Leverage Point
Narratives and Nudging
Are we getting better at telling the story about why gender-smart investing is important and how to do it?
The focus on gender, diversity and inclusivity has increased over the past two years - but has faced strong headwinds.
This is due to a combination of factors including the impact of the COVID-19 pandemic, a stronger spotlight on equality across sectors and geographies, regressive policies and shifting public opinion. While the media calls out companies for gender pay gaps and celebrates breakthroughs in male-dominated industries, an equal and opposite force debates gender identity and pushes back against inclusive language.
At the same time, more investors are aware of the importance of narrative in scaling gender-smart finance. But while positive progress has been made, there are reasons to be cautious: cultural and social factors are affecting the pace of change, while the danger of over-hyped returns and pinkwashing accusations looms on the horizon.
There is no one-size-fits-all approach to the gender finance narrative. Different geographies, cultures and communities have differing levels of exposure to the ideas and language inherent to many initiatives around gender equity and deploying capital by, for, and with a focus on women or gender-balance.
Some actors are reframing gender equity as a key lever for other global challenges. This presents its own opportunities and issues (such as making gender an instrument to achieve other goals). We are still faced, however, with the demand for a compelling business case for investing with a gender and broader inclusivity lens to win over more conservative investors. There is still work to do on how stories about successful gender-smart businesses and funds are framed in the media. And much to continue to learn and share from behavioural science about how to shift mindsets.
“A lot of people aren’t interested in talking about women or gender lens investing. It’s actually a big turn-off for them. Mexico was ranked 122 out of 156 countries in terms of economic opportunity and participation of women. And there’s a reason for that: deep cultural and systemic bias against women.”
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“There is still an inability in a lot of conversations to use the word gender, so ‘human capital’ or ‘human rights lens’ are two things that we hear a lot.”
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“We need to see more compelling stories about why prejudice is bad, why diversity and inclusion is good. From the investment perspective, we need very clear stories to say ‘we invested in this business and this was the result’ but with the added human interest. Ultimately, if we consider the negative alternative to diversity and inclusion, it’s prejudice. But people are not generally prejudiced against people or groups that they know. So, what you need to do is to create that emotional relationship.”
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“The other area that is drawing a lot of attention from within our [philanthropist] community is culture and narrative building – investing in organisations and media outlets that are focused on elevating and amplifying the stories of women and increasing the representation of women’s voices within the media itself. I think that funders are increasingly seeing that as a pretty powerful lens to be able to advance the issues that they care about, and then are investing in that.”
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Recognising power dynamics, and beginning to talk about them
A small but growing group of investors and institutions across traditional and social finance are starting to talk about power dynamics, both internally within their own firms and more widely within investment processes, and as an entire system. This reflects a widening recognition that you have to be able to name and analyse these dynamics before you can incorporate data and set targets. While these conversations exist on a spectrum – some people are more comfortable than others with the language of power – that they are happening at all is a notable shift forward.
“People are naming [power] in a way that they didn’t before. I think the ‘power’ word has been socialised and contextualised, and it has helped that this has occurred at a time of structural injustice awakenings. We’ve benefited from that [language]: phrases like racial power, social power and gender power (or lack thereof) have helped people not to feel so defensive. When you look around a table you can ask: whose voice isn’t here? Whose perspective is not being represented in the decision making – not the consultation but the actual decision making?”
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“I think all institutions are having conversations. And it is partially around mirroring the language and figuring out that model. So for instance, at the bank, we have a whole set of courageous conversations that are about inclusivity. And power can be the other side of inclusivity. So you have that conversation. And you think about what is inclusive about a process and be really clear about the design of the process? And each step and how it is or isn’t inclusive? And what could change? You don’t have to say power in that whole conversation.”
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“We speak the language of power, since money is power. So, we speak the language of power. And so a lot of what we end up doing is translating for folks who don’t already necessarily speak the language of power in order to get more powerful players on their side.”
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Confusion around language can affect the uptake of investment strategies
With more firms, advisors and investors getting involved in gender finance comes the danger of muddied waters. From “gender lens investing” to “gender finance” and “gender-smart”; “JEDI” to “diversity and inclusion”; “gender integration” to “gender inclusive”; the range of terminology used can make it more difficult for investors to move forward decisively. Even the word “gender” itself has been used and interpreted in various ways. Add to this the lack of consistency around frameworks, rules and regulations and you risk investors giving up before they’ve even begun.
More players in the space also leads to more strategies, not all of which will be well-designed or managed. While some variety in quality is inevitable, it is important to ensure that outcomes can live up to narratives.
“The wonderful thing is that more and more people are moving into the space. But the complexity to that is that there’s more but less sophisticated and experienced families and advisors. So it really is becoming murky and mucky in terms of the terminology that’s used and the quality of many of the strategies that are being offered. The worst thing that can happen is a poorly-managed strategy being in this space, gaining a lot of capital from good marketing, but then not delivering either on performance or on the mission alignment that they market. And if that happens, [investors] will not have a good experience and we will lose them and it will take years to get them back.”
