Ticking boxes or setting goals? Gender lens investing is a dialogue

Finnfund has since April 2019 invested over 121 million euros in companies that promote women’s empowerment in developing countries. I stopped to think what we have achieved in the past two years: We have joined two gender finance communities, implemented gender equality issues into our investment process through our gender statement and participated in defining the 2X criteria for gender investments. We have also organised training on gender equality issues within our own organisation. Yet, I have mixed feelings: On the one hand, it feels like we are just getting started. On the other hand, gender equality issues have quickly become a normal part of our work.

From risk assessment to setting goals

Supporting women’s empowerment is nothing new to Finnfund. For years, we have invested in projects with positive impact on women. For instance, financial institutions that offer microloans have notably impacted women’s empowerment, for example, by enabling women to found businesses. The assessment and monitoring of the situation of women has been part of our responsibility team’s daily operations for a long time if not always. We ensure that the operations of companies we fund do not discriminate against any groups, including women. We have always assessed risks related to companies’ operations from the point of view of women especially. The biggest change is that in recent years, we have also begun to assess and measure the impact our investee companies have on women.

Today, we always discuss how a company can support women as employees, managers and customers. We especially examine structures that enable the equal engagement of women. We highlight best practices and consider matters that still have room for improvement.

Criteria make diverse approaches possible

The 2X criteria defines what investing in women actually means. The criteria for women in leadership roles is for example one that our investee companies quite often fulfill. They either already have women in leadership roles and on the board or intend to include women in these higher positions. It is becoming increasingly rare to encounter situations, in which there are no women in leadership roles. However, these cases do still exist on certain sectors and in some countries.

A cross-section of the criteria makes discussions during the investment process more diverse. Even though most of the beneficiaries of a Sri Lankan life and health insurance company Softlogic’s life assurance product are women, we brought up gender equality within the organisation itself during the investment process discussions. We requested that Softlogic would commit to meeting other 2X criteria than the one on how much the service benefits women. As a result, Softlogic has been working on an ambitious gender equality plan that defines the company’s goals for engaging women as employees and leaders.

Ticking boxes or looking to the future?

This might be one of our biggest moments of revelation: we are no longer simply ticking boxes and trying to meet existing criteria but engaging in dialogue for the future with potential investee companies. During the investment process, we review a company’s current situation but, above all, the company’s target level and ambition regarding the empowerment of women in the company. We seek initiatives that support working women at all stages of life. We pick up best practices from mentoring programmes, recruitment goals, practices regarding employees returning from maternity leave and safety precautions for employees’ journey to and from work, for example.

Our portfolio companies have great best practices and some of these companies have turned out to be true pioneers of gender equality. For example, a Kenyan company Penda Health stands out because women make up almost 70 per cent of the company’s personnel. Women are working at all levels in the organisation, from support services to the board. Half of the management team are women and, in fact, the CEO is a woman as well. This is not a coincidence but a result of determined work.

More and more financiers are investing in equality

Integrating equality issues in the already massive due diligence process raised some questions. How would companies feel about our standards becoming even higher? Can companies find the right people to discuss their level of gender equality and future goals regarding equality issues? Are we able to ask the right questions, set reasonable goals and give good advice?

My concerns proved groundless. I must admit I was surprised how easily the subject has been brought up in discussions and how companies are used to dealing with equality issues. Oftentimes, we have not been the first ones to ask questions about gender equality – and we certainly will not be the last. More and more financiers are assessing their investments’ impact on gender equality. As a result, companies applying for funding must also consider their own equality strategy. And we can help them with that. Being classified as a 2X project is seen as a confirmation of a company being on the right track. The subject gains even more importance if other financiers are interested in it. The subject is taken seriously because companies know it will be brought up on every financing round.

Sights set on businesses founded and owned by women

Currently, our biggest challenge is to find women-owned companies that fit in our company size category. One of our 2X projects this year is Kasha, an e-commerce platform for female health and sanitary products operating in East Africa, founded by a woman. The management of the company includes several women and, in fact, Kasha is for now our only project that meets all the 2X criteria. We have also invested in a company in Myanmar called Proximity, whose other founder is a woman. However, many studies show that female entrepreneurs have much harder time finding funding than their male counterparts.

I am sure that financiers’ increased interest in investing in equality will inspire women to found and grow their own businesses. This is why we want to also highlight women-owned businesses – I believe in the power of example!

Kaisa Alavuotunki
Head of Impact, Finnfund

To read more

Ministry for Foreign Affairs of Finland: Finnfund’s investments empower women in developing countries
It pays to invest in women

Kaisa Alavuotunki Director, Impact and Sustainability kaisa.alavuotunki@finnfund.fi