• The Asian Infrastructure Investment Bank (AIIB) commits to closing the gender gap, enhancing gender equality, and maximizing the benefits and impacts of its investments.
• The Southeast Asia Women’s Economic Empowerment Fund is AIIB’s first impact investment in a gender-focused private equity fund.
• AIIB’s proposal of a sustainability-linked compensation scheme aims to incentivize the fund manager to pursue a gender-smart investment strategy and to achieve pre-defined women economic empowerment targets.

What is Gender Lens Investing?

Gender Lens Investing (GLI) has become more popular in recent years. GLI is an investment approach that takes into consideration gender-based factors across the investment process to advance gender equality and better inform investment decisions. GLI fits into AIIB’s Strategy on Investing in Equity by contributing to a profitable, impactful and well-diversified equity portfolio.

Incorporating a gender lens into investment decision-making has many potential benefits. GLI uncovers overlooked investment opportunities particularly from women-owned or women-led businesses, improving environmental, social and governance (ESG) outcomes via increased gender equality. Evidence shows that the GLI approach could help improve the structure of human capital to facilitate a more resilient and sustainable foundation and enhance a company’s competitiveness. By investing in and working with fund managers that adopt a GLI approach, AIIB can meet the twin goals of achieving development outcomes and financial returns.

Globally, the concept of GLI has been embraced by various asset owners and fund managers including large institutional investors, development agencies, foundations, family offices, high-net-worth individuals, and retail investors. The Wharton Social Impact Initiative started tracking the global trend of GLI since 2017 through Project Sage, which covered 58 GLI investment vehicles with a total of assets under management (AUM) of USD1.2 billion raised at that point. In 2020, those numbers increased to 206 vehicles with a total AUM of USD6 billion raised. However, GLI is still a niche market for private funds focused on Southeast Asia. The number of GLI funds targeting East and Southeast Asia has increased to 23 in 2019 from 13 in 2018. This growth trend is expected to continue as more private capital is mobilized and emerging private equity funds raise capital with a GLI angle. Being well aligned with its thematic priority of Private Capital Mobilization, AIIB hopes to mobilize more capital from global investors for impact investing opportunities.

Advancing Women’s Economic Empowerment

GLI is a great way to promote women’s economic empowerment by bridging the financing gap for women entrepreneurs, providing better equity for female employees and better products and services for female consumers.

• According to a report from the International Finance Corporation on the Micro, Small and Medium Enterprises finance gap in 2017, there are approximately 6.6 million formal women-owned Small and Medium Enterprises in developing countries, and their cumulative credit gap is estimated at USD1.5 trillion.
• Many organizations in Southeast Asia have not yet tapped the potential of female talent resource yet. Workforces and leadership teams across public and private sectors currently consist mostly of men, and few companies have existing policies to support and promote gender equality.
• It is forecasted by Boston Consulting Group that women will control 75 percent of discretionary spending worldwide by 2028. Companies that can provide the products and services that speak to and meet the needs of women consumers are poised to benefit from this growing trend.

Making the First Investment in a Dedicated Women’s Economic Empowerment Fund

AIIB commits itself to closing the gender gap, enhancing gender equality, and maximizing the benefits and impacts of its investment projects. As many scholars focused on the gender impact of infrastructure development have stated, improving affordable access to education infrastructure has the potential to generate lasting benefits that can contribute to gender equality and empowerment. Accessible health care infrastructure and services allow women to receive better healthcare medical care. Within the target sectors, the infrastructure and services offered in underprivileged areas in particular are of critical importance to drive social and economic development.

On October 20, 2022, AIIB approved the investment in the Southeast Asia Women’s Economic Empowerment Fund (SWEEF, or the Fund). With a commitment of up to USD10 million, AIIB aims to support women’s economic empowerment and gender diversity by making sustainable investments in companies that particularly affect women and girls in Southeast Asia. The Fund targets to invest in Southeast Asia mainly in Viet Nam, Indonesia, and the Philippines, and opportunistically in Malaysia, Thailand, Cambodia, Lao PDR and Timor-Leste. It is AIIB’s first investment in a dedicated women’s economic empowerment fund.

SWEEF’s investment strategy connects capital with high impact and high growth business opportunities in sectors such as healthcare, education, climate change mitigation and adaptation, as well as manufacturing efficiency enhancement. SWEEF’s investments are expected to create more gender equality opportunities and gender diversity outcomes for women, their families, and communities through its women’s economic empowerment focus. AIIB will work together with the Fund to help fulfill the unmet needs of women and girls in their communities.

Thinking Outside the Box – Sustainability-linked Compensation

It is often a challenge to balance financial returns and developmental impact. As a key investor in the private equity space, AIIB sets an example by designing and promoting a sustainability-linked compensation scheme. The Fund manager's compensation is linked to three sustainability performance targets, namely (1) women owned/led businesses, (2) demonstrated gender improvements over time, and (3) climate disclosure. AIIB hopes to demonstrate leadership by addressing social issues in sustainability-linked investments in the private equity industry. The scheme aims to strengthen AIIB’s value addition to gender equality, diversity, and climate finance. It also demonstrates AIIB’s thought leadership and creativity in promoting a gender and climate focused sustainable investment approach through private equity investments.

Conclusion

AIIB stands ready to support gender-focused investments. AIIB is committed to mobilize private capital and resources for women entrepreneurs and to support private equity funds dedicated to advancing gender equality. It hopes to work with managers to improve the environmental and social standards and practices in the industry with a multiplier effect from investing in impactful funds.

AIIB welcomes business partners to join as it continues to unlock the potential of women in business in emerging market and developing economies. AIIB hopes to encourage more investors to pave the way for a steady growth of sustainability-linked private equity investments. It also hopes to see more fund managers realize both financial returns and sustainable development impacts.