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“Whenever we were approaching family offices, it was much easier to actually start making them understand about impact investing, than gender lens. And it was also much easier to explain about environmental impact and other social impact metrics, than gender lens impact metrics. ”
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“You want to avoid people becoming critical of gender lens investing. Now people understand that it’s an exciting field, and there is a business case for it that can be substantiated even more going forward. But you definitely do not want to end up in a situation [...] where people do too much pinkwashing. And so that’s why you really need to make sure that you have accountability.”
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“I think that we need to be very clear, we need to start grouping strategies and make sure we’re comparing like with like, and one of the dangers that I do see is the watering down of what it means to be a gender lens investor.”
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“You can’t solve the problems through nomenclature; you have to solve the problems through actual strategies. I wouldn’t put a tonne of energy into trying to redefine the ESG framework because it’s a little bit flawed to begin with. It is about building bridges and trying to get more people involved. I think focusing too much on nomenclature ends up alienating people.”
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“We’ve started to change our language and not talk about gender lens anymore because people don’t understand what it means. Really, we’re not talking about gender lens, we’re talking about women. So we’ve tried to change that because the level of sophistication or experience in the space is so low, when you start using some language it can alienate people.”
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Gender lens investing is being framed as a risk mitigation strategy
Some actors are framing gender and diversity issues in terms of risk rather than opportunity or responsibility. This approach allows investors and companies to move past broad claims and identify tangible ways to support risk management and maximise returns, as well as impact. Framing gender in this way can also help shift it from being viewed as a social responsibility “initiative” to an inherent part of doing business.
This narrative shift sits on top of a growing social, cultural, and market risk: as consumers and workers demand more from companies and employers, those who do not realise that inclusivity is their responsibility risk getting left behind.
“The biggest challenge has been bringing people along on the core concept that adopting a gender lens into a business-as-usual investment framework is doable and desirable. The ongoing pushback on that has come from many fronts and from different angles, with people who either don’t believe in the role of capital allocation and investment decision making in broader systemic social change, or don’t think that it’s actually the role of investors to do this work.”
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“I have found that the opportunity argument has been well-utilised and investors hear it a lot. I find what often motivates you to cross the finish line in changing behaviours or strategies is when you start to feel that it’s a risk to not do it – that you might not be honouring your fiduciary responsibility or exercising your full ability to maximise returns if you don’t do it.”
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“A push that we’ve had for a long time that I do think has gotten some traction is looking at gender in the world and seeing it as a ubiquitous or systemic risk that all companies are exposed to. And then figuring out which companies are exposed to it in which ways, versus saying there’s some internal risk around gender and diversity that we need to track. That shift is really important for momentum, because otherwise, the presence or absence of women in a company is the only thing we could really talk about.”
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“One of my male team members recently said: “You know what, the business case has been made and we don’t need to keep doing that. This is just what it takes to be good investors, to be a good leadership team. And if you’re not there, we’re not going to try and convince you. We’re just going with the leaders because they know what the future looks like.”
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The gender narrative lacks urgency
With so many major global challenges battling for space on the political and corporate agenda, gender is at risk of being deprioritised by investment actors, particularly as the narrative around gender equality and inclusivity lacks the urgency of issues such as the climate crisis. With the milestone of reaching net zero by 2050, investment into climate solutions comes with a ticking clock that motivates investors to take a trade-off in price in order to achieve behavioural change. COVID exposed the need for more resilient supply chains, immediately. And while not having the same in-built deadlines, racial equity has also been propelled forward in the wake of the murder of George Floyd, at least in the US.
As of now, the field of gender finance hasn’t yet landed on the compelling narrative needed to move from billions to trillions. One key may be in reframing gender as a lever for change that sits across every other major global issue: by tapping into women’s talent, innovation, and economic purchasing power, you can accelerate progress across everything from climate and global supply chains to food and energy security.
“What climate has that gender doesn’t have is a future. Overall, the world of social justice doesn’t project clear futures. Finance needs a future to make a bet on. Climate gave them a future to make a bet against or on – a date when we are going to run out of oil or whatever. Gender doesn’t have that. And so, it’s all seen as chronic and you can’t make a bet on different things in the future.”
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“The world’s on fire. If it’s not a pandemic, it’s a war, it’s supply chains, it’s increasing interest rates, inflation, climate – it’s too easy to not prioritise gender. All of our leading thinkers have done a really good job of buttoning gender to these bigger overwhelming issues that we’re always facing. I think we have to do more of that.”
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“Gender does not receive the same sense of urgency. Fixing climate change is urgent. Improving gender is not secondary, not less important, but it’s less urgent. So we’ve tried to raise awareness on how we can tag on gender elements in sustainable finance: why is it equally important? What are the benefits?”
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“We’ve got to be building more bridges to folks outside of the core and we’ve got to get more male advocates. Men should be much more involved in thinking about gender. Particularly if they care about climate, let’s get them really thinking about gender as one of the levers that can be pulled for them to achieve some of their other priorities, even if they don’t care so much about women and girls. We know that gender is a lever that can be pulled on almost any issue, period. So let’s make that be something that is much better understood.”
