a direct correlation between greater gender diversity and financial outperformance. Even though the average female entrepreneur receives investment capital of $935,000, compared to $2.1 million for the average man, female-founded companies deliver twice as much revenue per dollar invested as male-founded firms. Moreover, companies with strong female representation on their boards are 28% more likely to outperform their peers, and gender diversity in executive teams increases the chance of outperformance by 25%.

The third myth is that there are not enough suitable projects to make gender-lens investing a compelling investment strategy. This reflects a lack of visibility, rather than a lack of supply. Fortunately, industry initiatives are emerging to shine a light on gender-focused investment opportunities worldwide. In 2018, for example, G7 development-finance institutions started the 2X Challenge to mobilize $3 billion to help empower women in developing countries.

Moreover, according to Project Sage 4.0, the number of funds allocating capital with a gender lens rose from 58 in 2017 to 206 in 2021. Conservative estimates indicate that $6 billion in total capital was raised for gender-lens funds as of mid-2021. And in the first half of 2021, female-founded companies in the United States raised more venture capital than at any point in the last decade. Clearly, there is no shortage of suitable projects – though it may require dedicated efforts to find them.

The fourth myth is that focusing on gender is not operationally important to a firm’s success.  Female customers, however, are an enormous potential market – one that could account for approximately $15 trillion of global consumer spending by 2028. A 2018 Credit Suisse report estimates that women account for approximately 40% of global wealth, representing a largely untapped opportunity to generate financial and social returns.

A strong internal commitment to female employees and leaders also can create value for women customers. According to the think tank Coqual, teams are up to 158% more likely to understand customers when their members represent the target market. The same study also found that companies with a diverse workforce and leadership are 45% more likely to have expanded their market share and 70% more likely to have captured a new market in the past year.

Finally, it is a myth that gender-lens investing is too narrow to be scalable. By definition, gender-lens investing lends itself to a variety of funding strategies, because gender considerations can be integrated into all aspects of an investment process and layered onto existing strategies. That is why an increasing number of impact-focused investors are helping to build the business case for gender-lens investing.

Power of gender strategies

The success of the European Investment Bank’s SheInvest initiative further illustrates the transformative potential of gender strategies. As a 2 Challenge member (and as the first multilateral development bank to adopt the 2X gender-investment criteria), the European Investment Bank mobilised €1 billion ($1.1 billion) in the program’s first year, providing African women with better access to finance, as well as tailored services and products. The 2X Challenge is working to raise $15 billion for investments in women-owned and led businesses across the world.

Despite gender-lens investing’s increasing appeal and popularity, and despite the growing evidence in support of its social and economic benefits, the field remains small relative to other impact strategies. But major opportunities exist that could expand gender-lens investing’s financial and social potential. The creation of the 2XCollaborative, a global industry group that convenes a broad spectrum of investors to promote gender-lens investing, shows that momentum is building.

By debunking myths and misconceptions, we can encourage even more social-impact investors – and conventional investors – to integrate gender considerations into their allocations of funding.

Christina Juhasz is chief investment officer for Women’s World Banking Asset Management.
Stephen O’Driscoll is head of Environment, Climate, and Social Policy at the European Investment Bank.