Webinar transcript: Empowering Women Through Investment: Driving Impact & Economic Growth

Voices of Impact Investing, the responsAbility investments podcast. In this episode: Empowering women through investment, driving impact and economic growth.  

Robert Widén: At responsAbility, promoting female empowerment is at the core at what we do and we have been doing so since the very beginning. We have through investments provided women in emerging markets with the tools and opportunities to build businesses, strengthen their communities and directly contribute to a economic growth. And with me today, our responsAbility's very own senior ESG officers, Emily Channon and Prajakta Saraph. Great to have you here. Emily is calling in from Tbilisi, Georgia and you focus on sustainable Food and Agriculture and Prajakta whom is calling all the way from Mumbai, India and is focusing on financial inclusion and on a daily basis you deal with financial institutions. Perhaps you can help us set the scene to get a grip on what gender lens investing is. 

Prajakta Saraph: Sure, thanks. Thanks Robert, and thanks for the introduction. So to simply explain gender lens investing, it is investing in companies with the focus on women. In this approach, we consider gender related KPIs while making investment decisions. And the goal is to promote gender equality and empower women by directing capital to businesses that actively support women's economic participation and leadership. 

Robert Widén: Emily, it would be interesting to hear more about how one actually can incorporate women's needs into an ESG assessment. 

Emily Channon: Indeed, happy to elaborate. First of all, let's start with the fact that an ESDD is conducted for all the companies that we consider investing in and it assesses not only compliance with local legislation, but also compliance with the IFC performance standards, World Bank Environmental Health and safety guidelines, ILO Convention and sectoral specific guidelines. The ESDD is comprised of both desktop review but also in person site visits and usually the type of areas that are visited during the site visits are production fields, packing areas, pesticide storage areas, workers accommodation, daycare facilities and also warehouses. And women's needs are assessed at every single stage of the due diligence. To give a few examples, but not limited to is working conditions and terms of employment, such as whether or not they've got contracts in place, paid leave, sick leave, paid vacation, paid maternity, equal pay, non discrimination, sexual harassment, equal opportunities, forced labour, child labour, occupational health and safety during the working period. Grievances. Whether or not the grievance mechanisms available to these employees are in the languages they understand. Whether or not the means in which they can submit a complaint is in the forms appropriate to these women. Some of them can't read, for instance. So there should be other means of being able to submit a grievance. Family planning, career development, just to name it a few. And then finally, I'd say that when assessing workers accommodation, we also look at whether or not the accommodation is gender segregated to ensure privacy and protection for women.  

Robert Widén: I mean, that's quite an extensive list from. Are those factors regulatory requirements or is this above and beyond? 

Emily Channon: No, no. So indeed the minimum, the basic commitment which we assess is local, complied with local legislation, which is the regulatory requirement. However, all the rest that I listed is above and beyond, such as, you know, the IFC performance standards, World Bank, environmental health and safety guidelines and so forth. But indeed, when we invest in companies, we want them to strive for the best. We want them to beat the best out there. 

Robert Widén: One would say that many of these things you mentioned should be actually a basic human right. So thank you for clarifying, Emily. Perhaps Prajakta you can elaborate a bit more on how one can integrate these gender consideration into investment decisions. Also, if you can touch upon the criteria to ensure alignment with gender lens principles. 

Prajakta Saraph: So to integrate gender considerations into investment decision making, we conduct gender assessments during our due diligence process. The factors which we consider are also sometimes common with what media has already covered. But let me talk about some of the key factors that we consider in gender assessments. So for the first one is for example, leadership and workforce diversity. Here we try to see if the company, what kind of gender make up the company has in terms of the leadership team or the overall workforce. We also look at the gender make up at different levels, which is the board level, the senior management, middle management and overall workforce. Then the second point is the gender inclusive policies and practices, some of which Emily has already covered. Those are the basic minimum. But other than that, we also focus on policies or practices to promote gender equality such as equal pay or flexible working arrangements or equal access to professional development for women. Then the third point is we also look at if the company has any gender inclusive financial products. So that is we check if the company is offering products tailored to women specifically designed keeping in mind their needs, such as credit schemes or savings products specifically designed for women. So yeah, these are some of the key factors which we use for gender lens investing. 

Robert Widén: Actually, my first question that comes to mind is how you monitor these labor conditions and address violations when identified. Maybe Emily, you can give an example on agriculture. 

