Gender-smart impact investing in emerging markets

08 Mar 2021

The global investment opportunity to improve the lives of women and their families is becoming increasingly well recognised. According to IFC, women-led small and medium enterprises (SMEs) worldwide face a US$1.4trn shortfall in access to credit. A McKinsey study notes that closing the gender labour gap could add US$28trn, or 26%, to annual global GDP in 2025.

When women earn a competitive income, they spend 90% of it on their households, food, healthcare, and education.

There is a strong correlation between gender-balanced leadership and financial performance. The funds with gender-balanced leadership outperformed their unbalanced peers by as much as 20% in annual returns. Fund management teams with female investment partners have approximately 70% more female-led businesses in their portfolios than teams with all-male partners. Furthermore, portfolio companies with gender-balanced leadership teams have outperformed unbalanced peers in median valuation increases by as much as 25%. In short, it appears that investing in women pays dividends with respect to both a social impact and financial returns.Photo by Christina @ on Unsplash

The disproportionate impact on women

Throughout the world, local fund managers stand at the nexus of identifying, funding and supporting the most promising entrepreneurs and companies. Quality local fund managers offer the unique ability to leverage investments of millions of dollars into generation of hundreds of millions in revenue in local economies, employment for tens of thousands, and delivery of essential products and services that can scale and improve the lives of millions. We expect our network of fund managers to have impact across three primary dimensions:

  • Market development — the fund managers in the Capria Network foster innovation among SGBs that deliver sustainable products and services in underdeveloped and developing economies through their investments.
  • Catalytic early-stage capital — the fund managers in the Capria Network provide access to early-stage and early-growth capital to entrepreneurs in forms best suited to their needs. Across different countries, the gaps in early-stage capital vary, creating specific market opportunities to make investments.
  • End clients/systems — the fund managers in the Capria Network invest in businesses that sustainably address specific needs of local low- to middle-income communities with solutions that matter and make a difference to their lives.

Our target is to directly improve over 8 million lives by 2028. The primary UN SDGs targeted by the Fund include gender equality, as well as quality education, good health, no poverty, zero hunger, life on land, clean water and sanitation, affordable and clean energy, sustainable cities and communities, industry, innovation, and infrastructure.

As of May 2019, Capria has engaged with over 700 PE/VC funds in 90 different countries, evaluating their leadership teams, investment and impact strategies, and pipeline and portfolios, cumulatively representing thousands of SGBs. Notably, most of the 19 funds selected to date to join the Capria Network are already investing in companies that disproportionately have a positive impact on women and their families. Here are just a few examples:

  • Radiation-free portable breast cancer screening device with the potential to save the lives of millions of women in India and beyond.
  • Providing high-quality, day-old chicks for consumer poultry farming that supports thousands of women farmers in Zimbabwe.
  • Home-based call centre service improving livelihoods for lower-middle-income women, allowing more time to educate their children and pursue their own education, in Brazil.
  • Micro-franchising of K-8 after-school maths learning that provides in-home employment for women and improves math education for lower-middle-income girls and boys in India.

Women’s leadership in Capria’s Network

In addition to supporting SGBs that impact women in emerging markets, Capria offers gender lens investors looking to support and empower financial firms with female leadership. Of the 19 fund managers, two teams are exclusively women-led and four have women partners or principals:

  • Terra Global Capital is a women-led team in Colombia raising a US$40mn fund to invest in small farmers and transforming the farmland from producing cocaine to producing chocolate.
  • Alitheia Identity is a women-led team, based in West and Southern Africa raising a US$75mn fund focused on investing in women-led, high-growth SGBs.
  • Capital Invent is a Mexico-based team with a woman partner in raising a US$60mn fund to invest in early-stage Ventures in fintech, edtech, SaaS, and e-commerce sectors in LatAm.
  • Lateral Capital is a team with a woman principal in Nigeria raising US$50mn fund focused on mid-stage growth companies across multiple impact sectors in Sub-Saharan Africa.
  • Unitus Ventures is a team with a women principal in our first local fund manager in the Capria Network is Unitus Ventures, the leading early-stage impact investor innovating for the masses in India, which we founded along with our partners in India.
  • Brightmore Capital is a team with a women principal in Senegal raising a US$30mn targeting high-potential SGBs across multiple sectors in Francophone West Africa.

Institutionalising gender smart investing across Capria Network

As Capria brings new fund managers into the Capria Network, we are committed to continuing to increase the integration and propagation of gender smart investing principles into our capacity development within the Capria organisation and for our network fund managers. These efforts include:

  • Integrating gender smart strategies into the investment decision process, including the addition of diversity, equity and inclusion (DEI) criteria to Capria Quantum, our proprietary evaluation tool to evaluate the selection and progress of fund managers.
  • Supporting our fund managers to foster gender-inclusive policies in their organisations and help them make their portfolio companies to become gender smart, including the dissemination of tools, templates, and guides to better integrate gender smart investing.
  • Inviting experts to share gender smart investing experience and learning in virtual and in-person workshops on gender smart investing.
  • Creating a gender smart investing leadership circle for Capria Network members with this focus to collaborate and share best practices.
  • Actively learning from and contributing to industry working groups and discussions, such as the Global Impact Investing Network (Gender Lens Investing Working Group focused on tools, research, and strategies); and Emerging Market Private Equity Association (Gender Parity Acceleration Working Group focused on research, tools for practitioners and advocacy).

This article was written by Uma Sekar, Investment Director, Capria Ventures.

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