Sandi M. Hunt from the Wharton Social Impact Initiative and Suzanne Biegel from Catalyst at Large discuss their new report on gender lens investing, Project Sage 3.0.

A new report from the Wharton Social Impact Initiative and consulting firm Catalyst at Large finds a dramatic increase in gender lens investing over the last few years, a strong indication that the financial sector is working to balance a legacy of lopsided investments.

A total of 138 private equity and venture capital firms have raised a cumulative $4.8 billion through 2019 for funds that invest in gender-diverse teams and generate a positive impact on women, according to the report titled, “Project Sage 3.0.” That figure is up from 87 firms that raised $2.2 billion through 2018, and 58 firms that raised $1.1 billion through 2017.

Report co-authors Sandi M. Hunt and Suzanne Biegel said the steady surge in both the amount and number of funds is encouraging because it signals an “accelerated momentum” for impact investing. Female founders currently receive less than 3% of all venture capital in the U.S.

“This is a very big umbrella, and there’s a ton of opportunity under it,” said Hunt, who is managing director of the Wharton Social Impact Initiative. “What I have consistently been amazed by is how we’ve mobilized around this field of gender lens investing, how this has become ‘thingified.’ It has a name. It has participating funds and investors using this language. But there is still tremendous diversity in what it means to be a gender lens investor and how you’re doing that.”

Biegel, a Wharton graduate and founder of Catalyst at Large, said the data collected in the third iteration of the report shows the gender lens market is real, vibrant and diverse.

“This is a very big umbrella, and there’s a ton of opportunity under it.” –Sandi M. Hunt

“It’s highly relevant to the investment trends of today and what’s needed in the market,” Biegel noted. “It’s not just what these funds are investing in, it’s how.”

Hunt and Biegel discussed the report during a recent episode of the Dollars and Change podcast. (Listen to the segment at the top of this page; find more episodes here.) The following are key takeaways from the report that they highlighted during their discussion:

Many Gender Lens Funds are First-time Funds

This finding is consistent with the previous two “Project Sage” reports. Almost two-thirds of the funds, or 61%, were first-time funds. The partners may not be first-time fund managers, but this is their first fund together with this focus or under this name.

Geographic Diversity Continues to Increase

The 2017 report found about 80% of reported investments were in the U.S. The latest report found that 38.1% reported North America as their investment target geography. Global funds represented an additional 11%. The remainder were focused in one or several specific regions. Target regions include Asia, sub-Saharan Africa, Latin America, Europe, and the Middle East.

Gender Lens Investing Is Still Broadly Defined

In their survey, the authors offered the funds six options for how they defined gender lens investing and asked them to select all that apply. About half of the 138 funds included all five classifications, suggesting that the term remains broad. The definitions were: advancing women in finance; advancing women in leadership; advancing products and services that improve the lives of women; advancing companies that have a positive impact on the women they employ; and advancing companies that improve the lives of women in their ecosystem (suppliers, distributors, customers and more).

“It’s not just what these funds are investing in, it’s how.” –Suzanne Biegel

Funds Are Also Focusing on Other Forms of Diversity

Among the funds surveyed, 45% consider gender as one of several key impact priorities of equal importance. Other priorities publicly stated in their investment criteria include racial/ethnic diversity (24.6%) and LGBTQIA diversity (7.2%). Responses widely varied for other forms of diversity, including but not limited to indigenous populations, refugee populations, low-income populations and more.

Biegel said the widening commitment to diversity is good news, but she also noted the bad news. “There were a lot of funds in this study that had no women of color, no people of color in fund management or on their investment committee, and that didn’t talk about racial and ethnic diversity in their thesis.”

Beyond the numbers, the report is designed to be an action tool for investors and those interested in understanding the market. It doesn’t make recommendations, but it offers detailed information and context. Visa Foundation and Bank of America provided funding for the report, and the authors said it makes a difference when major players lend support to such research.

“These are big names, household names. That signals that gender lens investing is not niche, that it is mainstream, and that it is valued and valuable to some really major players in the space,” Hunt said. “I find that tremendously exciting. I think it’s going to have a lot of people paying attention to this in a way that, perhaps, they weren’t before.”