Gender-Smart Investing Journeys: Jen Braswell, CDC
We speak to Jen Braswell, Director of Value Creation at CDC Group, about the importance of designing a gender strategy with operationalisation in mind, getting leadership and team buy-in, and maintaining momentum at a time of immense global upheaval amidst competing business priorities.
What were the major turning points or driving factors that led CDC to start really considering gender in their investments?
I think there were two things. One, and critically important, was that we were able to get our commitment to gender in our current, publicly-announced, five-year (2017-2021) strategy. We didn't have any experience with gender-smart investing at that time, so we've been on a long journey since then to make it meaningful.
The other key element was having an incoming CEO who was, and still is, a serious champion. Change from the top is critical when you're talking about any kind of diversity and inclusion. We were given the resources, license to operate, and the great gift of time to go out and build the network, understand where the field was, and how to insert ourselves into it. We chose to put a good chunk of that resource into building the field first – as a founding member of the 2X initiative - in parallel with our own approach.
Could you confirm the year just to give us a sense of chronology?
While we made the commitment at the end of 2016 for our current five-year strategy, it was in early 2018 that we launched the gender strategy. So we took the first full year to do the research across our portfolio, to understand what the participation and performance was, then to articulate the priority areas we cared about. We chose to focus on the business case and where women participate in the corporate value chain: women founders and owners, women in leadership, women in the workforce and women as consumers. That has since translated into the 2X Challenge criteria, and hopefully what we're all beginning to use as the framework for investing because it keeps it very close to the portfolio and the transactions.
Tell us about some of the early conversations; were there any sticking points? How did you make the case or progress the conversation?
There were many sticking points! And many sticky conversations are still happening. The first, that surprised me, was around walking the talk. Senior women in the business told me, "We can't go out and say we do this for a portfolio company if we don't do it internally". So we had to tackle our own internal gender balance and diversity first.
The other thing we heard, and still hear, is: "This isn't commercially practical.” But fortunately, the data that's emerging is consistently showing the correlation between gender balanced businesses (especially leadership teams) and commercial performance. We just did a review of CDC's portfolio and that positive correlation is clear. So consensus is building that not only is gender-lens investing 'practical' - it is, in fact, a smart commercial strategy.
“Gender lens investing has three levels: there’s the intentional investing on top, mainstreaming it across your investment process, and the value creation work”
One surprising sticking point that has more recently emerged - and I imagine this may be a challenge across other development finance institutions with a dual mandate - is a tension between our core development goal of poverty reduction and a focus on promoting gender balance and diversity in leadership. If gender equality isn’t explicitly stated as a core development goal, there can be a perceived tension between investing to directly impact underserved people and investing in women leaders and women-owned businesses. We have more work to do across the industry to make the case that both theories of change are important and complementary - and that investing in gender equity at the top of the private sector is a key enabling factor for generating broader impacts that contribute to poverty reduction (such as improved livelihoods, increased access to products and services) down the value chain. We've got case studies and anecdotes, but we need to build the data.
What were the needs and constraints you considered when crafting the gender strategy?
Crafting a strategy is one thing, operationalising it is another beast entirely. It's where everyone's been getting stuck; it's complicated. We thought hard about how to bring in gender data and analysis into the decision making process in our individual investment cycle. And then, how do we adjust our back end portfolio management process? This was an overall shift for CDC from a focus primarily on the commercial factors, to understanding the performance that we're seeing on impact. The key is making the link from the pre-investment thesis on gender through to post-investment portfolio management, which allows us to support value creation work if we're seeing challenges. A really critical element that has helped expedite operationalisation for us is the 2X criteria framework - which gives us a shared definition across the investment industry for what a good gender-smart deal looks like.
To me, gender lens investing has three levels. There's the intentional investing on top, and that's about establishing targeted gender-lens investment strategies to originate for, and proactively back, gender-smart businesses.The second layer is mainstreaming it across your investment process and bringing the gender conversation into every deal you end up doing. And we are aiming to do that as well. The third layer is the value creation work. So that's the ‘technical assistance’ support to help the businesses or funds drive gender-smart change in their business. We decided to start with the value creation support - stipulating in the beginning that it would only be 'demand driven' - because that was the easiest place for an unconvinced organisation to begin.