Emily Channon: Absolutely. So I think that's a very, very important aspect you've touched upon there. To start with, I would highlight the fact that not only do we conduct in person site visits prior to investing in the company, but we also conduct in person monitoring visits on an annual basis when we visit these companies to check whether or not they are improving, whether or not the issues identified have been addressed. And specifically on agriculture, I would highlight that we've got one very good mechanism in place which does help us. So when risks and gaps are identified during the due diligence phase, we put together an action plan, it's called an environmental and social action plan with a given timeframe which the company has to complete to close all of the gaps identified. We have a pricing mechanism which we link to the action plan, which means, for example, that if we have an action plan with a with a given time frame and the company completes the action plan in the given time frame, then the pricing would be reduced by 50 basis points, the interest rate, for instance. However, if the action plan is not implemented within the given time frame, the pricing would go up by 50 basis points, the interest rate. So there is actually a punishment also if you don't implement. And I must say this is a very good mechanism because it gives companies A, an incentive, of course, because they end up paying less, but B, it also gives them a higher sense of ownership and leadership for actually wanting to be better in handling environmental and social aspects, becoming best in class. This is actually something they take ownership on and they become a lot more involved. 

Robert Widén: It's interesting how you use and care, really to motivate businesses to change and also profit with it as well. If I turn to you Prajakta, I mean, we've heard what one can do. There's no doubt that investing in women, in businesses with a gender lens approach, contributes to social impact. Be interesting to see also how that leads to financial growth as well, beyond what Emily mentioned. Prajakta, what steps do you take to ensure that female entrepreneurs have equal access to capital and resources? 

Prajakta Saraph: Let me share an example from a gender focused fund that we are co-manage with the two other portfolio managers. So for this fund we aim to provide gender smart financial services to underserved women as well as support women-owned and women-led businesses in emerging markets by collaborating with financial institutions. So to engage with the women-led businesses, we work together with these financial institutions early on to identify areas where we can drive positive change. So during our gender assessments, we look at several factors including the market, market conditions, etc. And based on the insights we develop gender action plans similar to the environmental and social action plans which Emily was mentioning. But these action plans are again with specific steps for improvement on gender performance. These could be policies to support women's leadership or career growth within the company or also on the product side it can include market studies to better understand the needs of women borrowers. On top of this we also provide Technical Assistance. The Technical Assistance offers guidance and resources to ensure that these gender action plans are effectively implemented. So the technical assistance could also include financial literacy training for the women borrowers or developing women focused financial products or even creating networking and mentorship opportunities for women entrepreneurs. So the goal is ultimately to provide female entrepreneurs with not only access to capital, but also the tools and support they need to succeed and scale their businesses. 

Robert Widén: I mean, I just want to hear more of these stories. And I'm sure, Emily, you have a story within agriculture where you engage more with local communities and ensuring that these are met. 

Emily Channon: Indeed, a very good point engagement that you've touched upon and for all of the due diligences that we do conduct where we engage with the workers, I think it's very important to mention that we always engage local consultants who are familiar with the local context and laws, practices, and have a very, you know, deep connection with these people, as well as actually speaking the language or dialect in which these workers can communicate. And pre investment, we interview these workers when we find out where the policies that a company has in place are being implemented, you know, whether or not there's compliance with not only local legislation, but other guidelines. And it's during these interviews with the workers, because they feel so comfortable talking to the consultants interviewing them, that they're very transparent and very open. And this is when we quite often first find out about the issues in regard to the working conditions or women. Very recently we had a due diligence where one of the women was interviewed and when asked about what the working conditions were like, what it was like working for this company, her response was: do you want the truth? You know, I mean the response, of course we want the truth. To which she said: well, I haven't really been able to take paid vacation because every time I've requested paid vacation, the response has been, but your position is too important. You know, the work is very important. And if we let you go on vacation, then you know what happens to the work that needs to be done. And then this same woman also said that there was another instance when she felt ill and she needed to go to the doctor. So she requested some leave. And the response there was also, OK, well, we'll let you go for a few hours, but we're not giving you paid sick leave. We have to check in back tomorrow morning. And so this was a risk identified prior to our investment, which gave us the opportunity not only to put together an action plan, but also work with the company that we were going to invest in. It's also worth mentioning that this specific company where the workers were interviewed was a company that the company we were going to invest in was going to acquire. Hence, when we had discussions with the management and the owners, we expressed these concerns and stated that as part of the action plan and as part of the acquisition, they would have to address all of these labor conditions and improve on them. They were very committed. They agreed that we've put together an action plan in which this has been addressed. And indeed, in a few days, you know, I'm actually going to Latin America to actually monitor the companies that we have invested in, to actually check whether the concerns and issues identified and raised by these workers are being addressed and whether or not their conditions are being improved. So it does go, you know, way beyond just working in front of a computer. 

