Gender lens investing has grown worldwide in recent years. Private investment vehicles with a gender lens are valued at more than $2.2 billion in 2018, and $2.4 billion of public capital investment is under management. However, there are few gender lens products and investment vehicles in Latin America and the Caribbean.
This is one of the main conclusions of the first Latin American study on gender lens investing – published by the ESADE Institute for Social Innovation with BID Invest, the private sector institution of the Inter-American Development Bank (IDB) Group.
The report entitled ‘Investment with a gender lens: How finance can accelerate gender equality in Latin America and the Caribbean’ was presented today to mark International Women's Day as part of the event ‘Financial performance and gender equality: Why invest with a gender lens?’ co-sponsored by BID Invest and the Bolsa Institucional de Valores (BIVA) in Mexico City. This is the first detailed research published on private sector investment opportunities to encourage gender equality in the region. The report identifies gaps for risk, private, and seed capital; and offers examples of companies leading this trend in Mexico, Colombia, Panama and Brazil.
Investing with a gender lens includes investments in companies run by women that encourage gender equality in the workplace and develop products and services that positively impact women. According to ESADE director-general, Koldo Echebarria: ‘investment with a gender lens can lead to financial returns while significantly contributing to gender equality’.
Gema Sacristán, general director of the BID Invest Business, remarked that gender lens investing is ‘a proactive and cross-sectional investment strategy for different asset classes, which generates profits for investors and businesses’.
Gender bonds, the new trend
In Latin America and the Caribbean there is a large financing gap for companies led by women. However, women continue to be above the market in terms of consumption and credit growth.
Gender bonds are part of a new trend in social finance and an innovative way of granting loans to women or small firms owned by women. Currently, the financial gap is $5 billion for micro-firms led by women, and $93 billion for small firms owned by women.
The female market continues to grow
The report forecasts that by 2025 women will control 75% of consumer spending. Women also control spending as individual investors. Globally, women represent a key investment segment driving investment with a gender lens.
Gender diversity is good business and beyond the ethical aspects, diversity can improve the risk/reward profile of investment portfolios. The study says a diverse workforce helps organisations in various ways: attracting the best employees; reducing employee turnover; improving business performance; improving access to markets; and strengthening reputation. Companies with diverse workforces are better able to innovate in product development and take advantage of new business opportunities – such as the female market.
More investment opportunities in public capital markets
The study offers a comparative look at how investment vehicles in public and private capital markets are growing globally – as well as in Latin America and the Caribbean. Public capital investment strategies with an explicit gender lens represent more than $2.4 billion in assets under management in 2018. More than 30 stock investment strategies with a gender lens have been available since 2013, which is equivalent to more than five new investment options per year. Since January 2017, more than 16 new strategies have been launched. These vehicles cover various asset classes and structures, including: 14 individually managed accounts; 9 exchange-traded funds; 7 investment funds; 3 gender equality bond issues; an exchange-traded security; and a certificate of deposit.
Globally, venture and private capital funds with a mandatory gender lens rose quickly from $1.3 billion in 58 funds with gender lens strategies in 2017, to more than $2.2 billion in 87 funds in 2018. The fund launch index is also rising with 19 funds launched in 2017 and 27 in 2018. Six of the 87 venture capital and private capital funds indicate that Latin America and the Caribbean is one of the investment destinations. In 2018, regional diversity also rose, with only 40% of the 2018 funds announcing that the US was their only geographic destination, compared to 80% in 2017.
There is global information showing that the investment segments driving investment with a gender lens are women investors and millennials. Both segments will control a large amount of wealth in the years ahead, with women expected to own 32% of wealth by 2020. Women are inclined to favour sustainable investments (84% of women and 86% of millennials versus 67% of men are attracted to sustainable investments). Women investors are especially interested in gender diversity, with 79% wanting to invest in companies with strong diversity.
In the US in 2018, gender lens investors held $868 billion of institutional investment assets (up from $397 billion in 2016). Portfolio managers who consider equal employment opportunities and diversity were managing $843 billion in assets at the beginning of 2018 (up from $249 billion in 2016).