Introducing gender lens investing
Since mid-last year, Wall Street investors in sensitive industries have been insisting on so-called “Weinstein clauses”, that allow them to claw back their money if revelations of inappropriate behaviour damage the business.
It’s a mere part of something bigger, called gender lens investing, that goes way beyond the earlier concept of pink washing.
What is gender lens investing?
Gender lens investing incorporates an analysis of gender risks in investment decisions in the same way as an analysis of other risks.
The Wharton Business School identified 87 private equity, venture capital and debt funds that apply a gender lens, up from 58 in 2017.
How does it work?
The non-profit Criterion Institute works with Australia’s Department of Foreign Affairs and Trade on impact investing programs in the Asia Pacific, a strategy established under former Australian Foreign Minister Julie Bishop.
In applying a gender lens it suggests asking:
What gender patterns are at play in the market that could impact both opportunity and risk of the investment? Are, for example, girls’ education rates or domestic violence rates an investment risk at the national or industry level, or at the organisational level in terms of absenteeism and presenteeism?
What is the gender (and diversity for that matter) composition of the people screening initial investment opportunities? Is there a risk that opportunities will be missed through too narrow a focus?
Do you have enough information? If not, do you need other partners or sources?
Do processes such as tight turnaround times lead to quick but poorly informed decisions, amplifying gender bias?
The gender data gap shows the dangers inherent in ignoring the specific requirements of females for sectors such as health, medical and scientific product design, development and testing. For example, there is a heightened risk of injury for women in car accidents due to seat belt design being based on the average male body shape and size.
The absence of a gender lens also means missed product opportunities.
For example, approximately US$1 billion has been invested in women’s health technology over the past three years, and “femtech” is estimated to grow into a US$50 billion industry by 2025.
Where is the new money flowing?
Increasingly, it is going to firms led and founded by women.
Research finds strong returns from lending firms led by women, with a recent report concluding that “women owned start-ups are a better bet”.
A survey of Australia’s top 10 venture capital funds found that of 448 investments made in the inception stage of firms, 35% had female co-founders in 2018, up from 26% in 2017.
Historically, the inequity has been stark, with estimates suggesting that companies with female founders have received only 4.4% of venture capital deals, and those companies have garnered only about 2% of all capital invested.
Where to now?
Gender analysis is pointing to risks and opportunities. Smart investors are paying attention.