If you haven’t heard of the 2X Challenge, you will soon. Announced during the 2018 G7 Summit in Charlevoix, Quebec, it’s a call for development finance institutions (DFIs) to collectively mobilize $3 billion in commitments that provide women in developing countries with improved access to leadership opportunities, quality employment, finance and enterprise support.
As investors in businesses that provide exactly these services, Deetken Impact is keenly interested in how this capital is deployed. This is a potentially transformational opportunity to change the lives of women and girls in developing countries.
Canada’s Endorsement and Role
Importantly, Canada has accepted the 2X Challenge. But can we deliver? Clearly there is strong alignment philosophically; Canada has become a global champion of gender equality and has formally committed to a feminist international assistance policy. However, until very recently Canada didn’t have a DFI to actually operationalize this commitment.
We are seeing lots of progress in the right direction. Firstly, in early 2018, Canada formally launched its own DFI, FinDev Canada, and has hired experienced management. This includes CEO Paul Lamontagne, previously with Capafrica and CIBC Global Markets, and CIO Suzanne Gaboury, previously a Global Director of FMO (Netherlands DFI) and a Managing Director of Cordiant Capital. So far, FinDev has completed one transaction, a US$10MM investment in M-KOPA, a Kenya-based company that provides pay-as-you-go energy for off-grid homes.
In addition, Global Affairs Canada (GAC) has announced ‘’a new partnership to fund gender equality and empower women and girls’’ including a financial commitment of $300 million. The partnership is still at the consultation stage, and Deetken Impact looks forward to working closely with GAC as well as like-minded organizations from the private and philanthropic sectors to drive this initiative forward.
Our Two Cents
As a private sector investment firm with a focus on making an impact, we have identified a few key principles which we believe can help unlock more private capital, scale the partnership, enhance sustainability and maximize social impact.
1. Investing for impact is “high-touch’’. One thing we’ve learned in 10 years of impact investing is that identifying and supporting businesses that truly make a difference for women and girls is about real relationships and regular in-person contact, as well as well-developed networks and partnerships with other businesses in the region. Wherever possible, we think the 2X funds should leverage the skills and experience of local asset managers with a proven track record of success, and who have the capacity and capability to closely manage the investments on the ground to ensure continued alignment.
2. Bigger isn’t always better. With $3 billion to invest, it’s probably tempting to focus on investments in larger companies and projects. But we see tremendous opportunity for gender-informed investments in small and mid-cap companies across developing countries. In Latin America and the Caribbean, for example, a credit cooperative that is developing an app to help women clients address gender-based violence through connection to local counselling services. Or a water delivery company that has chosen to train 100% women drivers in a livelihood typically reserved for men. These small and mid-size businesses often have the tailored approach and trust required to get buy-in and spark social change.
3. It’s not just about the clients. Although businesses which focus on well-designed products and services for women clients can certainly help to foster equality and empowerment, we believe strongly that gender lens investing must take a 360-degree view. That means looking for investment opportunities that ‘’walk the walk’’ with women in senior management, women on the board, and women investors. These can be crucial indicators that the commitment to equality and empowerment is firm and truly embedded throughout the organization.
We are excited to see Canada’s strong endorsement of the 2X Challenge. We look forward to working together to make more capital and other resources available for investments that foster gender equality and drive transformative change in the power dynamics between women and men.