Women Bosses

Achieving gender equality is essential as a matter of justice and human rights— and it also unleashes a range of positive economic and development outcomes. While women and girls have made significant gains in the past decade in terms of education, health, economic participation, and political leadership, gender equality has yet to be attained in many critical areas, and at the cost of substantial and unrealized social and market benefits. In fact, the McKinsey Global Institute estimates that narrowing the global gender gap could add US $12 trillion in annual gross domestic product. The urgent need to close the gender gap was underscored in September 2015 with the establishment of the 17 Sustainable Development Goals (SDGs), which were adopted by 193 Member States of the United Nations and defined an ambitious global and universal sustainable development agenda. SDG 5 is dedicated exclusively to achieving gender equality and empowering all women and girls. Bridging the global gender gap will require leadership and investment by the public and private sectors. In particular, institutional and individual investors have both a significant market opportunity to realize and a unique role to play in accelerating the advancement of women and girls. To date, private investment for financial return that simultaneously supports gender equality goals (commonly known as “gender-lens investing”) has typically taken the form of investing in women-led businesses and investing in companies that promote gender diversity in their workplaces. Increased focus is needed on a third, less-common type of gender-lens investing: investing in companies that advance gender equality through their product and service offerings. The need for such offerings is clear, both in developing and developed markets. Globally, 1.7 billion women still do not own a mobile phone2 and 1.1 billion women are unbanked3—both major barriers to pursuing and benefiting from economic opportunities. Every day, women around the world spend 200 million hours collecting water to sustain their families due to inadequate infrastructure4— hours they could otherwise invest in education, gainful work, or leisure. Approximately 225 million women have an unmet need for modern contraception, preventing them from determining the number, spacing, and timing of births that best align with their aspirations for themselves and their families.5 Of course, these are not simply supplyside issues. Women’s access to and usage of products and services is shaped by prevailing social and gender norms, as well as constraints on women’s mobility and control over assets—obstacles that must be addressed to ensure women realize the full benefit of product and service offerings. Many of these challenges are disproportionately faced by women in low- and middle-income countries, but women in high-income countries are also disadvantaged by product and service offerings that fail to reach them or meet their needs, often due to deeply rooted gender biases in product design, market segmentation, and marketing. For instance, among women who have financial advisers, 67 percent stated in a recent survey that their financial adviser does not understand them or is not interested in their needs or goals.6 In addition to the moral imperative of closing the gender gap, the potential market impact is likewise substantial, creating significant opportunities for investors.

In fact, achieving parity across products and services in just five sectors—water, contraception, telecommunications, energy, and child care—could unlock a market of more than US $300 billion in incremental annual spending by 2025. Investors, asset managers, and companies can seize the opportunity to advance gender equality and drive financial returns by taking these initial steps: Institutional investors Incorporate a products-and-services approach into existing gender-lens investing and environmental, social, and governance (ESG) investing strategies. Individual investors Shift investments toward companies that offer products and services that support gender equality, focusing on companies that have committed to quantifiable goals or measures. Asset managers Create new funds and financial instruments for institutional and individual investors focused on companies offering products and services that support gender equality Companies Assess the gender equality impact of the company’s business strategy and current operations, such as the gender mix of the customer base. Assess whether and how the company’s products and services can evolve in new ways that promote gender equality, and measure and report progress against targets to help communicate the company’s potential social impact to investors and consumers alike. By investing in companies offering products and services that promote gender equality, investors can earn the “return on equality,” seizing profitable, under-tapped market opportunities. Given how the use of products and services shapes the health outcomes, livelihoods, and opportunities of billions of women on a daily basis, this investment approach has the potential to help advance gender equality at scale.In September 2015, 193 United Nations Member States adopted the SDGs as a universal action plan to end poverty, protect the planet, and ensure prosperity for all by 2030. The SDGs advance a truly global agenda, spanning developed and developing countries alike and requiring the leadership of the public, private, and social sectors. Delivering on the SDGs would have an impact on billions of lives while driving trillions in spending by governments, companies, and individuals. The Business & Sustainable Development Commission estimates that achieving the SDGs could unlock over US $20 trillion in new business opportunities.7 See the appendix for the full set of SDGs, as well as specific targets for SDG 5 on gender equality. SDG 5, “Achieve gender equality and empower all women and girls,” was designed with a singular focus on the rights and needs of women and girls. While it exists as its own dedicated goal, gender equality is also an essential precursor to many of the other SDG aspirations, which are mutually reinforcing. Indeed, women’s empowerment has multiplier effects on a wide array of areas essential to sustainable development, including hunger, nutrition, and food security (SDG 2); health and well-being (SDG 3); and education (SDG 4). For instance, the Food and Agriculture Organization of the United Nations (FAO) estimates that if women had the same access to productive resources as men (land, livestock, financial services, agricultural information, etc.), women’s increased productivity could raise agricultural yields by 20 to 30 percent overall, lifting 100 million to 150 million people out of hunger.8 And higher educational attainment and literacy rates among women are associated with lower rates of early and/or forced marriage, increased use of modern contraception,9 and lower levels of stunting among children.10 Gender equality also supports inclusive economic growth, reduces income inequality,11 and bolsters overall gross domestic product (GDP) growth (SDGs 1 and 8). Though women constitute half of the planet’s talent pool, they contribute only 37 percent of global GDP.12 The McKinsey Global Institute estimates that the world economy could gain up to US $12 trillion in annual GDP by 2025 by narrowing the global gap between men and women in the areas of labor force participation, hours worked, and the sector mix of employment in order to reach a “best in region” scenario (in which countries match the rate of improvement of the best-performing country in their region). Such a gain would represent an 11 percent boost to GDP above a business-as-usual scenario—a tremendous advance in the span of less than a decade.13 A “full-potential” scenario (in which women participate in the economy identically to men) would add up to US $28 trillion to annual global GDP in 2025—26 percent more than a business-as-usual scenario.

