In many countries across Asia, women and girls face persistent structural constraints that keep them trapped in subsistence living. These conditions reduce their resilience to economic and environmental downturns and become key barriers to economic development and increased political participation. The good news is that socially conscious investors, foundations, financial institutions and financial vehicles are looking to tackle this through impact investing.
Impact Investing is estimated to have grown to US$500 billion in 2019. From a distance, this growth looks incredible, but the specifics need work. Donors and investors face a rising tide of “impact washing” among funds claiming to pursue impact. If we get it right, impact investing can help break the cycles of poverty for underserved women in Asia – but it will require strategy and an eye to where dollars can make the biggest impact.
Family offices and Donor Advised Funds (DAFs) have a powerful role to play in catalyzing much needed change at scale. Here are three key things that they should know when deciding to take a step towards
- Adding strategic value to the impact investing movement
Increasingly, more actors are stepping up to play a strategic, catalytic role in impact investing. The recent Catalytic Capital Consortium initiative by the MacArthur Foundation, Rockefeller Foundation, and Omidyar Network demonstrates the growing view that we need to catalyze greater private capital for social development. There are many ways in which foundations, family offices and DAFs can do just that.
Institutions that have the ability to provide flexible, risk-tolerant, or patient capital can play an important role by investing in new financial products such as gender-focused bonds, especially in markets such as Asia where gender lens investing is still a new practice. This can encourage traditional investors to follow in their lead, and bring credibility to innovative approaches to women’s empowerment.
DAFs in particular can take their first step in impact investing through bonds such as IIX’s Women’s Livelihood BondTM Series (WLB Series), which are a US$150M bond series empowering two million underserved women in Asia with sustainable livelihoods. Not only can DAFs experiment in a safe space with funds already set aside for positive impact, they can do so without high-net-worth (HNW) families having to worry about sourcing, due diligence, and executing transactions.
- Social Impact Bond vs. Social Sustainability Bonds
In recent months, there has been a rush of “gender bonds” to the market. Many instruments claim to be bonds, but in reality, are philanthropic instruments. For impact investing players, especially those who are looking to diversify their strategies beyond philanthropy, it is important to understand what you are getting in to.
Social Impact Bonds (SIBs) continue to be a popular impact investing product. SIBs rose to prominence over the past decade as a financing vehicle to use private investment for services so that providers do not have to front the cost of delivery. Private investors bear the risk of the project, because they only receive returns from the government or another payer for their investment in social programs if specific outcomes are achieved. Despite their overwhelming popularity, SIBs are now coming to terms with almost ten years of underwhelming impact – especially in unlocking large private sector capital. Investors who are interested in a return on investment will need to look out for the fact that with SIBs, investors bear 100% of the risk, and will likely not receive any return.
In contrast, the Women’s Livelihood Bond Series are part of IIX’s Social Sustainability BondsTM – innovative financial instruments which pool together a group of impact enterprises to issue a collective bond. These bonds differ from Social Impact Bonds as they mobilize private sector capital to generate positive social impact, offer financial returns independent of social outcomes, and are able to be listed on both social and traditional stock exchanges. IIX’s proprietary impact assessments measure the social impact and financial viability of the borrowers beforehand, ensuring greater accountability for investors.
- Remain committed to deep impact
As issues like climate change, income disparity, and gender inequality grow more apparent, there are increasing opportunities to leverage capital to pursue returns both on paper and among real communities in need. Yet this excitement has led to an explosion of impact investing funds in the space that are sacrificing impact for scale.
As impact investing gains traction among some of Wall Street’s biggest financial institutions and funds, it is important to remain committed to instruments that can measure and verify the change that is really taking place on the ground. IIX’s Women’s Livelihood Bond Series does this through proprietary impact assessments measure the social impact and financial viability of the borrowers beforehand, ensuring greater accountability for investors.
As impact investing gains momentum, it is critical that investors and institutions target their dollars towards instruments that move beyond surface level change. Because women have a unique capacity to reshape their lives, families, communities, and countries, we must address the deeply embedded dynamics that lead women to be treated as victims, and instead empower them as the solution-builders.
Family offices and DAFs can play a role in valuing women for the force they can be, and help make contributions that change the world for the better.
For more information about the Women’s Livelihood Bond Series, contact Natasha Garcha at email@example.com.