Gender-lens investing (GLI) is a relatively new area in the investment space – there is a small but rising number of funds that take into account gender-based factors across the investment process to drive progress towards gender equality, and enhance returns.
Interestingly in private markets, however, is how this is being adopted by not just gender-focused funds but also wider strategies focused on climate change and/or developed and developing markets.
See also: Private enterprise: The specific skillsets for sustainable investor
GLI has grown by 30% in private markets over the past two years, according to research by 2X Global, and many predict further growth. But how exactly does this work, and how is it having an overall positive impact on gender equality?
Gender-lens investing explained
2X Global, a membership organisation focused on driving capital towards ‘gender-smart’ investments, defines GLI as the integration of gender analysis into a new or existing investment process for better social and financial outcomes. For example, these investments focus on providing women with leadership opportunities, quality employment, finance, enterprise support and products and services that enhance economic participation and access.
The organisation also created the 2X Criteria, a global industry standard for assessing and structuring GLI investments. This contains six themes for investors to consider: leadership; access to capital; workplace equity; products and services; gender justice; and women as investors.
According to 2X Global, these themes target areas where gender inequalities exist and work to enhance diversity at every level.
See also: The shape of things to come: Schroders Capital’s Zappia on the future of sustainable finance
The firm’s research also demonstrates how GLI is increasingly on investors’ radar as they understand its part in uncovering hidden potential risks.
For example, companies that show no evidence of working to reduce their gender pay gap are at higher risk of losing more women over time. These losses – likely women with the skills and resources a company values – can lead to an overall decrease in talent and diversity, which is therefore correlated with the company’s performance.
Companies are 27% more likely to underperform on profitability if they fall into the fourth quartile for diversity, equity and inclusion (DEI), according to McKinsey & Company.
Read the full article in PA Future’s October 2024 digital magazine.
