Diversity Driven: Transforming the Landscape of Impact Investing

Diversity Driven: Transforming the Landscape of Impact Investing

By Pierrick Ribes, 22 December 2023

In the realm of impact investing, gender diversity is not just a metric of social responsibility but a catalyst for profound economic and societal transformation.

It involves harnessing a wide range of experiences, perspectives, and skills to drive innovative and sustainable investment solutions as well as reshaping how investments are made.

Why Gender Diversity Matters in Impact Investing

The intersection of gender diversity with financial success is vividly illustrated by recent research from McKinsey, which reveals that companies with diverse and inclusive teams outperform their peers by up to 36%. This remarkable outperformance, observed across 15 countries and over 1,000 companies, is a testament to the power of diverse perspectives in fostering innovation and effective problem-solving. Beyond financial metrics, gender diversity has shown to be a catalyst for more innovative, sustainable solutions, pivotal for longterm development. 

Women’s roles in the global food system are a prime example. They constitute almost half of the agricultural workforce in low-income countries and are primarily responsible for food preparation and purchasing in households. This centrality in the food chain presents an opportunity to invest in enhancing women’s capacities as both producers and consumers, driving forward solutions for food security and sustainable development.

A study by McKinsey Global Institute suggests that advancing women’s equality could add US $12 trillion to global GDP by 2025 showing that gender diversity has the power to drive economic growth but also driving societal impact. 

Incorporating a Gender Lens Into Investment Portfolios

The concept of Gender Lens Investing (GLI) has emerged as a pivotal strategy in this context, fundamentally reshaping how investments are made and their consequential impacts. 

Gender Lens Investing is an innovative approach that intentionally focuses on addressing gender disparities and promoting gender equity. This strategy encompasses investing in womenowned or -led enterprises, supporting companies that advocate workplace equity, and backing enterprises that significantly improve women and girls’ lives. There are two broad categories of GLI: 

1. Investment in Gender-Focused Enterprises: This includes capital allocation to women-led businesses, companies promoting gender equality in staffing and management, and those whose products or services directly benefit women and girls. 

2. Gender-Informed Investment Processes: It involves genderfocused analysis in pre-investment, due diligence, and post-deal stages, considering factors like a company’s vision on gender issues, organizational culture, use of gender metrics, and commitment to gender equality. 

Advancing Gender Diversity, Equity and Inclusion

In today’s world, there is a global trend where women’s significant contributions are undervalued, underscoring not only a social justice In the realm of climate resilience, women’s disproportionate impact contrasts with their potential as agents of change. Representing a significant majority of those displaced by climate events, women’s experiences uniquely position them to contribute to climate action and resilience strategies. Their presence in decision-making roles leads to more effective sustainability discussions and actions within organizations. Companies with a third of their board as women keep emissions at 0.6%, much lower than the 3.5% in firms without women on the board. (Transition Investment Lab Annual Report, 2023) 

The adoption of a gender lens investment strategy is not only a step towards equity but also a strategic move that unlocks potential in previously underexplored market segments, ensuring a more equitable distribution of capital. Concentrating on gender-diverse and female-led initiatives allows investors to tap into previously unnoticed opportunities, effectively aligning financial gains with wider social and environmental objectives. This progression towards more inclusive investment practices is poised to generate significant and meaningful change, harnessing the unique strengths and viewpoints that women contribute to the investment arena. 

“The financing gap for female-led companies globally is estimated to be US $1.7 trillion with at least US $42 billion needed in sub-Saharan Africa (SSA). The gap widens if you add in companies that are gender diverse. In 2022, of the nearly US $5 billion in venture capital deployed to early-stage companies in SSA, 85% went to male-only led teams” - Lisa G. Thomas, Partner and Managing Director, Samata Capital

To read more about impact investing and the state of impact investing in the world today, download and read the Special Report here


Next Read: What is Impact Investing

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