In February, Palladium Managing Director Steven Van Weede spoke at the GenderSmart Investing Summit. The Summit, which was held virtually this year, brought together investment leaders and influencers, fund managers, venture capitalists, investment intermediaries, development finance institutes, and gender experts to untangle complex challenges and make new commitments to gender finance.

The session ‘Data Harmonisation, Measurement and Management’ asked experts to discuss the importance of data for ‘gender smart’ investing and how to build consensus across the industry on data alignment.

But as Van Weede notes, it’s easier said than done.

For most investors, the focus is on financial returns and overall risk of investment. But for impact investors, there’s a third dimension, which is, of course, impact. “Risk and financial returns are fairly clear to measure and while the language around risk is somewhat newer, impact is a completely new world. There is a very broad and divergent set of impacts that people are interested in, and the ways of measuring or reporting on impact are only now being agreed upon,” he says.

Understanding Impact

Van Weede believes that we need to move the needle towards agreement and standards around the measurement of impact, so that when a fund says they are ‘achieving impact’, there’s integrity behind those statements that can be measured and eventually audited.

“It would be perfect if everyone applied the same rules or measured the same things,” he explains.

“But the problem is that we’re dealing with so many different contexts and dimensions. It’s not enough to simply say we want to make a difference in gender because it begs the question of how and who and where, and those answers vary vastly across different contexts.”

One area where the industry has struggled is in obtaining data up and down the value chains from the investees and their beneficiaries or clients; this is where the real impact on lives occurs. In recent years, initiatives like 60Decibels have made strides in listening directly to those who feel the impact. The Small Enterprise Assistance Funds’ Gender Equality Scorecard© (GES©) Manual gives us another angle – a way for investors to effectively measure gender impact when investing into small and medium enterprises.

Meanwhile, groups of investors are working hard to agree on how and why to collect evidence of gender impact. Notably, the 2X Challenge group of development finance institutions have laid out 2X Criteria for assessing a gender smart investment, and these are now linked with the Global Impact Investing Network’s (GIIN) IRIS+. The World Benchmarking Alliance’s recent work on gender gives a benchmark to assess corporate performance.

And these days, it is about a lot more than measurement and data collection. Instead, it’s about using that data to create better impact, which is the focus of the Gender-Smart Enterprise Assistance Research Coalition (G-SEARCh), published just this month. The Coalition brings together several gender lens investors (AlphaMundi Foundation, Acumen, SEAF, Root Capital, AHL Venture Partners and Shell Foundation) to determine how data can be used to help investors work with their small and medium businesses to increase their gender impact.

Yet, it is clear that many investors, even if they are bought into the concept of utilising a gender lens, don’t know what to measure or how. Van Weede suggests that the best place to start is establishing where investors are on the spectrum – whether they lead with gender or if gender is one of the many different impact areas on which they focus. With that established, the decision on what to measure and what tools and frameworks to use becomes slightly clearer.

For those leading with gender, a more rigorous framework for measuring and reporting impact may be needed, whereas for those focused on gender among many things, a lighter approach may be appropriate and pragmatic. At one end of the spectrum is Palladium’s proprietary Gender Benchmarking Tool, an in-depth analysis of financial institutions, allowing these organisations to benchmark themselves against a wide range of local, regional and international comparators along many different dimensions.

Lighter-touch frameworks, such as self-assessments, exist at the other end of the spectrum.

The Solution

But for deal-making professionals like Van Weede, the question isn’t just whether data harmonisation is possible for gender lens investors, but rather when to harmonise, and when to be specific. “There’s a tension between the need to harmonise data and the reality on the ground where the work is happening, where the situations are context-specific, and tailored approaches may be needed,” he explains.

“It is important that we continue to work towards harmonisation for impact investing and gender lens investing specifically. But at the same time, the focus should be on getting the data that drives better decision-making for both the investees and the fund managers. Sometimes that means a combination of industry-standard data analysis and investor-specific approaches.”

“There could be underlying risks that we’re not aware of unless we get to the data or, on the other hand, we could be missing opportunities because we aren’t accessing or investing in women. Both are reasons to make sure we are serious about impact-proof and what it takes to make a difference.”

Back at the GenderSmart Summit session, the group found clear consensus around the need for data. For many investors, it is critical to demonstrate gender results and to prove that gender smart investing reduces risks and generates results that are comparable or higher. To further drive the point home, one group of investors in the conversation shared that they had commissioned a detailed impact study only to find out that they weren’t reaching the community they had set out to reach. Without the data they would have never known.

The data is out there, it’s simply a matter of capturing it. Without it, it’s impossible to identify any risks and, more importantly, the benefits of investments, a crucially important tool for funds or investees seeking capital.

For more information, contact info@thepalladiumgroup.com.