One thing is clear after participating in the first Gender Smart Investing Forum in Latin America; interest in gender smart businesses and investment practices is overwhelming. The GSI Forum was organized by Pro Mujer and held within the framework of the 10th Annual Latin American Impact Investing Forum (FLII).
Investing with a gender lens has grown significantly around the world from $1.3 billion in 2017 to $2.2 billion in 2018. Yet Latin America lags behind. According to the International Finance Corporation (IFC), only 5% of capital funds go towards supporting women-led enterprises, and 73% of women-led SMEs in the region report not having access to financial institutions nor getting the amount of financing they need to support their businesses.
Women represent close to half of the world’s population but their participation in the workforce is still limited. Women’s full participation in the economy could bring significant growth, estimated by McKinsey to add up to $28 trillion dollars globally by 2025. Moreover, research shows that women invest 90% of their income back into their families and communities, improving education and health prospects, reducing poverty and creating a virtuous cycle in the economy.
Why Invest in Women
Investing in women-led businesses and increasing women’s participation in the workforce are both crucial to generating economic growth in a more equitable fashion, but the scope of Gender Smart Investing is much broader. It aims to advance equal representation on boards and management teams, equality in the workplace and in the value chain, and having women and girls at the center of the products and services that companies design and sell. Only by incorporating all of these metrics into business and investment decisions, will we truly advance gender equality.
In addition to the benefits generated in terms of economic growth, reduction of poverty, and advancement of gender equality, there is a proven business case for gender-lens investing. Businesses that incorporate gender smart practices report increased profitability. In the same way, funds that invest with a gender lens report higher returns. There are several reasons for this – mainly that by incorporating the women’s perspective into business practices and investment decisions, we allow for more diversity, inclusion, and sensibility which better understands and aligns with the female population. As Susana Garcia Robles, Chief, Loans & Equity Operations and Gender Coordinator at IDB LAB recently emphasized, “women are responsible for 64% of purchasing decisions globally”.
Some Practical Challenges
Despite the compelling gains and benefits on all fronts, we see two significant challenges. The first is analytical; we need to be able to measure the extent of inequality through the analysis of disaggregated gender data, as well as creating new approaches to address conscious and unconscious biases in investment decision-making. The second barrier is the practical challenge of execution, namely the know-how, time, and resources required.
We believe that as gender smart practices are more broadly adopted and collaboration among organizations strengthens, the know-how will be more widely shared and understood. The Latin American Gender Smart Investing forum and other spaces alike are critical in facilitating this.
A major debate during the forum centered on the cost of implementation of a gender smart strategy and whether the company or the investor should bear the cost. Great ideas were proposed including cost-sharing or commercialization of the data for government or university research use. Another idea that stood out for me was the use of tax incentives for companies and investment funds that have a gender smart strategy. This is an idea being driven by Silvia Torres Carbonell, Executive Director of the IAE’s Entrepreneurship Center and W20 delegate in Argentina, and which might be worth pursuing in each of our countries.
Deetken Impact uses a gender smart strategy to evaluate our fund’s investments because we believe in the positive impact we’re generating and the proven business case. We will continue to collaborate with others in this ecosystem to broaden the adoption of these practices and together accelerate gender equality in Latin America.