By Sarah Kaplan & Jackie VanderBrug
Across a wide
spectrum of society there is growing
recognition of the central role that
women play in the world economy. Books
such as President Jimmy Carter’s Call to
Action and Sheryl Sandberg’s Lean In
advocate increased women’s empowerment.
Former US Secretary of State Hillary
Clinton made a strong case for the economic
inclusion of women as a vital source
of economic growth when she spoke at the
first Asia-Pacific Economic Cooperation
High-Level Policy Dialogue on Women
and the Economy.1 And studies by corporations
such as Goldman Sachs highlight the
potential increases in GDP if women had
equal access to employment and credit.2
From these ideas, as well as from work
in women’s philanthropy and advocacy for
women’s corporate leadership, a movement
focusing on the nexus of gender and investment
is emerging. This movement, which
encourages the use of capital to deliver
financial returns and improve the lives of
women and girls and their communities, is
known as “investing with a gender lens.”
What do we mean by “lens”? A lens
allows us to see the world differently. Looking through a “gender lens” helps
investors gain new perspectives, highlight
poorly understood inequalities, uncover
new opportunities, identify blockages in
the system, and find value where none
was found before.
Why “gender” and not “women”? Although
it is focused on the impact of investing
on women and girls, the movement uses
the term “gender” to emphasize that making
change means looking at the socially
constructed roles, relationships, and expectations
of women and men and the ways
that these are reinforced by educational, political,
economic, and cultural systems.3 Using
“gender” brings both men and women
into the conversation. The movement’s objective
is to look at the entire financial and
social system, not just at women.
To understand how a gender lens can
change the way investment decisions are
made, consider the example of Root Capital,
a nonprofit agricultural lender focused
on increasing rural prosperity in Latin
America and Africa. Root Capital invests
in businesses that are too big for microfinance
but are unable to get credit from
banks—what the organization calls the “missing middle” of finance. They not only
lend capital but also offer financial training
to help farmers and agricultural businesses
access markets.
Root Capital did not start with a gender
focus, but in the course of its work
the organization learned about the challenges
women face in accessing resources
like credit, land, training, and agricultural
inputs. A gender lens became a starting
point for exploring new opportunities for
action. Root Capital launched a Women in
Agriculture Initiative based on the belief
that gender-inclusive businesses—rated
by a potential client’s percentage of women
leaders, women managers, women employees,
and women suppliers, as well as inclusive
programs and culture—can create
greater financial and social impact.
Through a gender analysis, Root Capital
found that effective investment in agriculture
requires attention to the whole
social system, from enabling land ownership
for women farmers to empowering
middle managers (often women) who are
the hidden influencers in small agricultural
enterprises, to training entrepreneurs in
financial management. A gender lens led Root Capital to identify businesses in traditionally male-dominated
industries that have a high impact on women, such as a Nicaraguan
collective of women coffee farmers that launched the “Las Hermanas”
brand of coffee. It also led Root Capital to focus more on female-dominated
but sometimes neglected industries such as shea butter. As
a result, a gender lens has expanded, not limited, the range of products
and services the lender offers and the types of clients it serves.
Digging Deeper into Gender
Although there is increasing discussion of the role of women in organizations
and in the larger economy, the tenor of the conversation has
been more about how women can learn to operate within the existing
system than about how to overcome structural barriers. Sandberg’s
Lean In, for example, has been criticized for not taking into account
what happens when organizations push back. The breast cancer awareness
campaigns that cobrand “pink” products have been criticized
for benefiting marketers more than women with cancer. We are not
saying that women should not lean in or that people should not buy
pink products. We are now at the point, however, where we need to
go beyond these individualistic concepts. We must engage trillions
of dollars of investment capital to capture the gains that come from
paying attention to the systemic problem of devaluing women.
Investing with a gender lens is about creating a new economic logic
that bridges the market logic of financial returns with the feminist
logic of women’s equality. Traditional investors often fear that a focus
on women may make them too pink, and traditional advocates for
women’s rights often fear that engaging with investors may mean they
are selling out. Gender lens investing builds a bridge between these
two worlds. It is not about investing in women as if they were commodities,
nor abandoning feminism (with its roots in anti-capitalism).