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“Gender doesn’t exist in a vacuum. The number of things that banks are supposed to care about is just being screamed at us with so many different topics constantly. And I think the challenge around gender is: why is this more important with our limited resources?”
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Education and storytelling can turn compliance into advocacy
For the gender finance field to reach its potential it needs to move beyond tokenistic compliance towards real commitment. This involves not only sharing the genuine success stories emerging from gender-smart investing but also building a more nuanced picture of what good practice and success looks like. There is a need for more resourcing of initiatives to educate both the public and private sector around gender-smart vehicles, companies, approaches and success stories (and about the inherent biases in the system which keep us from realising the opportunity).
Peer influence matters. As more investors and advisors are vocal about normalising rigorous and effective gender-smart investing within their circles of influence, it will lay the groundwork for further investment.
“As much as the [guarantee] mechanism, I think, is working to some degree, it does still require us to constantly bring up the fact that women are a different market, that they face different risks, that they expect to be approached differently, that they don’t want just a marketing campaign, that they want products that are specific to them.”
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“I think we do need more research and evidence on these structural or deeper issues, on market barriers and power dynamics, on how the design of certain features in the investment world and the financial system have differentiated gendered impacts. How do they affect men and women and other excluded groups differently? Then it really needs to be translated into practical guidance and tools in terms of what we can do about it. It can’t be the gender experts doing this alone. It has to be the gender experts with the investment professionals working together.”
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“As a technical service provider, we’re not going to go and talk to a specific type of investor and convince them. It has to be another investor that’s considered their peer. So there has to be that leveraging across peer segments.”
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Building the business case, and beyond
While it can be frustrating to those who see that investing with a gender lens is both the smart and the right thing to do, it is still important for some to continue building the business case for gender finance and to present it in finance-first language. There is plenty of evidence available: one of many examples is an IFC study that found when VC firms increased female-partner hires by 10%, they saw 1.5% increases in returns for the overall funds and 9.7% more profitable exits.
The more concrete links that can be made between risk, innovation, opportunities for value creation, and company performance, the easier (theoretically) it will be to get larger institutions on board. Given the biases in the system, that still remains to be seen. But the “business case” argument says that rather than asking mainstream investors to change how they see and measure value, lead with financial returns and trust that impact will follow. Strong arguments have been made that building commitment tied to the business case alone will not be as sticky in an economic downturn, nor when increasing gender equity in a struggling firm doesn’t “pan out” with short-term financial returns. Evidence is emerging that real values-based commitment is stronger than business case when it comes to enduring change in investment behaviour.
“Fundamentally, most people are investing their money to deliver a return. And I think, as a sector within investing, we’ve not been particularly clear on the investment case behind gender lens investing. I think we’ve been very clear on the impact case and on the social benefits case. But I think we’ve been less clear on the actual investing case.”
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“To me, the unanswered question is: how might we build a stronger business case for gender lens investing to attract those capitals [sic] that are more traditional? I’m not talking about the impact investing ecosystem. I’m talking about traditional investors, where the money really is right now.”
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“I think that we’re still over in a side niche and that most capital is not paying any attention. And so we need to help mainstream financial allocators, and asset and product builders understand that they’re missing out on an opportunity, both for financial impact and also social impact. I’m not having any trouble unlocking my own capital. But if we want to actually make a difference, I think that we have to be paying more attention to the 95% of capital that is not paying any attention to us.”
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“A lot of the investors, if they see [writing/reports] from a more activist standpoint, it turns them off and they’ll have an immediate distrust of the data. Whereas if the discussion is more nuanced, they will actually spend time and effort looking into it and you’ll get an investor with a much more open frame of mind. Then they can actually contribute to solutions.”
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Strengthening the climate-gender connection
As momentum builds around net-zero strategies and the just transition, there is an opportunity to be proactive around pointing out the synergies between climate and gender equity. For those in gender finance, now is not the time to assume that these connections will be obvious to mainstream investors. Instead, it is a vital moment to push the conversation around the two interconnected themes forward – not with a victim narrative but with a solution-focused one.
“There is the narrative of gender being a vulnerability in the climate discussion, rather than an opportunity. People always talk about adaptation and resilience when they think about gender and climate. That’s obviously important but we also want to recognise the opportunities there.”
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“The just transition gaining traction is a good opening for us to shine a spotlight on the importance of gender considerations in that process. Every organisation is trying to figure out what they need to do on climate and we really want to be ensuring that we are around those tables and making sure there’s an explicit, not implicit, gender focus.”
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“When a climate solution has resonated with clients we’ve had better luck bringing them a reproductive health strategy. That’s because they’ve been paying attention to the Drawdown numbers and understand that there is a very clear through-line between reproductive self-determination and climate. It’s all connected – and that has worked from a messaging point of view. For example, we’ve worked with a family where the mother and the young adult daughter were very keen on a women’s health issue opportunity that we had. The father was happy enough to go along with it but what really sold him was explaining how it was connected to his interest in climate.”