by Juliet Blum

Jessica is a Senior Investment Manager at DEG (KfW Group)

  1. Can you tell us more about the 2X Challenge you’re chairing?

The 2X Challenge was launched by a group of Development Finance Institutions (DFIs) at the G7 Summit in 2018 as a joint commitment to invest at least USD 3 Billion with a gender lens until the end of 2020. 

At the time it really felt like a challenge – but by joining forces and developing practical investment tools, we were able to accelerate change very quickly and within only 2 years we had already surpassed that initial target by collectively mobilizing USD 4.5 Billion in private sector investments that benefit women in emerging markets. 

The 2X investment criteria are today a global standard for gender lens investing and have been fully integrated into the IRIS+ framework, which is the impact management & measurement framework of the GIIN, the Global Impact Investor Network.

  1. Within the field of impact investing, what role does gender play?

Gender lens investing is a new megatrend rapidly gaining traction across the global field of investment and finance. Interestingly, it has not only become a priority for impact investors, but mainstream commercial investors are increasingly recognizing that on the one hand, inequality is a systemic risk and on the other hand, that there are important upside opportunities of investing in women’s empowerment. Gender lens investing resonates with investors across the risk-return-spectrum because there is a strong impact case as well as a strong business case for investing with a gender lens. The data is compelling and when you start the journey you actually experience the opportunities pretty quickly.  

Investments in women are associated with important ripple effects at the micro, meso and macro level – creating value not only for women and their families, but also for communities, companies, the private sector more broadly, as well as the macro economy. At the same time, social justice movements around the world, the climate crisis and the Covid-19 pandemic make a strong case for building more equitable, sustainable and inclusive economies. Gender lens investing is an opportunity for all of us to put our money where our mouth is. 

  1. What are in your view the greatest challenges we are still facing when it comes to investing in women?

A key lesson we have learned in the 2X Challenge is that intentionality matters. The business and impact case are strongest when women and diversity more broadly is valued. Gender lens investing is about valuing women rather than just counting them. To really move the needle, it is important to incorporate gender analysis into financial analysis and resist the temptation to simple tick more boxes on our due diligence check list. 

Related to this, there is a trend towards applying a power lens to investing. This work has been spearheaded by Joy Anderson at the Criterion Institute. A gender lens ultimately reveals the patterns that keep systemic inequities in place. So, looking at gender comprehensively means that you also look at other dynamics such as racial equity. Joy Anderson at the Criterion Institute has spearheaded interesting work applying a power lens in finance to analyze how power dynamics shape the way we structure deals, how we assign value, and where biases and privilege are informing decisions and masking risks and opportunities in the market. 

In my own PhD research, I have found interesting patterns in the current state of play: Investors are now increasingly recognizing the imperative of addressing gender and racial bias in capital allocation to entrepreneurs. However, there is a notable focus on the promotion of women’s empowerment through investments where women are the beneficiaries rather than the custodians of empowerment.  In other words, while there is now a growing focus on women entrepreneurs as beneficiaries of investments, the industry is still hesitant when it comes to putting money into the hands of female fund managers and putting them in charge of investment decision-making. So the change I’d like to see in 2021 is that we start backing more women as fund managers. Genuine empowerment includes holding power over investment decisions.