Rather, the movement promotes gender analysis as a way of reshaping
the system to change what we value as we invest. Paying attention to
gender is not just about having a social conscience, nor is it about adding
to our list of environmental, social, and governance investment
screens. Instead, gender capitalism is about applying a gender lens to
highlight the ways that gender is material to financial outcomes and
financial outcomes are material to gender.
There is, however, no universal approach to investing with a gender
lens. There are important distinctions between resource rich and
resource poor settings, between different regions and countries, between
different economies, and between different investment products.
The ideas and examples in this article are meant as starting
points for a larger conversation about how seeing through a gender
lens can improve the financial and social returns of investments.
We focus on three ways that a gender lens can serve this function.
The first is gaining access to capital—getting women involved as investors
and investees, from Silicon Valley to Bangladesh. The second is
promoting workplace equity—using capital to value gender diversity in
leadership and promote equal rights throughout company value chains,
from top management to the shop floor. The third is creating products
and services that affect the lives of women and girls, from clean cookstoves
in Africa to pharmaceuticals that have been tested on women
and adjusted for them. These three approaches are neither exhaustive
nor exclusive. Instead, they are useful analytically in identifying opportunities
and uncovering barriers to progress. As the Root Capital
example shows, investors may use multiple lenses simultaneously.
Gaining Access to Capital
When we look through a gender lens, disparities between men and
women’s ability to access capital become quickly apparent. Across
all industries—from retailers, to filmmakers, to high-tech entrepreneurs—women have historically had trouble gaining access to
investment capital, despite evidence that women-led companies may
deliver higher and more consistent returns.4 In addition, there are
few women in the business of investing money (in banks, venture
capital firms, or hedge funds, for example), which compounds the
problem, especially given the tendency for people to invest in and
mentor people like themselves.
Women launching and expanding ventures around the world
have an estimated collective credit gap of $320 billion (the difference
between the capital they are seeking and the credit to which
they have access),5 which creates a major opportunity for investors.
Stereotyping, implicit bias, and constrained networks may leave
strong women-led firms without adequate investors. For example,
about 6 percent of US venture capital funding goes to women-led
businesses. This is not just a supply problem, but also a function of
an investment process that subtly discounts women. An important
part of the process entrepreneurs must go through to obtain an investment
from a venture capitalist is to “pitch” their idea in person.
But women have been socialized to be less comfortable pitching, and
we all have been socialized to perceive women less favorably in those
contexts. Experimental studies show that investors are 60 percent
more likely to invest in pitches delivered by men than by women,
even when the content of the pitches is identical.6
Innovative investors are breaking these patterns. Consider Village
Capital, an organization developing and funding innovative social
enterprises. Finding that the traditional due diligence process was
expensive and not terribly effective, Village Capital created a peer
mentoring and peer selection approach that would, in their words,
“democratize the entrepreneurial process.” They select cohorts of
about 15 entrepreneurs in specific geographic areas and industries
for a 12-week program based on peer mentoring. Village Capital
commits to providing funding to the top two enterprises, which
are selected on the basis of peer evaluations. The program was not
specifically designed to enhance female entrepreneurs’ success, but
Village Capital found that although only 15 percent of the participating
companies had female co-founders, these companies represented
40 percent of the investment winners. Female co-founders
have been 2.7 times more likely to get funding through this model,
and the differential has increased as Village Capital has improved
the structure and transparency of the programs.
“There are systematic, implicit biases that investors have in the
traditional venture world that many don’t even recognize and that
disproportionately favor men. When you are more structured, methodical,
and transparent and your assumptions are things you have
to back up, women-run ventures tend to be appropriately valued,”
says Ross Baird, executive director of Village Capital.
The opportunities to rethink investment processes are not limited
to incubators and accelerators. The 2013 launch by the International
Finance Corporation (IFC) of a “Women’s Bond” has created
new legitimacy for focusing on women’s access to capital. About $175
million has already been committed by the IFC to banks such as Itaù,
the largest bank in Brazil, for investments in women-owned businesses.
