Last year, 144 million people lost their jobs due to COVID-19 and hundreds of millions more saw their income reduced.

The negative impacts of the crisis disproportionately affected women, young people, and the vulnerable. In the US, one in six is going to bed hungry, and one in five is at risk of losing their home. The situation for many in the poorest economies is even more perilous.

At GSG Impact, we have been working on impact solutions in 50 countries across emerging and developed markets throughout this crisis. We have witnessed first-hand three themes that could be the catalyst to enable the most disadvantaged to participate in the recovery, while also delivering fairer and more sustainable economies long term.

1. Investors are getting gender smart

Globally, and across all regions and income groups, more women have lost their jobs than men as a result of COVID-19. This imbalance is projected to have reduced global GDP by $1 trillion in 2020 alone. The negative effects go far beyond economics. There is growing evidence that working towards the United Nations Sustainable Development Goal on gender equality (SDG5) also directly improves food security, education, health, and environmental protection.

Gender-lens investing is a positive way of focusing capital on projects that empower women and filter through communities. It is gaining traction — between 2014 and 2019, investments into gender-focused products on public markets jumped from $100 million to $3.4 billion¹. New initiatives, such as the Gender Lens Initiative for Switzerland², are a model for how research and investment can combine to identify investable solutions. Investors have no reason to hesitate — gender-lens investing brings better financial returns and is material to the recovery. For example, Gender Smart found that over 10 years of investing, companies with a female founder performed 63% better than those with all-male founding teams.

Governments have a central role to play too. A pandemic plan being piloted in a province of Canada shows how gender lens can be applied. Issues including planning and data collection can be addressed to ensure that public policy is aligned with positive gender goals, especially for the post-COVID recovery.

2. The intersection between green and social

Green and social bonds are moving into the mainstream. Last year, sales of green bonds grew by 13% to a record $305.3 billion, while social bond issuance jumped sevenfold to $147.7 billion. Overall the market could reach $900bn in 2021 according to Bank of America. While distinguished in financing terms, it is increasingly evident that environmental and social issues are intertwined. For instance, research has shown that green recovery plans can create 1.3 times more jobs than more traditional measures³.

However, not all that is green is good. Take the example of the Waoranis, an indigenous tribe living in Ecuador’s Amazon rainforest. Increased investment in wind turbines has created significant social and environmental challenges for the tribe as their territory provides 75% of the global supply of balsa wood, a critical light-weight component in turbine blades.

Understanding where green and social intersect is essential for policymakers, investors and businesses to maximise the benefits of investments while minimising the negative consequences. A growing body of technical recommendations — such as the Impact Investing Institute’s Green+ Gilt model⁴ and UNDP’s standards for SDG Bonds — provide guidance for measuring and managing issues the confluence of these two topics.

3. Investors increasingly want Impact, not just ESG

In major developed markets around the world, assets with an ESG filter total more than $30 trillion⁵. There may still be some uncertainty over what that means practically, but the figure is growing and expected to reach $53 trillion by 2025 — or one-third of global assets⁶. Large investors increasingly want to go further and demonstrate real impact — Singapore’s Temasek is just one large institution to commit significant capital to new impact initiatives since the start of the year e.g. recent deals with Leapfrog and BlackRock.

Asset managers are taking action. In our work, we have seen eagerness among some of the world’s largest investment groups to collaborate on topics like the harmonisation of impact standards and reporting to fight the risk of “greenwashing” or “impact-washing”. They are also devising products to raise and deploy more capital into impact.

The UN SDGs provide something of an impact roadmap but the challenge of meeting those goals is only growing. The financing gap for the SDGs could increase by 70% to $4.2 billion annually due to COVID-19. Most of that capital will be needed in developing markets that have been among the hardest hit by the pandemic. Investors too will have to work harder and direct more of their capital to emerging markets if they really want to contribute to solving some of our world’s most critical problems.

Impact investment is at an inflection point. There is growing demand, and understanding, of the benefits of investment that intentionally seeks positive social and environmental outcomes. But at the same time, investors, asset managers and governments need to understand where capital is most needed and the best way to deliver real impact. The result could be a stronger recovery, and fairer economies that benefit us all.

1. https://www.gendersmartinvesting.com/gender-lens-investing-in-numbers

2. 21.03.08-sfg-gender-lens-initiative-for-switzerland-press-release.pdf (sfgeneva.org)

3. Green Recovery Plans Can Unlock Millions More Jobs Than ‘Return-to-Normal’ Stimulus — Sustainable Recovery 2020 (iisd.org)

4. REPORT (impactinvest.org.uk)

5. http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf

6. https://www.visualcapitalist.com/inside-esg-ratings-how-companies-are-scored/