Accelerating progress toward gender equality will require significant investment on the part of public and private investors. The United Nations and others have established a foundational framework for sustainable investing, and plans for financing the SDGs are underway. Private investors are increasingly considering sustainability and social impact within their investment strategies—including gender equality (see sidebar, “The growing field of sustainable investing”).15 The field of gender-lens investing has the dual goal of delivering financial returns to investors while advancing gender equality. It has typically taken the form of investing in women-led businesses and investing in companies that promote gender diversity in their workplaces. But there is a third, less-common approach to gender-lens investing that represents a large opportunity for investors: investing in companies that advance gender equality outside their four walls, via the products and services they offer to the market. This type of gender-lens investing has the potential to not only significantly advance gender equality globally but also deliver financial returns to private investors. All three forms of gender-lens investing can be incorporated into a variety of investment vehicles, including index funds and exchange traded funds (ETFs), venture capital and private equity opportunities, and innovative financing structures such as private debt vehicles  A significant number of women around the world have unmet needs for products and services, from basic survival supports (such as water and energy) to more advanced technology products. Highlighted on the next page are just five sectors among the many that affect women through their products and services (others include financial services, transportation, consumer packaged goods, and media and entertainment). In these five example sectors alone, the McKinsey Global Institute estimates that the market impact of gender equality–focused products and services could top US $300 billion in incremental annual opportunity by 2025. Increasing the reach of these products and services  will have three types of impact:

Investment in privately held companies is at the forefront One example is IIX (Impact Investment Exchange Asia)— a financial intermediary that focuses on social enterprises and economic development—which launched the Women’s Livelihood Bond. The bond is liquid and tradable, providing individual investors with access to debt in privately held, women-owned enterprises. These enterprises include ones focused on providing clean energy that reduces women’s unpaid care burdens, electronic payment systems that support women’s economic empowerment, and financial service providers who promote women’s access to credit. Proceeds from these bonds are lent to the impact enterprises (mission-driven for-profits or revenuegenerating nonprofits) and to microfinance institutions that benefit women. Similarly, the global nonprofit Women’s World Banking launched a private-equity partnership to make direct investments in women-focused financial institutions. The investees offer a broad range of products, including savings, insurance products, and pensions, to meet women’s financial needs. Another example is Rethink Impact, a venture capital fund that focuses on companies with women in management roles that create impact across a range of areas, including healthcare, education, sustainability, and economic empowerment. Rethink Impact’s investments include Neurotrack, the developer of the first-ever digital test for Alzheimer’s, which is a disease that disproportionately affects women (more than two-thirds of Americans with Alzheimer’s are women)20 and Seedling, a company working to make physical and digital STEM toys that appeal to both girls and boys. Limited focus on publicly held companies to date Investors in publicly held companies are less represented in this space, as there are few investment vehicles today that focus on public companies with pro–gender equality products and services. For the most part, investors interested in publicly held companies tend to approach gender-lens investing through a focus on public companies that are advancing gender diversity and equality within their four walls; there are a variety of index funds, actively managed funds, and public debt funds that take this approach today.21 As more data become available on the extent to which public companies are supporting gender equality through their product and service offerings, investors will have increasing opportunities to integrate this lens into their investment strategy. For instance, Bloomberg launched the Financial Services Gender-Equality Index in 2016 to measure gender equality in the financial services sector, addressing the paucity of gender equality data available. The index includes 7 metrics (of 47 total) related to companies’ product offerings, such as whether they track their client base by gender and retention of women clients. To increase investment in companies that support gender equality through their products and services, all stakeholders (investors, asset managers, civil society organizations, and the companies themselves) need to address three critical enablers: establishing standardized metrics, creating new investment vehicles across asset classes, and demonstrating market-rate returns. Of course, these enablers are not unique to this type of gender-lens investment—they are common challenges across the field of sustainable investing. However, nuances unique to gender equality, particularly regarding metrics and investment vehicles, will require tailored solutions. 1 Establish standardized metrics to evaluate whether and how much companies’ products and services advance gender equality Investors are looking for rigorous, standardized data to quantify the social impact of potential investments. In other forms of gender-lens investing, investors can consider standardized, easily quantified metrics such as the ownership stake of women, the number of women on the board, and the number of women in senior management roles. However, there are few standardized metrics to evaluate the social impact of companies offering pro–gender equality products and services. The creation of such metrics will require careful consideration of a few challenging questions: Not all offerings targeted at women consumers necessarily advance gender equality, so how can investors determine which ones do? How much of a company’s total portfolio of offerings needs to be pro–gender equality to qualify? And how should a company’s stated goals for supporting gender equality be weighed in the absence of demonstrated, measurable impact? Call to action: The investment community, companies, or civil society organizations—or a partnership among these stakeholder groups—should develop a single, standardized set of metrics and reporting standards to measure the impact of a company’s products and services on gender equality. These metrics can then be built into companies’ existing infrastructure for social impact metrics and reporting, and they will help drive consistency, accountability, and transparency. Because it takes time for the social impact of a product or service to be realized, in the short term companies will most likely report on their actions, such as number of women served. In the long term, civil society organizations focused on gender equality can contribute their expertise in measurement and evaluation to help companies track the social impact of their actions in a more rigorous way, potentially coordinated across the sector.22 For a mo re detailed analysis, see sidebar, “What are the right metrics?” 2 Create new investment vehicles across asset classes focused on the products-andservices approach Asset managers must create the investment vehicles for this investment approach to be viable. Investors and companies also have an important role to play by embedding this approach in their investment and business strategies, respectively. Call to action: Institutional investors can work with investment advisers to reevaluate their current approach to sustainable investing, and gender-lens investing in particular. They can expand their current approach to incorporate companies promoting gender equality through their products and services, and they can work with investment advisers to determine which financial instruments are available to deliver on this strategy. Individual investors can discuss new approaches to gender-lens investing with their financial advisers. In the short term, this could take the form of investing based on a company’s stated goals to support gender equality via their products and services. Over the long term, individual investors could shift investments toward new investment vehicles that become available, such as index funds focused on pro–gender equality products and services. Institutional asset managers can test demand among various investor segments for a focus on companies that offer pro–gender equality products and services. They can develop new products for both institutional and individual investors that focus on these companies and incorporate the products-and-services approach into existing genderlens investment vehicles. Venture capital and private equity firms and investors can consider whether their current investment approach covers the full spectrum of ways that companies affect gender equality, including through the products and services they offer. They can then develop new funds focused on companies with offerings that help advance gender equality. Companies can assess the role of women in their business strategy, including the gender mix of their customer base and the extent to which their products are tailored to the needs of women and marketed to women. They can also set ambitious goals for the gender equality impact that their company has through its products and services, and they can define metrics to measure their impact. All of these efforts should be communicated widely to the investment community to enable interested investors to identify companies that align with their investment strategy  Demonstrate market-rate returns from the products-and-services approach to gender-lens investing As with other forms of sustainable investing, such as those focused on the environment or community economic development, investors need to be confident that they can earn market-rate returns or better through the productsand-services approach to gender-lens investing. For investors bound by fiduciary duty, this question takes on even greater significance.23 The financial case for gender-lens investing is starting to take shape; for instance, MSCI, an independent provider of research and tools for institutional investors, has studied the correlation between financial returns and gender diversity and found a positive relationship—a promising initial finding, even if not evidence of causality.24 As discussed previously, there is a significant business opportunity for companies offering products and services that support gender equality—at least US $300 billion across just five sectors. However, specific analyses will be needed over time to demonstrate that investment in such companies generates attractive, risk-adjusted returns. Call to action: There is a significant need for research to quantify the financial performance of companies with pro–gender equality products and services. Actors within the investment community, such as asset managers or investment consultants, could be well-positioned to spearhead this research.

As gender-lens investing gains greater traction, the investor community’s approach to screening and selecting companies that promote gender equality through their products and services will evolve. As more investors want to participate, they will demand increased transparency and accountability—and there are limitations to what company self-reporting can provide. This may create the opportunity for third-party assessment, providing investors with a more rigorous and robust input to their screening of prospective investment targets. Such assessment could be formalized as a voluntary certification program orchestrated by an independent group that would provide recognition to companies that have demonstrated achievement of certain standards of social impact, similar to the EDGE Global Gender Equality Certification.2 There are three key advantages to the third-party evaluation approach. First and foremost, it removes the concern of divulging proprietary business strategy to competitors, allowing a broader range of companies to participate. Second, it improves comparison and helps establish benchmarking norms across companies and sectors. Third, it increases accountability for companies to perform against a standardized set of metrics. However, as discussed above, success will require a common set of gender equality impact metrics developed collaboratively among investors, companies, and civil society.