Corry Van Gaal from Global Affairs Canada, Durreen Shahnaz from IIX and Wharton's Sherryl Kuhlman discuss how empowering women can reduce risks and enhance overall outcomes for impact investors.

Gender equality by 2030 is one of the 17 Sustainable Development Goals (SDGs) that the United Nations has identified. However, the U.N. faces challenges in raising the $5 trillion to $7 trillion needed annually to achieve those goals, and private sector investment is critical to fill that funding gap. Persuading private investors to back projects that advance gender equality calls for concerted efforts to show that empowering women could reduce risks and enhance overall outcomes, especially in creating sustainable peace in conflict-affected regions around the world.

The Knowledge at Wharton podcast series From Backstreet to Wall Street focuses on women, innovators and entrepreneurs who are building sustainable peace. In this episode, three experts share their insights: Corry Van Gaal, deputy director of the Impact and Innovative Finance group at Global Affairs Canada, a government agency; Sherryl Kuhlman, managing director of the Wharton Social Impact Initiative; and Durreen Shahnaz, founder and CEO of the Singapore-based Impact Investment Exchange (IIX), a social stock exchange and the world’s largest impact investment private placement platform. (Listen to the complete podcast above.)

Two years ago, Canada announced its Feminist International Assistance Policy, which lays out a focus on gender equality and the empowerment of women and girls. That policy had pledged that 95% of Canada’s bilateral international development assistance initiatives would target or integrate gender equality by 2021 and 2022. It achieved its goals for that policy in just one year after its launch, according to Van Gaal. In particular, this program includes the empowerment of adolescent girls, and it has “a strong focus on the fight against sexual exploitation and abuse, and the promotion of gender equality and humanitarian action,” she said.

Women account for a larger share of the world’s poor — especially when they are girls or young women or even elderly women, said Shahnaz. Gender inequality is one of the big factors that cause conflicts, and therefore, empowering women with livelihoods is the way “to build sustainable peace from the ground up,” she added. “The only way we can meet this gap is to bring private sector into it. We have to make sure that the private sector learns how women empowerment can reduce a lot of the financial risk, and the political and the social risks.”

Impact Investing and Peace Building

A McKinsey study found that women’s economic empowerment could add $12 trillion to global growth by 2025. It is especially critical in areas where poverty and inequality continue to fuel conflict. In order to build sustainable peace in today’s world, market-driven solutions and women have to be part of the equation.

Van Gaal said her group is piloting new approaches and partnerships with financial institutions and businesses to support inclusive private sector development in low-income countries. The Canadian government and other donors are exploring innovative approaches to tap the private sector and banks to help create jobs and opportunities for vulnerable communities around the world, and also the social and economic infrastructure to bring peace and reduce conflict, she added.

“We have to make sure that the private sector learns how women empowerment can reduce a lot of the financial risk, and the political and the social risks.” –Durreen Shahnaz

The lack of access to services and finance in conflict-affected areas puts a strain on other parts of a country and on neighboring countries as people begin to migrate, said Van Gaal. The Canadian government saw opportunities in that situation to attract the private sector and financial investors to those regions. It attempts to do that through two new developmental assistance programs it launched in 2018 — a sovereign loan program, and an international assistance innovation program. “The intention behind these programs is to give Canada greater flexibility in working with new partners and in helping to de-risk some of these investments,” Van Gaal explained. Global Affairs Canada had committed 1.5 billion Canadian dollars over five years, and $493 million annually thereafter.

The Canadian government found that it could help private investors brave the risks of entering conflict-affected areas if it provides concessional finance, such as low-interest, long-term loans, first-loss guarantees or other mechanisms. “Those would help give investors the confidence that if they are interested in going [into conflict-affected areas], we can work alongside them to help make the risk profile of those investments more attractive,” said Van Gaal. At the same time, Canada also wanted to ensure that it is able to achieve the desired development impact, particularly for women, she added.

Shahnaz said an “an incredible correlation” exists between organizations working at the ground level in creating opportunities for especially women, and the role they play in creating and sustaining peace. She encountered that when the United Nations tapped her organization a few years ago to work in conflict-affected areas in Afghanistan, Indonesia, Myanmar, Nepal, Pakistan and the Philippines. Studies have shown “a positive correlation” between country rankings of global peace and gender equality, she said. Women play a big role in mitigating the risks investors face in conflict-affected areas, she added.

IIX last year launched its Innovative Finance for Sustainable Peace Initiative at the U.N. General Assembly. Shahnaz listed its three objectives: One was to use the financial markets to drive sustainable peace across the world by creating what she called “business-worthy companies, and equal communities.” The second was “to embed a gender lens into the global peace dividend,” and to recognize women as not victims, but part of the solution for peace building, she added. The third goal was to galvanize the key stakeholders from both public sector and private sector — and the philanthropic community — to jointly create innovative financial products for peace.

In her previous posting as Global Affairs Canada’s team leader of private sector development in Bogota, Columbia, Van Gaal’s role was to help connect women farmers to markets in conflict-affected areas. Back then in 2015, rehabilitating violence-affected farmers was a crucial part of the peace-building process in Columbia. Van Gaal learned to “walk the talk” after she and her husband, Luis Meneses, formed a firm called MAMO Botanics, a social business that aims to help Colombian farmers grow environmentally sustainable crop alternatives to coca, the plant used to make cocaine. The Cacay nut they grow is seen as a miracle nut as its oil has anti-aging properties, according to the firm’s website.

