Gender Equality + Climate Investment Criteria

Posted on June 21, 2023byMarypat Thenell Smucker

In 2021 we introduced our gender lens investment criteria and related them to the three ESG pillars. Here we update our combined gender equality and climate-focused criteria for investee entities. See the figure below. Clear boxes on the figure indicate our compilation of gender lens investment criteria, while green boxes add a climate focus. This framework is our take on a set of metrics and directions for use by gender + climate investors and managers of private and public portfolios. From start-ups to large public corporations, investors should equally fund women-led renewable energy ventures, gender-equal boards and leadership teams seeking to address climate risks, women-led and equality-focused mitigation and adaptation solutions, and women-led crisis response initiatives.

Our research shows that the management teams of most gender lens equity funds in our coverage universe employ a wide range of these standard gender lens criteria in their processes, including with investee engagement. Also, most of these funds employ ESG screens. The first family of publicly listed gender + climate equity funds was launched in 2022, with additional offerings launched this quarter. We expect to see more funds combine gender-focused investing with specific climate criteria. Our criteria framework provides goalposts, particularly with placing a gender lens into climate investing.

This compilation of gender lens criteria can aid investors seeking to direct capital toward investees with gender equality strength – a tool for investing in women as leaders of climate solutions. Within this landscape of ideals, variable combinations of targets and timelines are applicable to investees. Key principles include:

Key starting point: above-average governance and workforce equality
Progress in one category reinforces others
Raise gender equality targets incrementally until parity
Data collection and disclosure supports all other categories

The Parallelle criteria encompasses corporate finance gender-focused metrics. Investors have an opportunity to apply a gender and climate lens to an investee’s financing instruments and funding activities. The sustainable bond market now includes a growing number of corporate issuers of sustainability-linked bonds. Some include gender-focused performance indicators among a selection of broad-based sustainability targets. As we have previously pointed out, corporate venture capital is a route that investee entities can take to promote gender equality. According to CB Insights, corporate venture capital (CVC) reached a record level of $174B in 2021 before declining 43% in 2022 in a dampened environment for venture funding.[i] Early-stage CVC comprised 62% of the total. By investing in gender lens funds, investors of every size can find opportunities to participate in venture capital (VC) investing, including VC investments focused on women founders of climate solutions.