With women starting ventures at unprecedented rates, we are
likely to see more innovations like this.7 Women-focused crowdfunding
platforms such as Portfolia, gender-aware venture capital firms
such as Illuminate Ventures, regionally focused investment funds
like Texas Women Ventures, and nonprofit intermediaries such as
Agora all provide investors with access to compelling opportunities.
Despite the flurry of activity, vast scope remains for continued
progress. A gender lens on access to capital challenges embedded
beliefs about how the system for capital allocation works. Sharon
Vosmek, CEO of Astia, an organization helping women participate
fully in high-growth entrepreneurship, points out that the venture
capital and high-tech world is so captured by the “myth of meritocracy”
that it can barely start a conversation on gender and cannot
see that its understanding of merit is gendered.8
Grasping how definitions of “merit” may embed criteria biased
against women can open investors’ eyes to new opportunities. For
instance, Illuminate Ventures deliberately recruits women advisors
and investors, putting it into a different deal flow from other venture
capital firms. The result: About half the companies in Illuminate’s
portfolio have female co-founders, a share that is dramatically above
the industry average of 6 percent.9 New opportunities also present
themselves when investors expand the definition of what type of business
constitutes a good investment. For example, women disproportionately
start businesses that aim for steady profit rather than rapid
growth or a quick and rich exit. Broadening one’s definition of an
entrepreneur to include the woman filmmaker in Hollywood and the
woman coffee farmer in Nicaragua (along with leaders of Silicon Valley
high tech startups), also expands the set of investment opportunities.
Promoting Workplace Equity
A gender lens on workplace equity allows the investor to look across
the entire corporate value chain and ask, “How are women’s leadership
and equal rights valued?” The answers to that question can
lead investors to new areas of opportunity. For example, research
shows that the financial returns of companies with three or more
women on their board are substantially higher than for companies
that have no women on their board.10 But the power of a gender lens
to illuminate risks and opportunities hardly stops at the boardroom
door. Evidence shows that inclusive environments are associated
with better organizational outcomes and that gender-diverse teams
at all levels make better decisions.11
Investors are beginning to see financial opportunities in taking
gender into consideration. The Women and Girls Equality Strategy
(WGES) is an investment approach developed by U.S. Trust in collaboration
with the Women’s Foundation of California. The foundation
was eager to advance its mission—the economic security of
women and girls—through its investments in addition to its grantmaking.
Operating in a fiduciary environment where investments
must comply with “prudent investor” laws that mandate judicious
choices about the tradeoffs between risk and return, the foundation also needed to maintain market rate returns. “We wanted to align
our investments with our values, and also to use a gender lens to
identify smart investments in companies we’re proud to own,”
says Judy Patrick, CEO of the Women’s Foundation of California.
U.S. Trust (which employs one of us) leveraged its Socially Innovative
Investing platform to create a strategy that looks holistically
at how companies engage women—as consumers, employees, and
agents of global change. One important metric that investors are
beginning to use is the number of women on boards of directors.
For example, Morgan Stanley’s Parity Portfolio uses this number as
an investment screen. The WGES approach adds other metrics to
analyze how gender equity plays out throughout the organization.
WGES examines quantitative criteria to compare companies with
sector peers on factors such as pay equity; recruiting, retaining, and
promoting women; supply chain and subcontractor relationships;
gender impact of goods and services; and portrayal of women in
media. The strategy considers both policy and practice; for example,
the existence of policies for inclusive hiring as well as the track
record of payments for discrimination lawsuits.
Companies that score well in the analysis are also likely to have
fewer environmental penalties, labor violations, and product safety
recalls. In short, they are well-run companies. A gender lens, as it
turns out, provides another important set of metrics for separating
high-quality companies from the others. “We employ a disciplined
process of portfolio construction that combines this social analysis
with fundamental research and an optimization process,” says
Jason Baron, managing director and portfolio manager at U.S. Trust.