“Often we can get into a situation where we’re reporting on just process and activities versus real outcomes.” –Corry Van Gaal

Measuring Impact and Progress

According to Van Gaal, measuring the outcomes of her organization’s efforts in gender equality is a challenging task. “Often, we can get into a situation where we’re reporting on just process and activities versus real outcomes,” she said. A combination of several activities is required to achieve the desired outcomes, such as the intention, strategic focus, the quality of the management teams, and even the gender equality of the organization trying to achieve these goals, and that of the government that is trying to implement new policies, she explained.

As part of its efforts to sharpen the outcome indicators at a project level, Global Affairs Canada is working to develop a “development impact framework that is prescriptive and concrete about what it is we want to achieve when it comes to gender outcomes,” Van Gaal continued.

Shahnaz agreed with Van Gaal that it is difficult to measure women empowerment in particular, “because women have been systematically excluded from official systems and the formal economy, especially in developing countries.” Even in the developed countries, “the threshold is very low” in the various indices used to measure gender equality, she added.

For example, an organization may have “just a handful of women on the board,” and it may earn brownie points for doing something for women, Shahnaz explained. At the same time, there are organizations and enterprises that are trying to integrate social impact and gender equality in particular into their core business, she noted. That may take the form of “gender-transformative income opportunities or shifting the gender path dynamics or provision of even gender-sensitive or gender-specific goods,” she said.

On that front, the IIX has tapped the Impact Reporting Investment Standard, or IRIS, of the Global Impact Investing Network, a New York-based nonprofit that aims to increase the scale and effectiveness of impact investing worldwide. By adding financial indicators to IRIS, it is possible to track the value of the impact on, for example, a person who has switched to using a clean-cook stove, Shahnaz said. “Investors [find such measurements] very digestible; they understand that,” she said. They see a correlation between reduced risks for their investments if more women are involved, she explained.

“Women have been systematically excluded from official systems and the formal economy, especially in developing countries.” –Durreen Shahnaz

The central issue with measuring outcomes of impact investing is that private investors and the organizations that implement social programs are “measuring different things and in different ways,” said Van Gaal. “We are essentially partnering with for-profit entities, recognizing that through their work, they can achieve social impact. But we do ultimately speak different languages.” In the least, both sides need to “understand and respect our different interests and impact expectations,” she said. That appreciation could lay the foundation for creating better measurement systems, she added.

Challenges in Enlisting Partners

For Global Affairs Canada and its program on innovative finance, it is important to select the right partners, and have data that allows measurement of financial inclusion issues for women, Van Gaal said. She noted that only about 42% of women have access to land and collateral, compared to men. “This is a big impediment to women’s ability to access loans, as most loans around the world – particularly longer-term loans – require fixed collateral to secure the asset.” She underlined the two most important issues here: “Investing in a shared understanding of our results, and together starting to invest in the database and the baseline data to set our indicators against.”

To be sure, it is not easy to enlist partners on that development path. “Sometimes it’s difficult to find partners with sufficient risk appetite to invest, and this is completely normal,” said Van Gaal. It has been difficult to secure participation from even some of the NGOs working in conflict-affected regions, let alone private sector companies or financial institutions to provide banking services in those regions, she added.

Getting investors to appreciate how gender equality improves the creditworthiness of a project calls for some creative approaches in some cases. For instance, the returns on investment in a solar panel project may be more secure if women are its owners, but it may not be easy to convey that to investors, said Shahnaz.

“We are essentially partnering with for-profit entities, recognizing that through their work, they can achieve social impact. But we do ultimately speak different languages.” –Corry Van Gaal

Shahnaz has had to make decisions even on issues such as who attends the meetings with investors. “Is it more effective if I go and say it to a male investor, or should a man do it?” was one question she has had to consider. “We actually saw that it’s better when a man does it, because they feel comfortable. We have to do a lot of those things in terms of understanding what the market is comfortable with, and then slowly introducing things that are not that comfortable for them.”

On its part, the Wharton Social Impact Initiative has been conducting research on gender equality, notably reports prepared by Vice Dean Katherine Klein on the financial correlation with having women on the boards of companies, said Kuhlman. While meta-studies did not show much evidence of a strong impact by having women on boards, they did not find evidence of any weak impact, either, she added. Having one or two women on a board is unlikely to dramatically influence business outcomes because their roles in business changes are likely to be negligible, she explained.

Kuhlman pointed to one study her team put together on how publicly held companies treat women in terms of representation, compensation and related issues. Studies like that help in advancing the understanding of women empowerment, the obstacles on that path, and how best to address them, she added.

On the role of women in building peace, Van Gaal pointed to the 1997 Nobel Peace Prize recipient Jody Williams and her view “that sustainable peace is really achieved when the majority of people on this planet, and particularly women, have enough access to resources to live dignified lives.”

Shahnaz defined peace in one word: happiness. “Happiness comes from opportunity and resources,” she said. “If we can somehow figure out how to give opportunity and resources to pretty much everyone on this planet – women and men – I think we will have peace.”