Gender equality lending takes focus at multiple firms

Multiple funds are turning their focus not toward a specific sector but on improving gender equality and investing in women. It’s not only to improve diversity, but because – plain and simple – it’s just good business.

Calvert Impact Capital, a Bethesda, Maryland-based impact investor, announced last week that it will head the deployment the C$75 million ($55.99 million; €49.74 million) private debt sleeve of the newly formed multi-strategy Equality Fund – a vehicle that is committed to advancing feminism and investing in women. The fund collected a C$300 million investment from the Canadian government.

The sleeve will be lending to funds and intermediaries that support women’s businesses and organisations with an emphasis on emerging markets. For Calvert Impact, operating this strategy will just be business as usual.

“We will be leveraging our historical business and knowledge and bring those elements to the assets of the Equality Fund,” Jennifer Pryce, chief executive of Calvert Impact, told Private Debt Investor. “It will mirror our work.”

Prior to this opportunity, Calvert Impact has been lending to help build up communities and women for the past 24 years. It lends agnostically but has found a plethora of opportunities related to healthcare, agriculture, financial inclusion and community development. It typically lends to smaller funds that range in size from C$15 million to C$500 million, as well as intermediaries and some direct lending.

“We are excited to continue to look for ways to activate larger pools of capital into the markets we know,” Beth Bafford, vice-president of syndications said. “I think the benefit is showing how to create more efficiencies in these markets to get more money flowing. These markets are investable.”

The organisation “screens in” potential borrowers instead of “screening out”, said Leigh Moran, the director of strategy at Calvert Impact. By this they won’t rule out organisations that are less diverse, they will rather support those looking to incorporate gender practices.

The organisation has an open-ended vehicle called Community Investment Note, which allows for multiple types of investors to contribute to the movement, including retail or brokers, as well as solo investors.

The firm has deployed more than $2 billion since its inception and currently has approximately $500 million on its balance sheet. The firm also operates a syndication strategy to help these funds expedite the capital-raising process.

“The big thing, I think, that’s really powerful is that [the fund] is demonstrating that one can take all their assets and align them with a mission,” Pryce said. “That sends a strong message into the financial market that this is really possible to do. You can invest for impact as well as returns.”

While these initiatives are focused on the impact and social good, the benefits extend far past that. Lending through a gender lens offers increased diversification – and usually higher returns on investment.

A study performed by Calvert Impact found that returns on equities, assets and sales were all higher from top diversity quartile leadership teams and boards of directors than those in the bottom quartile of organisations surveyed.

For return on assets, both diverse leadership teams and boards more than doubled their returns compared to those in the bottom quartile. On the leadership side, on average over 11 years, the average ROA for top quartile diversity firms was 3.9 percent, while for bottom quartile firms it was 0.3 percent. On the board of directors’ side, the results were 3.7 percent and 1.5 percent, respectively.

Calvert Impact is not the only player looking to increase access to capital for women and underserved communities. San Francisco-based CNote is a fintech platform designed to lend to women and minority owned start-ups and businesses through its partnerships with community development financial institutions (CDFI), as previously reported by PDI. The platform has deployed more than 450 loans since inception and is currently raising its Wisdom Fund, which is targeting 4 percent returns.

Co-founder and chief executive Cat Berman told PDI that using technology to advance investments in women not only closes the wealth gap but also provides a chance for investors to diversify their portfolio and discover new sources of alpha.

“My hope is when we think about diversification of strategies that we also think about diversification of fund managers and who is creating those products,” Berman previously told PDI. “I think that includes diversity and gender, diversity and race.”