Robert Widén: You really make a difference there. One takes it for granted having a vacation or going to the doctor. And, and these things don't, they don't seem to be obvious for all businesses across the world. So it's great that you're doing this rigorous due diligence and really drive this change towards a more resilient growth, that lasting change. Thank you Emily for sharing that. Prajakta, we've heard a success story. Obviously it's great to see that Emily still goes to monitor and see that it continues to be. So it would be great to see if you could share one or two examples on how gender focused investments have driven both financial returns and positive social impact. And this is something that I'm hearing from a lot of investors. They understand the positive impact side, but they want to hear also about how it contributes to financial returns. 

Prajakta Saraph: Happy to share examples. I have a couple of examples. Let me please give you one. Let's talk about classic microfinance examples. So for instance, Sarita, she's one of the female borrowers based in rural areas of Gujarat, India. She joined a group of seven women to form a joint liability group. This group helped these women access their first ever loan from a microfinance company funded by responsAbility. These women were mostly involved in agricultural activities or small informal businesses like sewing clothes or running grocery stores, selling milk, etc., and they had limited access to our traditional banking services. So by applying for a loan as a group, the need for a physical collateral, which is generally a necessary requirement for loans and also major hindrance for the low income group was replaced with social collateral. So the members of the joint liability group in this case are they're mutually responsible for each other's repayments. And thus, it imparts a financial discipline and thereby encourages timely loan repayments. So going back to the story of Sarita, she bought a buffalo using this loan. And currently she is selling about 7 to 8 liters of milk on a daily basis to local milk operatives. And she earns about 150 USD per month. Now, this income has increased her household earnings by 20%. And for the first time, Sarita could contribute more to her family's finances and gain a sense of financial independence. So this is also a first time for other women in her group who had control over financial decisions in their households and it led to significant increase in their involvement and overall decision making. This is an example which highlights the power of gender lens investing. By focusing on underserved women, this microfinance institution provided more than just financial support. It fosters independence, pride, and empowerment among these women. 

Robert Widén: Emily, perhaps you can round this up and give us one of your personal examples where you've seen finance play a key role in protecting women. 

Emily Channon:Absolutely. Just to set the scene a bit, there was one agricultural company in Latin America producing fruits and vegetables, and they had a lot of seasonal workers, and then they also provided workers' accommodation to all of these seasonal workers. On top of this, they also provided family workers' accommodation for the seasonal workers, so they actually enabled these seasonal workers to travel with their families and stand up family workers accommodation. It is very important to note that the seasonal workers were hired from a very remote region within the country and it took them up to two days to travel to the company site where they would be working throughout the season. The recruitment was done by the company. So the company's representatives would travel to all of these remote regions, they would recruit workers and then bring them back to the company. And so during one of the site visits when our consultants were walking around, interviewing workers and they were looking at the workers' accommodation, which was meant to be empty because during the day all of the seasonal workers are working on the fields. And then one of the family workers' accommodation, there was a woman with three children. And then the consultant said, what are you doing here? You know, how come you're not working? Because there was an amazing daycare facility which was free of charge. And when I say amazing, you don't really see that level of daycare facilities even here where I live. So it was very impressive. And so the question was, how come the children aren't at daycare? To which the woman responded: Well, apparently the daycare has a policy that's unless all of the children have their legal documentation, legal IDs, they're not allowed to attend free of charge. Which meant that this woman was unable to work, had to take care of the children in a room which was dedicated to her. Which then did negatively impact their financial income because her husband and herself had travelled with their three children. Hoping to earn enough to then make ends meet throughout the entire year while the children were taken care of in a free of charge daycare facility. So one of the action plans we put in place was to ensure that at the recruitment stage, it was made sure that everyone had all of the necessary documentation so that all of the children that were being brought to the workers accommodation could attend the daycare facility free of charge, which would also then enable women to earn more and improve their livelihoods. So I think this is a very important example where we did a lot of work in it. 

