Building Country-Wide and Context-Specific GLI Models: An Interview with Tim Radjy
Tim Radjy is Founder and Managing Partner of the AlphaMundi Group and Chair of the Gender Lens Initiative for Switzerland (GLIS), an initiative housed by the non-profit association Sustainable Finance Geneva (SFG). It aims to enhance Switzerland’s contribution to SDG 5 (Gender Equality) by raising awareness around gender lens investing in Switzerland and beyond. Launched on International Women’s Day in March 2021, the GLIS relies on an Academic Research Committee (ARCO) to steer market research, and an Investment Solutions Committee (ISCO) to steer financial innovation. Following his session at the 2022 Virtual Programme, Tim shared his insights into scaling gender lens investing (GLI) in emerging markets.
Tell us about market creation opportunities for gender lens investing in emerging countries.
Market building in emerging countries can help develop opportunities and a deeper understanding of GLI. There is a need to work with the entire value chain of capital, from investors to portfolio companies. Labels based on the 2X criteria can help provide a rallying call around clear industry standards. Lastly, the role of both governments and associations should not be overlooked – as both can play a key role in promoting GLI.
The AlphaMundi Foundation (AMF) developed a Gender Smart Technical Assistance Program, and all the AMG portfolio companies are recommended to engage with the program. The program starts with a diagnostic (assessment of gender lens opportunities), the second phase is the development of an action plan, the third is implementation, and finally, an assessment of the success of the implementation and remaining gaps. The program can take 7-15 months to complete. Such programs have a ripple effect, across companies and countries, and also with our investors and donors.
Industry standards for developing markets are very important, but we see a gap on similar standards for developed markets, including Europe. What could be a meaningful industry standard for Europe?
“Some labels, such as Edge, are relatively easy to engage with from the start, but encourage continuous improvement – such approaches can ease barriers to entry, as there is a low threshold for organizations to dive into it, but then an increasingly high threshold to stay in it.”
There are international labels that are being used and developed in the European context, including Equileap’s index in the Netherlands, and the Edge Foundation certification in Switzerland. Some labels, such as Edge, are relatively easy to engage with from the start, but encourage continuous improvement – such approaches can ease barriers to entry, as there is a low threshold for organizations to dive into it, but then an increasingly high threshold to stay in it.
The new EU sustainable finance disclosure requirements (SFDR) primarily focused on the environmental side, and now is starting to look at social issues. Earlier this year they published an initial social taxonomy framework, and we hope to see a strong gender lens component. It’s one thing to create global standards, but another one is to make sure that they are enshrined in the domestic agenda and in the national legal framework. Relevant public sector agencies should be clearly identified so companies know whom to turn to, where to get support and what laws to follow.
What potential do you see for gender bonds in Africa, and what are the structural constraints?
Currently it’s quite difficult to issue a gender bond, and easier to issue a broader sustainability bond in which there is an explicit gender component. Within the African context, and in emerging markets in general, looking at impact investing, the bulk of capital is coming from Europe or the US, in part because most of the global wealth is in the US/Europe. Local financial markets have not yet shifted gears to invest in sustainability. Banks and pension funds in Africa capture savings but they usually purchase government bonds or invest in the top 10 companies in their stock exchange. They do not invest the savings in sustainable enterprise and even less so in women led-enterprises.
This requires a big cultural/mindset shift, and this is where the Global Steering Group for Impact Investing (GSGII) of the G7 can play a big role, through their National Advisory Boards (NABs). NABs create an ecosystem of senior leaders that engage in public-private partnerships to develop new policies and products for impact investing, and gender lens investing is a key feature of their agenda. We are on the cusp of change, due to the shift in emerging market economies investing in their own sustainable future and reassessing the way they've been using their limited financial resources. Secondly, as government agencies get support from international bodies, we will probably see an increase in sustainability or impact-related bond issuances over the next 5-10 years.
“A good first step is to bring everyone around the table and invite senior experts from other countries where things have worked, and then adapt what’s worked into the local setting.”
How do you build the ecosystem? How do you increase understanding to build capacities on impact investing?
In smaller countries, you can either join a regional or cluster NAB, or create your own, if you have a big enough market. For example, in Central America, a single NAB was created for a number of countries. The GSGII can help mobilize senior leaders from other countries, facilitate private public partnerships. A good first step is to bring everyone around the table and invite senior experts from other countries where things have worked, and then adapt what’s worked into the local setting. Inspiring people to believe that it's possible and that it is desirable is the first step in getting things done.
In building the GLIS, or when talking about the National Advisory Boards (NABs) on impact investing, what are some of the ingredients that are required, what are the pillars that help create an enabling environment?
Go for the path of least resistance. When you're launching a new initiative, you don't want to get bogged down. In stage one, focus on a coalition of the willing: platforms and organizations that are receptive and enablers. In stage two, you can start to bring in those that need more convincing. In the GLIS example, we started by asking for a quote of support, and we were able to start a dialogue around that. Once you start, you should work to maintain momentum, develop an implementation plan and an adequate resource plan.
To bring the mainstream into the impact and gender lens conversation, you need 4 things:
1. Market data establishing the business case, the bottom-line rationale for doing it.
2. Industry standards that can help actors adopt the right policies quickly. Most often institutional investors want a cookie-cutter/template approach that can be easily applied.
3. A range of financial products to provide investment solutions across asset classes, themes, and sectors. Product labels will make capital allocation easier for institutional investors.
4. Reduce the barriers to entry, ask for easy commitments initially, such as committing to GLI principles, ensuring they participate only in gender diverse panels, sponsoring events or hosting events for their staff and/or clients on GLI and sustainability approaches.
Find the latest GLIS publications HERE.
5 October, 2022: Attend Gender Equality in the Financial Industry: Quo Vadis? For more information click here
