Gender Lens Investing

By Malaika Maphalala

MM nepal WEBThe Economist lays it on the line: “Forget China, India, and the internet—economic growth in the next decade will be driven by women.” Indeed, it’s already begun, with women’s incomes worldwide growing from $13 trillion in 2009 to $18 trillion by 2014.  That $5 trillion of growth is almost twice the growth in GDP expected from China and India combined during that period, making women the world’s biggest emerging market.  Even Goldman Sachs, while not my favorite authority, says, “investing in women is the single best way to reduce inequality and drive economic growth.”  

Gender equality in economic structures will both promote economic growth and make the world a better place.  While the World Bank wants to “make women more competitive in financial markets,” it misses the vital point that financial markets need to be reframed to value the work that women are already doing.  Hence the importance of a new conversation emerging in the investment field: Gender Lens Investing.  Gender Lens Investing says that when we acknowledge the competitive advantage that gender inclusiveness brings to business, as well as the remarkable social and financial impacts connected to empowering women economically, we will make better investment decisions and ultimately transform our global economy. 

One of the key reasons investment in women’s enterprises globally has far-reaching social impact is that as a woman’s earnings grow, on average 80% of her profits will flow to improve the lives of her children and family through better nutrition, health care, education, and housing. That’s compared to just 30% of a man’s profits.  This means that investing in women has a 50% greater positive impact on primary drivers of long term, intergenerational change, and reduction of hunger and poverty.  

Financing in agriculture is just one excellent demonstration of the huge disparity in access to capital between men and women.  Women do over 50% of the world’s agricultural work (up to 80% in some regions), yet receive just 10% of financing for agricultural enterprises.  The UN’s Farming and Agriculture Organization estimates that if women had the same inputs as men farmers, their yields would increase 20-30%, creating the potential to lift 120-150 million people out of poverty.  Root Capital, a social investment fund and a leader in Gender Lens Investing, chose to establish the Women in Agriculture initiative in 2012.  They understood that directing money toward women involved in farming would be a powerful force in breaking the cycle of poverty and hunger in rural areas of the developing world.  

Intentionally working to direct financing to women meant shifting how they went about selecting their investments.  Women often farm different crops than the large-scale wholesale commodities that attract most agricultural financing.  So, Root Capital looked at what commodities they could be investing in to reach more women. Their initiative focuses on industries that traditionally employ large percentages of women, such as wild-harvested crops, staple food products, and agro-processing, as well as businesses led by women entrepreneurs and managers.  

MM organic WEBOne of my favorite stories out of Root Capital’s initiative is the story of CADO, a cooperative of small-scale organic sugar cane growers in the Ecuadorean Andean region. Their dynamic president, Cecelia Arcos, is a third generation farmer who tends the same field that belonged to her grandmother.  Cecelia and the other cooperative members had long been growing sugarcane and brewing it into a strong alcohol with a rich cultural history as both a beverage and a medicine.  Through Root Capital’s financing, and connecting with international buyers like Dr. Bronner’s and The Body Shop, the cooperative was able to secure a steady market and premium prices for their organically produced alcohol, for use in soaps, perfumes, and cosmetics.  They have become the first-ever exporter of fair-trade, organically certified alcohol (the accompanying photo shows purification testing), and their sales volume has nearly tripled in the last two years. As a gender inclusive cooperative, half of their members are women whose families are benefiting from the increase in income, and Cecilia herself has become a powerful role model for other women farmers in a male dominated society.   

Beyond the outsized social impacts connected to investing in women, studies show that gender inclusiveness in business offers a significant competitive advantage. Credit Suisse reports that corporations with a higher proportion of women in top management show more successful growth in terms of operating results, employee satisfaction, public image, and stock price. By a lot. Companies with three or more women on their boards have a 53% higher average return on equity.  Apparently management made up of both sexes makes for stronger teams that are better at solving problems and spotting threats, making these companies better investment choices. 

And as investors, studies show that women tend to do better than men.  They consistently earn higher returns and are also more drawn to think beyond financial returns to include social and environmental values in their investment decisions.  We see this clearly at Natural Investments where our client base is made up of disproportionately more women than men.  Some years back, my colleague, Michael, in noting this disparity, said “I think it’s because men tend to make investment decisions using their left brain, and women…”—I braced myself for the seemingly inevitable (and sexist) conclusion that women invest with their right brain, but was happily surprised when he instead concluded—“and women use their whole brain.” Wow.  Looking to the future, as women’s economic clout grows, so will their power to shape the global economy.  And by all indications, it will be a change for the better.  

And as investors, studies show that women tend to do better than men.  They consistently earn higher returns and are also more drawn to think beyond financial returns to include social and environmental values in their investment decisions.  We see this clearly at Natural Investments where our client base is made up of disproportionately more women than men.  Some years back, my colleague, Michael, in noting this disparity, said “I think it’s because men tend to make investment decisions using their left brain, and women…”—I braced myself for the seemingly inevitable (and sexist) conclusion that women invest with their right brain, but was happily surprised when he instead concluded—“and women use their whole brain.” Wow.  Looking to the future, as women’s economic clout grows, so will their power to shape the global economy.  And by all indications, it will be a change for the better.  

This article first appeared in the Fall 2013 edition of the Natural Investment News

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