Advancing Gender Lens Investing Standards for the Field

As the 2X Global member meeting kicks off, 2X’s Sana Kapadia and Criterion Institute’s Joy Anderson discuss the evolving standards landscape and why, to reach its full potential, the field needs to do more to support action and hold investors accountable for whether impact is achieved.

Over the last two decades the field of gender lens investing has emerged as a systems-change effort to drive progress towards gender equality, and to specifically have gender matter in investment approaches and hence decision-making of financial markets. However, it has not yet reached its potential due to challenges with the quality of implementation.

At its core, the field offers the potential to advance positive change around a wide range of issues tied to gender equality and justice. This is why it has long sought to capture impact beyond the representation of women on boards or a count of women-led businesses. Naming specific gender-transformative outcomes has convened a robust community around a shared agenda and, in recent years, increasing discourse among those in the field of gender lens investing has shifted from why gender lens investing matters, to what ‘good’ gender lens investing looks like.

Efforts to date

Leaders in the field have since taken steps to improve the quality of implementation through efforts targeting what ‘good’ looks like. These efforts have generally fallen across three main approaches: developing frameworks to allow investors to mainstream gender in their investments; screening which funds “count” by requiring that the funds are explicit about having an intentional gender screen for their investments; and focusing on impact metrics.

In efforts focused on building and implementing frameworks, many tools (e.g., EWB, GEM, Sweef Capital Gender ROI) provide a framework to support investors to mainstream gender in their operations. Across the frameworks, they generally aim to assess commitment to diversity, gender equality, and women’s economic empowerment, and identify and measure gender equality mainstreaming strategies within portfolio companies. These tools share the belief that mainstreaming gender in the operations will result in improved decision-making and improved profitability, and therefore, gender mainstreaming is considered a value creation activity.

Other tools, including Veris’s yearly report on gender lens in public equities and Project Sage from the Wharton Social Impact initiative* provide overviews of funds that “count” as gender lens investing funds. Both reports require funds to identify whether and how they apply a screen for their investments. 

Efforts to create new impact metrics – including IRIS+ from the Global Impact Investing Network, Sustainable Development Goals, Impact Management Project, and the 2X Criteria, to name a few – are important steps for defining impact goals, measuring progress, and holding investors accountable for whether that impact is achieved. 

Taking a further step within these global efforts, over a decade of conversations have been taking place looking at opportunities within the processes, structures, and analysis of finance to deepen the impact of gender lens investing. Acknowledging that impact metrics tied to outcomes will take years to measure, these conversations have highlighted the value of the addition of short-term indicators that track how power, privilege and bias are being addressed within investment practices as a mechanism to increase the confidence that the longer-term gender equality outcomes will be achieved. Ultimately, without paying attention to identifying and tracking specific and measurable changes in practices, the efforts to advance the quality of gender lens investing implementation will be incomplete. 

From good to better to best

An independent and universally available 2X Certification will create more transparency, accountability, and credibility in the field of GLI by differentiating levels of rigor, providing a benchmark for different global actors in comparison to their peers, and illuminating concrete areas of improvement. This will enable investors to move beyond self-assessments through to third-party verification, assurance, and certification.

2X Certification is intended to increase the quality and quantity of gender-smart financing, through greater uptake of certification, driving the behavioral and practice changes required to qualify for, maintain or upgrade certification. Ultimately this will support enhanced capacity of the global investment community to deploy gender-smart capital with more depth and impact.

Alongside this, to create transformative impact, we must uncover how power, privilege, and bias operate in finance as part of good gender analysis. We must then identify specific practices that disrupt those power dynamics and are therefore more likely to lead to better outcomes. Criterion’s Standards of Practice make the negative and usually hidden impacts of power, privilege and bias visible within investment practices, and provide concrete steps to address them.

The Criterion system is not a simple scale for ranking and rating different investments or fund managers. It is intended to provide nuanced, context-specific guidance about finance practices so that these can become more equitable, for those who have the power to set a high bar and demand changes to traditional investment norms: ‘standard setters’. In general, these standard setters are asset owners and managers who are deploying capital to investment funds, and Donor agencies and philanthropists who are funding technical assistance or other incentives for investment managers in blended finance. 

Get Involved

2X Certification and Standards of Practice come at the implementation challenge from slightly different angles. 2X Certification solves for more harmonisation across the field of gender lens investing; Standards of Practice bring in a critical layer of context-specificity. Both work together, building on existing efforts to drive the field forward.

As we continue to develop both systems, we invite gender lens investing practitioners and standard setters to contribute their expertise in future design sessions for both 2X Certification and Standards of Practice, and develop a more nuanced understanding of how to use their power to advance the change they seek.

Once seeing where power, privilege, and bias hold back social change progress within investment practice – and shifting these practices accordingly – becomes normalized within gender finance, the entire field will benefit.   

*Project Sage has started the next round of research as Project Catalyst. Send us an email if you are interested in contributing to the work.