To many, impact investing connotes low or no returns. Despite the skepticism, these investments made with the goal to generate a social or environmental impact alongside a financial one, is a growing market. About $60 billion worth of impact investment assets are under management, according to the Global Impact Investing Network – which provides much-needed capital to some of the world’s biggest challenges, in sectors ranging from agriculture to education. And some of the biggest returns lie with women.
A survey of impact investors by the Global Impact Investment Network found that a third of respondents explicitly target gender equality as an impact theme, and with good reason. Investing in women isn’t a noble act of charity, but a great business opportunity. A new study from consultant Cambridge Associates and the Global Impact Investing Network found that private equity and venture capital funds with impact missions produce about the same returns as funds for which the goal is simply high returns.
Marianne Haahr, director of the Global Opportunity Network, shared with me five ways you can invest in women, and how this helps the world.
1. Invest in ‘women’s crops’ In the developing world, households are more typically divided along gender lines. Women are responsible for feeding the family, and men manage the money that comes from the ‘cash crops’. Traditional investments into smallholders tend to back the most lucrative assets, like tobacco, which are held by men, but focusing on subsistence crops ensures that women can feed everyone and then sell the surplus for profit. Investing in ‘women’s crops’, such as maize, cassava and millet, empowers women within their own families and beyond the household. Haahr says that “some women form cooperatives so they can market their produce at better prices, and this gives rural women a stronger voice locally.”
2. Back micro-insurance
“Poor people don’t live hand to mouth – it’s a myth,” Haahr explains, “they’re brilliant portfolio managers.” She’s referring to the sheer diversity of crops and livestock women invest in when they have money from the most recent harvest. Micro-insurance provides protection for households on low incomes, so that when there’s a crisis – the rains don’t fall or a pest hits the crops – women aren’t forced to sell off their assets, such as the chickens and cows. “She’s lived through enough crises to know that her best approach is to diversify, so micro-insurance allows her to maintain that over the long-term” adds Marianne.
3. Pave the way from microfinance to microsavings
Led by the model created by Grameen, microfinance has demonstrated significant returns for women who demonstrate, time and again, their capacity to lift their families out of poverty. “The other side to the coin is microsavings” says Haahr, who points to the success of mobile banking in Africa as crucial in giving women more control over their finances. “When women have cash, they are often pressured to spend it or give it to a male family member, so if you invest in low-barrier savings options then you’re giving women a greater say in how their money is spent, and that’s better for the entire household.”
4. Invest in leadership “Women in leadership positions are role models for the next generation, but we have to do more to get them there,” Haahr says. In addition to seeking out companies that target women as beneficiaries, it’s easy to invest in women by choosing those that have good internal policies on gender, and are led by women. This is great for giving women the backing they need to flourish in leadership roles, and research by Mckinsey also shows that it’s also great for business – companies with gender diversity outperformed those who don’t by as much as 15 percent. Another report showed that Fortune 500 companies with at least three female directors saw a return on invested capital increase by at least 66 percent. “Ask fund managers for options that are led by women, and make it clear it’s one of your key investment criteria”Haahr says. It’s clearly an untapped market, as a findings show that only 2.7 percent of VC funding goes to female-led companies at the moment.
5. Invest in the long term Impact investing doesn’t always produce returns overnight, but investing with an eye to the long-term is more likely to yield financial and social outcomes as far as women are concerned. “You can pick the length and return of an impact investment, but it’s more often the case that you’ll see a higher return over ten years than, say, one year,” Marianne explains. “If it’s important for you to see comparable returns, then have your eye on a long term strategy. Many of the challenges women face today will take a generation to solve.”
With some of big players, such as JP Morgan, setting up impact investment funds, and the rise of gender-specific ones like Pax Ellevate Global Women’s Impact Fund, , there’s no shortage of opportunities to make women a part of your investment strategy – with results that will improve lives as well as your investment portfolio.
This article was written by Emma Johnson from Forbes. This reprint is supplied by BNY Mellon under license from NewsCred, Inc.
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Emma Johnson, Contributor