“It mitigates against any unintended bias and enables us to design
for clients’ needs—and attribute any outperformance to selection
of companies based on their gender analysis scores.” In 2013, WGES
beat their S&P 1500 benchmark by 3.6 percentage points.12
The goals of gender-focused investment vehicles are both to generate
returns and to use the power of these investments to help push
companies toward gender equity. Several trends point to the increased
value of using a gender lens to look across an entire value chain. Take
education: As women are increasingly educated, investors must consider
which firms will win the war for talent. Governments like that of
Japanese Prime Minister Shinzo Abe are seeing the economic benefit
of women in the workforce and are establishing incentives for corporations
that excel in gender diversity. Coca Cola has embarked on an
ambitious campaign, called the 5x20 program (the goal is to empower
5 million women entrepreneurs across Coca Cola’s value chain by
2020), to leverage women’s participation throughout its business.13
The Calvert Foundation, a social investing intermediary, found that
the process of launching the pioneering Women Investing in Women
fund (a gender-focused investment vehicle) energized its staff and
created new client relationships and opportunities.
Including gender equity in investment evaluation metrics drives
transformative conversations about realities inside and outside organizations.
To date, organizations have relied on important, but
crude, measures such as counting the number of women at various
levels of management. If counting continues to predominate, it risks
provoking the backlash of tokenism. Using a gender lens on workplace
equity broadens the questions to recognize other dynamics.
For example, understanding the gendered context in which people
operate—such as research demonstrating that women can be either likable or competent but not both, or that in some cases domestic
violence can increase when women’s income increases—helps leaders
innovate more effectively.
Various organizations are working to fill the data gap on both gender
policies and outcomes. For example, EDGE, a certification process
for corporations, looks at the trifecta of policies, outcomes, and
employee self-reports. The latter provide an essential understanding
of the gendered experience in organizations. That is, innovation will
not increase simply by having meetings with more women in a room
if these women do not feel free to express their opinions. The certification
process highlights areas of opportunity in creating workplaces
that harness everyone’s talent.14
Creating Products and Services
In some ways, businesses are adept at creating products and services
for women and girls. Consider the huge businesses devoted
to women’s apparel, beauty products, and feminine hygiene. But
thinking about providing products and services for women and girls
risks being translated into “sell more stuff to women.”
The approach of the gender lens investing movement is different.
The goal is to create opportunities and reduce risks by designing products
and services (and their value chains) that empower women and
girls and improve their lives. This means changing the design process
from designing for women to designing with women. It is not about
taking products and making them pink. Successes in producing clean
cookstoves, in reducing infant mortality, in improving feminine hygiene,
and in other areas come from collaborative innovation.
Companies incur two costs if they don’t think about gender as
they design their products and services: The first is missed market
opportunities and the second is the reputational risk that could
come from badly designed products. Some companies are now
taking up this challenge. For example, automobile
companies have recently begun to test the safety
of their cars with female-size crash test dummies
in the driver’s seat. And some drug companies are
beginning to think of the problems and missed opportunities
of not adequately testing pharmaceuticals
on women. (Clinical studies are disproportionaly
based on men.15)
The Global Alliance for Clean Cookstoves is demonstrating
the power of investing in products for
women. Clean cookstoves and fuels can improve
health outcomes related to emphysema, cataracts, and
heart disease as well as alleviate economic burdens
that disproportionately fall on women and girls. The
organization now has more than 1,000 partners working
to build a global market for clean cookstoves and
fuels. What they have found, however, is that adoption
of the new cookstoves has been spotty. Some of
the challenge lies in designs that do not fit the needs
of the women: They are engineering solutions from
companies mainly in developed economies delivering
products to people in resource-poor environments.
To get people to adopt the new cookstoves, the
alliance has gone beyond thinking of women as only
the users of the products. They have used gender analysis to identify a whole series of best practices, from product
design (observe women cooking and involve women in the design
esthetics), to production (give women the opportunity to manufacture
components), to financing (support financial institutions in
lending to women and consider rent-to-own or micro-consignment
strategies), to distribution (use gender-informed marketing messages
and offer trial periods to female distributors).16
“Previously, we found that cooking energy companies didn’t
fully understand how a gender-informed approach could help their
bottom line. Gender requirements were generally donor-driven and
not seen as something that could improve their effectiveness,” says
Corinne Hart, director of Gender for the Global Alliance for Clean
Cookstoves. “But now they are seeing how using a gender lens can
enhance their business model and increase sales and adoption of
their products and services.”
