The use of finance as a strong tool for social change is not a new practice—the success of the microfinance movement and the growth of female entrepreneurs have contributed to stronger economic growth for India.

Using gender as a category of analysis in investment decision making is an emerging area of interest. Gender-smart investing for public equities grew to $560 million (around Rs36,433 crore) in 2016 globally (Carlile and Pyott, 2016), with growth in emerging markets expected to accelerate to 4.6% in 2018. The market for integrating gender into the investment selection process is growing both in size and sophistication—currently we have 58 funds that total almost $2 billion in targeted fund size. Gender lens investing is a broad umbrella term which typically covers one or more of the following activities:

1. Investing in gender-based impact themes such as increasing access to capital for women entrepreneurs, supporting businesses that generate value by selling products and services that benefit women and girls: Women have an exponentially harder time accessing capital compared to men—women own only one-third of the small and medium enterprises in emerging markets. In India itself, we have a $158 billion financing gap for women-owned micro, small and medium enterprises (Micro, small and medium enterprise finance, improving access to finance for women-owned businesses in India, 2014).

2. Screening portfolio companies based on gender diversity in leadership and the workforce: Several studies highlight the direct link between female leadership and better business performance—for example, a 2015 MSCI World Index study showed that companies with strong female leadership generated a return on equity of 10.1% per annum versus 7.4% for those without. Yet, only three out of every 100 CEOs in India are women and only 9% of start-up founders are women.

3. Advancing gender diversity via fund manager selection whereby women are represented in investment decision-making roles: Women make up less than 10% of the venture capital and private equity workforce globally. Only 7% of partners at top 100 venture firms are women (Crunchbase Women in Venture report, 2016)—this number is even lower (4%) for India.

4. Integrating gender into the financial analysis of investments from a risk perspective: The global shakedown in Silicon Valley has led to considerations of the potential cost of not integrating gender into investment decision making—crucial for an industry whose core is risk-assessment and appetite.

With such a clear business case, what will it take for gender lens investing to move into the mainstream, so that financial return is balanced—indeed strengthened—with the inclusion mandate? Moving intentional capital—in any of the areas outlined above—is key for us to establish the investment thesis. Unless we make the investments, we will not have the data required to demonstrate that it may not be necessary to take a financial haircut to do gender lens investing. The best business case is the one that demonstrates financial success to our limited partners, that frames this as opportunity rather than experiment.

We also need to expand the pool and pipeline of female entrepreneurs and investors. Leveraging networks—such as WeConnect (a global network connecting women-owned businesses to qualified buyers) and SheEOs (which finances female entrepreneurs) enables women to pool together their capital, their networks and their ideas. There is a strong demand and need for good data and training. The evidence base on the financial and social impact of investments in closing the gender gap is very limited. There are some exceptions—e.g. Project Sage, which is a global scan of private equity, venture capital and private debt funds with a gender lens. But we need more regional and country-specific analyses coupled with training and tools for fund managers to explore new deal structures and highlight opportunities.

We also need more examples and more success stories to be shared and amplified. In India, where 400 million people remain cut off from the electricity grid, a market was built for off-grid solar products by focusing on women as distributors under the Lighting Asia/India programme. For distribution, Lighting Asia/India partnered with Frontier Markets, a clean-energy-products company, to develop a network of self-employed women recruited from self-help groups. These women-run alliances provide access to funds and technical assistance to help women in local villages start their own businesses. Between 2016 and 2020, the network is expected to expand to 20,000 women distributors from just 250 in 2016, highlighting the collective power of a community of women who function as both customers and distributors.

Whether it is a large private equity investment in a chain of maternal health clinics, or an early-stage investment in a new range of gender-neutral toys that subvert gender stereotypes, the venture capital private equity (VCPE) industry is increasingly seeing the value in applying a gender lens to investments.

At a recent VCPE conclave, a leading private equity global partner shared, “every company in the world is thinking about gender, so why should the VCPE firms not think about it.” The interest in gender lens investing is growing—and so is the opportunity for us to work towards valuing, rather than counting, women.

Shalaka Joshi is the gender lead—South Asia , International Finance Corporation.