About the Author: Andia Chakava is the Investment Director at Graça Machel Trust and Investment committee member at OPES LCEF Restart fund, Justice, equality, diversity and inclusion steering committee member at GenderSmart, visiting lecturer at Bertha Centre for social innovation and entrepreneurship and Founding Chairperson of New Faces New Voices Kenya.

 

IMPACT INVESTING IN A CHANGING WORLD

 

Women’s tales of transformation that transcended professional roles and how COVID-19 has shaped that narrative does not go without much adoration. I recently invited 12 women to my birthday get together to share their stories. With limitations on group gatherings, I curated a list based on characteristics that I admired most about them and how they are navigating through the pandemic. Experiences varied from self-doubt due to spending so much time reflecting in isolation, job losses, confronting fertility challenges, rage about racial injustice, inability to pivot their business. We were authentically unpacking our changed outlook and perspective, and one thing was clear – we are all on a self-discovery journey.

 

Impact investing is an industry also on a journey. According to IFC, the Investor appetite for impact investing is as high as $26 trillion— $21 trillion in publicly traded stocks and bonds and $5 trillion in private markets[1]. Not only does the impact investing industry have the potential to crowd in additional capital, but it can also change the mindset and drive impact in never-before-seen ways that can contribute to creating a sustainable and inclusive global economy.

 

As an industry, we sometimes lose sight of what is truly important because we are trying to operate under an agreed industry measurement and reporting standard. We convene and reconvene, advocate and belabour ourselves with tools, case studies and evidence. This permits us to create risk-averse screens that justify our lack of active and deeper participation in emerging inequality matters.

 

Impact measurement allows things to get done and lays the foundation for incremental change. It also assesses broader benefits beyond the financial numbers that demonstrate how as investors, our choices affect communities either for the better or worse by providing valuable data on metrics we might ordinarily undervalue. However, we must be aware of other factors that need to be measured. These are indirect or intangible yet impactful, like attitudes and perceptions that can influence commitment and affect relationships. The impact is also eroded because of sudden disruptions resulting from political unrest, health threats like COVID-19 and environmental disasters.

 

Therefore being impactful is a never-ending wheel of purpose.

As this happens, our world continues to change in complex ways deepening the inequalities:

• Technology founders have increased their wealth. Ten of the wealthiest people in the world have boosted their already vast wealth by more than $400bn (£296bn) since the coronavirus pandemic began as their businesses were enabled by lockdowns and financial crises across the globe.[2]Our governments have entrenched their power with increased lockdowns and curfews, using it to settle scores against political opponents.

Each cycle comes with its turmoil from business closure, rising cases of gender-based violence, increased adolescent pregnancy due to school closure, racial tension due to acts of injustice across the globe, and the latest – vaccine hoarding, also referred to as vaccine apartheid between the haves and have nots.

 

One thing I know is that charity begins at home. So the impact is not just what you do – it is simply a way of life. How can we do this more consciously and deliberately as investors?

 

Generally, there is no US and them. We cannot design impact outcomes without the participants in the room. We need to be better listeners to avoid unintended consequences. The feminist mantra is ‘Nothing about the US without US’

My home country Kenya is celebrated for financial inclusion deepening using the mobile phone. Mobile transactions narrowed financial inclusion gaps to less than 10 % and increased female autonomy and participation in the economy.

 

However, it has unfortunately encouraged easy access to short-term and expensive debt for subsistence purposes exacerbated by the ongoing pandemic. Hard hit COVID-19 sectors such as education, hospitality, events and retail were faced with job closures, with several businesses operating runways of less than three months. Developing economies often enjoy no safety nets nor insurance for situations like this, immediately creating abject poverty.

 

How can we create skills and roles that can retool and shape Africa’s burgeoning young population to be global workers? How do we get the world to see the brilliance and talent of young people living in emerging markets?

One of the ways is through collaboration. Eight years ago, I co-founded a country network of women in finance called New Faces New Voices Kenya. 2020 was a good year for us; despite COVID-19, we partnered with a record number of international organisations. We were allocated increased responsibility and provided resources to execute, but I kept wondering – would power have shifted without the pandemic?

 

 

Jobs (64%), gender (55%) and financial inclusion (45%) are the top impact priorities at the enterprise level for investee enterprises of small and growing capital providers operating in Sub-Sahara Africa (SSA)[3]. 71% of majority women-led capital providers prioritise jobs as a critical impact objective (compared to 64% of all capital vehicles).[4] So assuming we will maintain this trend of focusing on job creation:

• How many of us are using indigenous teams to do the groundwork but are still retaining the power at investment committee decision making?
• How many of us are using locally present groups but working through expatriates and or global consulting firms?

There is a chance to do things differently after acknowledging our power, privilege and implicit biases and bringing that into our impact expectations.

