When Professor Durreen Shahnaz, founder and CEO of Impact Investment Exchange, first considered the concept of a structured bond to connect underserved women to the financial markets, bankers and financiers advised her not to use the words “women’s livelihood” as this could have driven investors away. They wanted them to call the instrument “high yield”.
However, this was not negotiable for Shahnaz. The bond’s overt gender lens may have been seen as bold for the capital markets at the time, but it has since proven a hit with investors as it mobilized more than $ 48 million and over 815,000 women across three issues and influenced girls all over the south of the world.
The Women’s Livelihood Bond, first issued in 2017, worth 150 million, brings together a large number of partners from the public and private sectors. WLB releases capital for women-centric businesses by pooling businesses that benefit underserved communities.
The multi-country-multi-sector portfolio strategy diversifies the risk and helps to increase the impact. IIX has built in rigorous methods of assessing and measuring the impact of launching the investments to ensure that beneficiaries’ votes are tied to investment funds, making everyone accountable for building an inclusive future.
The second WLB was issued in January 2020 and the third in December 2020. Even throughout the pandemic, the bond delivered an annual return of 5.65% for investors from 2017-21, which is cheap compared to the 2020 average of 4% return for Asian high-yield corporate bonds and 1% to 3% yield on Social bonds.
The main reason for WLB’s success is that IIX is focused on empowering women – as suppliers, employees, managers, entrepreneurs, and customers – as we believe women are at the heart of development. There is a tripartite relationship between economic development, empowering women and reducing the risk of financial instruments.
Research has shown that women invest up to ten times more of their income than men in the well-being of their families, including child health, education and nutrition. This enables community-wide growth and economic development, which in turn makes the organizations that work with these women less risky.
Innovative financing solutions such as the WLB directly counteract the permanent exclusion of underserved women from the global financial markets by opening up untapped sources of capital in the private sector for women-oriented companies that have no access to large international capital.
Incorporating a gender perspective into active sustainable investing is also a strategic way to address climate change. In Asia, much of the workforce works in sectors affected by climate change, such as agriculture, forestry and fisheries, with natural disasters costing the region $ 53 billion in 2016 alone. These effects are most felt by women who are trapped in self-sufficiency due to high structural barriers. Closing the gender gap could add up to $ 28 trillion to global gross domestic product by 2025, which is more than enough to fill the climate finance gap.
In the future, the WLB will continue to build up with the preparation of the fourth issue: the Women’s Livelihood Bond 4 Climate, a bond in the amount of 50 million US dollars. WLB4Climate has demonstrated scalability and replicability through WLB2 and WLB3 and will be the world’s first intercontinental sustainability bond expanding across the global south, starting with Africa.
Conrad de Jesus is Director, Research and Advisory, Impact Investment Exchange.
This article was originally published in the August issue of OMFIF’s Sustainable Policy Institute magazine.