Lessons Learned
Several lessons can be drawn from these three different approaches
that will help investors use a gender lens to guide their decisions. The
first is that systems matter. For investors, it is easy to focus on the
specific investments without thinking of the systems in which they
are embedded. For example, when microfinance works for women, it
is not just because of the loans, but also because of the entire set of
principles and programs that have been created to support women
entrepreneurs. When the loan comes with technical assistance, a
commitment by the women to have a different relationship with their
husbands, and a loan compact that includes support groups, results
improve. Similarly, encouraging women entrepreneurs anywhere in the
world without confronting the biases in the entire funding system will
not increase the number of women-owned businesses. Using a gender
lens is about changing processes, not simply working within them.
The second lesson to be learned about gender lens investing is that
metrics are important for creating incentives and for tracking progress,
but our current methods are often not sophisticated enough to
measure all that is important. Counting the number of women—on
corporate boards of directors, in hedge funds—is a good start, but it is
not enough. Asking about metrics, collecting data, and reporting the
results trigger dialogue and actions to reduce inequities and uncover
opportunities, but creating metrics that can reveal systemic issues is
hard. As University of Oxford professor Linda Scott and her colleagues
show in their three-year field study of Avon resellers in South Africa,
we cannot understand the impact of women’s entrepreneurship until
we define success according to the criteria of the women themselves.17
There, key outcomes not often measured in studies of microfinance
were changes in self-perception, improvements in self-confidence, and
development of expertise that the women experienced.
The third lesson for gender lens investing is that women must be
at the table in all of these conversations, and in adequate numbers.
As Christine Lagarde, then France’s Finance Minister, famously said,
“If Lehman Brothers had been ‘Lehman Sisters,’ today’s economic
crisis clearly would look quite different.”18 A token woman on a panel
or on a leadership team does not make for effective representation.
(In fact, research shows that tokenism can often be worse.19) This
cannot be a women-only conversation. We are all implicated in the
current gendered systems of capital allocation, and the only way out
is for everyone to see the world through gender lenses.
Moving into the Mainstream
The important question we must now answer is how to move gender
lens investing from the fringe to the center of the discussion.
The sustainability movement took years to be taken seriously but
has now entered the mainstream with thematic investment funds
attracting assets and corporations like Wal-Mart Stores producing
sustainability reports and being asked by their shareholders to address
environmental, social, and governmental issues. As we reflect
on what it will take to build the field, we see three immediate barriers
as well as some openings that make us optimistic.
First, there are not enough investment vehicles that leverage a
gender lens. One fix for this deficiency is for investors to demand
access to these types of investments. This can be a virtuous or vicious
cycle: Without demand, supply will be suppressed, but greater
demand can instigate innovation. A quicker fix is for investment
managers to add gender metrics to their existing analyses.
Second, we lack the data needed to design smart investments.
We have to get to the point where gender-disaggregated data is a
de rigueur consideration when making investments. And we need
different kinds of data that support gender analyses (such as the
surveys that EDGE is now doing). Some of these data should include
case studies that can show how investing with a gender lens can be
done. More data will create both the “proof points” to justify action
and the “signposts” for those who want to act.
Third, concurrent with the development of data, the field needs
to develop expertise in bridging the two domains of gender and
finance. Investors and financial institutions need skills in doing a
gender analysis. Women’s empowerment organizations would benefit
from expertise in using finance as a tool in the toolkit. Today,
few people can speak both languages, and few organizations know how to make the connections. Building the field will be essentially
about finding ways to build these forms of expertise.
The financial crisis from which we are just emerging has caused
many people to question the foundations of the existing system.
Moments of crisis can create opportunities for systems change.
Can a gender lens help us move forward from the current upheaval
in financial markets and the broader economic crisis? Given the increasing
attention to women and the economy, can a gender lens on
investing offer tangible solutions for making progress?
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