Should Gender be ‘Material’ to Investors?

Prior to SIPA, I worked with women workers who were in the informal sectors in emerging and developing market contexts. Most of these women were microentrepreneurs or operated Micro and Small businesses (MSBs) that were not registered consequently falling in the category of informal sector. This also meant that access to resources for these enterprises was limited since they not only fell through the gaps of public policy by the nature of their informality but also were overlooked by private service providers. Through my work, one common reflection was the lack of financial products that were gender sensitive since women were deemed risker. Moreover, women in the informal sector were more likely to be excluded from markets given that they are employed in low-paying and insecure jobs. My work provided me with an overview of a micro challenge that results from a lack of gender-sensitive financial products.

Through my research for this course, I got an opportunity to look deeper into the macro factors of investing in gender equality. The story does not change when we move to a macro-level analysis. Despite the well know benefits and opportunities of having gender-sensitive financial products, through my research in this course it has become evident that gender risk is still not considered when making investments. The pandemic has highlighted that across all contexts, the impact of a crisis falls disproportionately on women and is not gender-neutral. The economic and human capital risks as an outcome of the crisis and its impact on investments have all been well documented. However, the impact on gender equality is still yet to be reflected in investor behaviors. This lack of gender-sensitive investment is particularly shocking at the sovereign level that has committed to gender equality through global agendas. Through our research, we found that the number of sovereign financial products promoting gender equality is not enough to bridge the gender gap.   The gap in gender-sensitive financial products is stark which reflects the micro-level outcomes, especially in the emerging markets context.

Gender equality should be ‘Material’ to all levels of investors since the economic outcome of women’s drop in the labor force is well known and the externalities well quantified. There are more externalities that are associated with a lack of gender-sensitive investment strategies both for private and public sectors. Not having a gender-sensitive analysis in investment strategies can result in a large workforce underrepresentation. Gender-sensitive investment not only promotes diversity but will also have an intergenerational impact on human capital as research has shown that women tend to divert their income to children’s education and wellbeing.  Investing in gender-sensitive infrastructure also remains critical as it can mitigate risks during the time of crisis as we faced during the pandemic.  There are many more reasons why gender should be ‘Material’ for investors that are beyond the scope of this reflection blog.

Through my research and my courses on sustainable finance and ESG investing, it has become evident that there is a large gap in gender analysis in investment strategies despite social and environmental impact taking center stage in investment conversations. Therefore, there is a need to discuss further and produce more evidence on how Gender should be material to investors.