Robert Widén: It seems like they tick all the boxes until you see this case. So thank you for sharing that.  And with that, I'd like to turn to the listeners. We've received some questions already. The most recent question we've received here. I think that puts some emphasis on complementing you on your DD and action plan being that they, they cover the risk and impact management, but they, the question highlights that it is costly as well and this often means higher transaction costs. And the question really is here, how do you balance financial returns and gender impact and how much resources do you invest in risk management and has it been a challenge to achieve return on investments? Perhaps Emily, when you mentioned a bit, on the example earlier with the incentive approach, perhaps you can elaborate a bit on that. 

Emily Channon: Indeed for us to talk about, you know, costs in general, so indeed the way the fund has been structured from the very beginning was to budget for all of these costs because we value and understand the importance and significance of all of this monitoring and due diligence in person. Indeed touching upon the incentive, which is a very big incentive for these companies. As soon as you start talking about an incentive and you know, 50 basis points for the interest rate might not sound a lot when you think of it like this. But you know, depending on the size of the loan, you know, this could be $750,000, more or less, depending on how big the loan is. So financially it's a very big amount which they do end up saving. And from our end when it comes to monitoring in particular, we can mix it up.So you know, if we don't use consultants, then I myself travel, just like I am in two days when I would be accompanied by the local team in Latin America when we do our visits. So indeed, we do manage this and we don't see this as an issue and it doesn't affect the IRR overall. 

Robert Widén: Thank you, Emily. And I think perhaps one could add on that and this is a question from another listener, which we could actually combine in a way. Yes, these due diligence and ESG procedures are costly, but it depends on the products as well. So if for example, Prajakta, you mentioned Technical Assistance, that is something we can do at responsAbility, which doesn'tinvolve a higher cost for investors, but it'sactually grants which help us improve these consultants or the methods or actually implement them. And then there's also Blended Finance, depending if you scale these investments, it does make a difference as well, which is also important. So if it's a very small investment, yes, I mean this would be very costly, but usually there's a tendency to have larger products. The question which I'm referring to here is if you can share some examples of the products that are specifically assigned for women. So I mentioned Blended finance, for example, and I mentioned larger products. So Prajakta, perhaps you can mention some of the products which one could use. 

Prajakta Saraph: Of course. Yes, happy to. So to give you an example of the financial institutions and the kind of products we help develop for the women borrowers, these are products with lower interest rates for women borrowers or longer tender or lower collateral requirements. Soit's been observed, generally women have better repayment rates and they default less. They have better financial discipline, which is why helping them with loans which are having lower collateral requirements or maybe flexible terms, longer tenure, lower interest rates could help. So these are examples of some of the financial products that could be offered. Thank you very much. There's one question here from Pascal: Do you apply the gender lens approach to all your funds? Well, yes, it's true that for some of our funds we do conduct in depth gender due diligence. We also recommend gender action plans as I mentioned earlier for the companies to strengthen their gender policies or attract and retain female staff. However, responsAbility does not apply the gender lens approach to all of the funds. But having said that, gender KPI's do form an important part of our impact eligibility as well as our ESG risk management framework. And as Emily also mentioned earlier, it's definitely part of the ESG risk management for every single fund. 

Robert Widén: Thank you very much. Before we wrap things up, Prajakta and Emily, if you can share one thing which you want the listeners to take away from this session, what would that be? 

Prajakta Saraph: I would like to say that gender lens investing is not just a trend, it's a powerful approach that drives both social impact and financial returns. By prioritising gender equality, investors can unlock untapped markets, reduce risks and create long term value for a more inclusive and sustainable future. 

Emily Channon: Whereas I would definitely say that for the environmental and social due diligence, it is crucial, extremely important to actually get to know these companies, visit them, be there on the ground, be present and not only be assessing companies through a computer. 

Robert Widén: That is a good ending mark. And to both of you, a big thank you for sharing your expertise and experiences. I mean, it's been really interesting to hear more. Also, thank you listeners, everyone who listened in, Please feel free again to reach out if you have any further questions, we will answer separately the questions which are still there. Please follow us on LinkedIn at responsAbility Investments AG and subscribe to our podcast, Voices of Impact Investing on Apple Podcasts and Spotify. And if I would like to end with something, Please remember, investing in women goes beyond the 8th of March. 

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