Let’s not pat ourselves in the back when we create jobs even though they are numerous. We need to ask ourselves more profound questions like:

• Are these jobs permanent or temporary? Several temporary workers have been left destitute after COVID-19. So are we creating seasonal or generational wealth?
• How are many representatives from disadvantaged communities hired? Are we entrenching power where it already exists because it is convenient?
• Are we only dealing with job creation in urban or rural areas? What is the outreach of the businesses we back?
• Are we paying people a living wage or a minimum wage?
• Are we taking advantage of the tax laws and regulations to behave recklessly, or are we imposing global best practice standards?
• What is the ratio and pay gap of women, youth, disabilities of workers employed at all levels of the organisation?

What about our investee companies – how can we cushion the distress? Ideally impact conscious investors should be the first responders, early adopters and market leaders in demonstrating what is investible during times of uncertainty. So we should see more early-stage investors, first loss providers, reimbursable grants and concessional capital to catalyse innovative market initiatives.

 

There is a saying in my language that says: If you see a lioness in the rain, you may mistake it for a cat and try and befriend it only to get bitten. In the same way – when things are challenging and uncertain as they are now, this is an opportune time for impact investors to demonstrate that we are indeed lioness and have the muscle to make a difference because we prioritise impact over return.

 

Generally, as an impact conscious investor we:

 

• Acknowledge those good things take time through the provision of patient capital.
• Are prepared to do hard things by working in complex regions and environments whilst appreciating the intrinsic differences of each region and country.
• We will be building the evidence of impact as we action our respective mandates. We become the living tools of proof that it can be done.
• Have a responsibility to seek additionality intentionally.
• Know that things are never simple; therefore, intersectionality matters- so socioeconomic status, race, gender and age are factors that we cannot ignore in our disaggregated outcomes.
• We are aware that we are not right just because we hold the purse strings that should make us more humble because we need the support of our investees to decide how best to utilise it.

It is not clear what will happen next, but what is clear is that we need to do something about it.

To build teams that are focused on purpose, passion and impact. Be conscious of who is not in the room when making the decisions and be deliberate in including them.

 

 

When you are an impact investor, nothing should be off the table – the bigger the problem, the more significant the cause. So why is it easier to talk about gender than race?

 

Which sustainable development goal is least invested? GIIN study[5]  found that half of the investment funds target SDG 8 ‘decent work and economic growth and SDG 1 ‘no poverty and about a quarter target SDG 3 ‘Ensure healthy lives and promote well-being for all’ SDG 7 ‘affordable and clean energy and SDG 2 ‘zero hunger.’ Only 13% target SDG 5‘gender equality’ and SDG 10 ‘reduced inequalities.’

 

The UN recognised Sustainable Development Goal 5: Gender Equality and Women’s Empowerment, as a “pre-condition” for achieving the other 16 SDGs[6] When women earn a competitive income, they often invest in their families —food, healthcare, and education— setting off a virtuous cycle that improves outcomes for future generations[7] Women are also caregivers and are preoccupied about the future making women natural allies to climate change.

 

More women in the workplace are concentrated in occupations known as the 5Cs: caring, cashiering, catering, cleaning, and clerical functions, which are deemed essential work, thus increasing the risk of catching COVID-19 for women. While men reportedly have a higher fatality rate, women and girls are especially hurt by the resulting economic and social fallout.

 

Today, the total value of private capital invested with a gender lens is estimated to be more than $4.8B globally (up from $2.2B in 2018). That’s a market opportunity of over $8B globally, up from $5B in 2018.

This is how I choose to impact the world through impact investing using a gender lens by driving effect through:

 

• Maximising gender equality outcomes through product customisation. This suit underserved and unmet needs tailored for the female client base; increased social Justice through gendered organisational policies and the creation of more confident and visible women leaders (fund managers, business owners, investors) acting as role models, mentors and future investors of aspiring and younger female entrepreneurs and professionals.
• Elevating the women rights movement by recognising the contribution of women rights organisations like Graça Machel Trust and boosting recognition and appreciation for the power of the collective inherent in the African women associations and self-help groups; recognising indigenous African female fund managers, through putting our efforts and vision at the forefront, leveraging our networks and African women associations to make this skill set visible to international investors.

 

This is my consciousness – what is your consciousness, and how will you pursue it?

 

Sources:

[1] IFC, The Promise of Impact Investing, (2019)

[2] https://www.bbc.com/news/world-55793575 ‘Wealth increases of 10 men could buy vaccines for all’ Jan 2021

[3] Emerging Market Small and Growing Business Capital Provider’s Survey Results, June 2020, Collaborative for Frontier Finance

[4] Emerging Market Small and Growing Business Capital Provider’s Survey Results, June 2020, Collaborative for Frontier Finance

[5] Unlocking the potential of frontier finance GIIN 2019

[6] “News: Women’s economic empowerment is a pre-condition for sustainable development, say UN High-Level Panel members” UN Women, July 17 2017, http://www.unwomen. org/en/news/stories/2017/7/news-womens economic-empowerment-is-a-pre-condition-for-sustainable-development

[7] Bloom, David E. et al. “Invest in Women and Prosper.” Finance & Development, Vol. 54, No. 3, September 2017. https://www.imf.org/ external/pubs/ft/fandd/2017/09/bloom.html.