Gender and Power in Pacific Impact Investing: A Gender Lens Investing Case Study
The five-year Pacific RISE program, an initiative of the Australian Department of Foreign Affairs and Trade, is building the impact investment market in the Pacific. The program, which concludes in July 2021, has promoted gender lens investing in partnership with nonprofit think tank Criterion Institute. The program serves as a case study in the “how to” of comprehensive gender lens investing, and has generated influential new insights and valuable resources for gender lens investors worldwide through several core approaches.
1. Developing a Comprehensive Gender Lens – a Pacific-focused Approach
Early in the program, the Pacific RISE team wanted to counter a narrow understanding of gender lens focused solely on women-owned enterprises. The team explored other ways finance could be used to influence women’s economic empowerment, such as supporting menstrual health or water sanitation projects (where women were the primary users or beneficiaries), identifying gender-based violence as a viable investment theme, and embedding gender in the COVID-19 response. This approach challenged local investment players to go beyond ‘box checking’, and built the capacity of intermediaries, investors and donor agencies to get more gender-smart.
“Pacific RISE focused on the strengths of the Pacific region and the needs of Pacific enterprises and communities, where traditional investment practice tends to start with investor needs as an opportunity for capital.”
The program also included capacity building for investors to better understand gender and for gender and social organisations to understand finance. “We provided Pacific-centric gender data and analysis for intermediaries to use alongside their financial analysis,’ says Amanda Jupp, Pacific RISE facility manager. “We also funded finance training for Pacific women’s and gender organisations to help them better engage with intermediaries and understand the role of capital in achieving outcomes for women.”
Pacific RISE focused on the strengths of the Pacific region and the needs of Pacific enterprises and communities, where traditional investment practice tends to start with investor needs as an opportunity for capital.
2. A Gender Lens Addresses Bias and Power
A comprehensive gender lens pays attention to biases and power dynamics across the investment process, uncovering embedded structures in traditional finance that have influenced impact investing. This insight – once considered fairly radical – is now gaining traction with the gender lens investing community, in large part thanks to Pacific RISE and Criterion Institute’s work.
The program team analysed the Pacific RISE portfolio midway through the program, scrutinising each deal’s core business model, relationship dynamics, risks, due diligence process and red flags. This analysis uncovered dynamics of power that privileged traditional finance models and investors – and which impacted the success of deals.
The most successful deals incorporated trust and strong partnerships between stakeholders, alignment of incentives across businesses and investors, clarity regarding investor and enterprise needs and timeframes, and contextualised expectations and commitments – a more equal dynamic of power across the investment process.
“The most successful deals incorporated (...) a more equal dynamic of power across the investment process”
From this analysis the team designed a framework to assess and address dynamics of power within the investment process.
3. Identifying Alternative Financing Approaches
In seeking to address needs on the ground, Pacific RISE found that the greatest demand for capital was coming from smaller Pacific enterprises that were unable to access traditional forms of finance. Investing individually in these businesses, however, was viewed as overly expensive and risky by many investors. As the program progressed, and incorporated increased attention to dynamics of power, it became clear that developing market-focused finance vehicles addressed power imbalances and provided a stronger model than traditional single-investment deals.
Pacific RISE’s portfolio supported promising non-traditional approaches. For example, models designed to distribute funds to smaller enterprises or artisans, pooling funds from multiple investors. The investor profile was broadened to include Australian foundations and family offices and a global pool of crowdfunding donors. The team also identified opportunities to fund the creation of market-focused finance vehicles with a gender lens – for example, exploring where finance can support menstrual health and waste recycling.
“Our menstrual health trade finance vehicle demonstrated a gendered problem,’ says Jupp. “It’s an example of working with Pacific organisations to create something that’s investable but doesn’t require the businesses to go into debt or to change.”
Ultimately, Pacific RISE sought to identify how investment could address market challenges in addition to business challenges, or, in the words of Joy Anderson, Criterion Institute’s President and Founder, “fix the capital, not the company”. This is a critical shift towards increasing the long-term sustainability and impact of gender lens investments in the region.
“Pacific RISE was looking for the high-growth deals for the first two years. This approach came from the assumption of what impact investing is and what makes it work: finding deals that met the needs of investors,’ says Anderson. “Those assumptions have now been challenged.”
If you’re involved in designing investment vehicles or investing with a gender lens, and would like to learn more about the findings of the Pacific RISE program and the implications for global gender lens investing, register here to attend the workshop on 8 July, 2021.