With billions as bait, development financiers seek to hook private investors on gender-lens investing

ImpactAlpha Editor

Jessica Pothering

ImpactAlpha, November 16 – Private equity and venture capital fund managers have an added incentive to apply a “gender lens” in their investment strategies: billions of dollars in capital dedicated to advancing women as entrepreneurs, employees and consumers in emerging markets.

Two initiatives championed by development finance institutions and development have nearly $5 billion to invest in intermediary funds as well as directly in enterprises. The 2X Challenge, backed by 14 development finance institutions, or DFIs, in North America, Europe and Asia, has mobilized $4.5 billion. Those commitments surpass the initial 2X Challenge goal of $3 billion for gender-lens initiatives by 2020. Of the total, $2.4 billion was committed by participating DFIs and $1.2 billion by private investors.

The U.S.-based International Development Finance Corp., a founder of the 2X Challenge, committed this year to spurring an additional $6 billion for gender-focused initiatives globally.

To encourage established private-equity funds focused on emerging markets to commit to 2X criteria for women’s employment, entrepreneurship and leadership, CDC Group and other DFIs including DEG, European Investment Bank, FinDev Canada, FMO, Proparco, SIFEM and SwedFund are co-investing in a series of designated “2X Flagship Funds.” In September, Development Partners International’s ADPIII became the first such fund. CDC had earlier anchored the fund with an $80 million commitment.

“We want to emphasize the benefits that gender-focused investing can provide, not just in terms of returns, but in helping to drive economies, unlock opportunities, and improve the quality of life for women across Africa,” DPI’s Runa Alam said at the time.

CDC has developed metrics for gender impact in partnership with the Global Impact Investing Network.

A separate effort, the Women Entrepreneurs Finance Initiative (We-Fi), an alliance of International Finance Corp. and emerging-market development banks, has raised $355 million from donor countries and invested $300 million in 18 fund managers, banks and companies.

The World Bank’s We-Fi effort, originally touted by Ivanka Trump, Angela Merkel, Justin Trudeau and others at the G20 summit in 2017, is working to mobilize $3 billion for women entrepreneurs in emerging markets. The World Bank Group, which includes the IFC, has allocated $91 million of the $355 million raised so far. Partner development banks include the AfDB (Africa), ADB (Asia), EBRD (Europe) IDB (Latin America) and the Islamic Development Bank.

We-Fi-backed investments need not be women-led. Lahore-based venture capital firm Sarmayacar, for example, pledged to expand the pipeline of women entrepreneurs in Pakistan while in Lagos, TradeDepot committed to increase the number of women-led businesses on its supply-chain platform. 

Dmitriy Fotiyev contributed to this article.