Since then we have been steadily working on mainstreaming, which has been a big focus and has taken a huge amount of internal engagement. We just had the first gender presentation at one of our quarterly portfolio review meetings - and it generated a lot of great conversation. But where I wish we could have started is the top piece, with intentional gender-lens investment strategies: that's where I think we all need to go, because it's how we can scale our investments into gender-smart businesses the fastest and demonstrate to the market that investing with a gender lens is a strategic advantage for any investor. Intentional strategies also help us get over the problem of perceived risk, since many of the gender-smart businesses in the market currently have different/unique characteristics. For example, most gender-lens strategy funds out there today are first time managers (a perceived risk); and many businesses catering their products and services to women consumers are start-ups or smaller ticket-size equity investments that are hard for large investors like CDC to invest in via our current investment strategies.
What about the role of internal stakeholder gatherings?
Internal stakeholder communications is key. When you’re introducing a new way of working to any organisation you have to engage, engage, engage. Get your voice into every internal conversation. Find ways to keep gender at the top of the agenda, because it easily falls off. When we launched our gender strategy internally, we brought in our CIO to stand up and say, "if we're not investing with women in mind, we're not world class investors". Powerful voices do help.
Importantly, we've trained our IC because if they don't understand what questions to ask about gender, decisions will get made differently than we want. We've done a lot of work to get 2X gender data a spot on the IC papers, and the teams gathering the data have been trained as well. This is all part of the mainstreaming. We regularly engage teams all across our business to ensure they have the tools they need to support our gender-smart approach – including investment officers and impact management professionals, regional teams, sector heads, legal and compliance teams and more.
How have recent events impacted the work you've been doing, and have you had to adjust?
We've done a lot of work internally to understand how COVID has impacted our portfolio. We've seen lots of job losses, retrenchment, and in many sectors where we had a high percentage of women employed. So particularly in South Asia, in financial institutions, and in manufacturing. We're just coming out of the phase where we've been trying to stabilise the portfolio and inject liquidity and we’re moving toward rebuilding for the new normal. We've had a lot of technical assistance (TA) redirected for advisory support for businesses, and that has had a very strong gender component. All of the TA that we've deployed, and all the portfolio consultants all over our markets have been looking at the impact on women, and asking how the business can think about their women employees as they’re rescaling.
“Engage, engage, engage. Get your voice into every stakeholder conversation. Find ways to keep gender at the top of the agenda, because it easily falls off”
I would argue that without TA for gender, it's going to be very hard to further the agenda because there are so many other commercial priorities post-COVID. We've seen a huge demand for more D&I support across our businesses, particularly our financial institutions and larger corporates, over the COVID period. And I think that is somewhat driven by the Black Lives Matter movement and the growing consensus that businesses have a role to play in addressing systemic inequality; gender is part of that.
What are some standout investments that illustrate your strategy?
A large part of what we've been doing is nudging portfolio companies. So for example, we've invested in a logistics company in India, to support a significant growth strategy. When we were making the investment only 2% of the workforce were women. So as a condition for our capital, we agreed an action plan for an increased percentage of women year on year, and we hired a consultant to support the company to realise targets and support the women that they hire. . We track how they're doing every quarter and expect to see retention and performance improvements as the percentage grows.
We've also been able to work with an increasing number of fund managers to adopt new gender-smart approaches in their investing, which is quite exciting. We’ve recently announced a new partnership with Development Partners International, a top quartile regional fund for Africa as a 2X Flagship Fund that is committed to use the 2X framework to ensure at least 30% of the deals across their portfolio are gender-smart, and they're going to be reporting on that. It's a big commitment for them. They've also made the commitment to maintain their gender balance at the senior level, which includes intentionally promoting gender balance and diversity in their talent management and recruiting and progression.
“Without TA for gender, it’s going to be very hard to further the agenda because there are so many other commercial priorities post-COVID”
What's next for CDC?
Intentional investing. So in our FI portfolio, we are developing a new approach to directed lending, which means providing our capital to a bank to on-lend to a targeted segment of borrowers, including women entrepreneurs and 2X gender-smart companies. This is new to CDC, and we'll be seeing that roll out over the next year and a half.
And then I think our power is in our funds business. We have 1200 portfolio companies across CDC, and over 1000 of them are in our funds business. We have a different challenge with the gender strategy funds which is that most are smaller and first time, and we have to deal with the perception risk there. That's about creating an intentional strategy that says, we are going to invest in these funds. And we are going to prove that investing in these funds achieves the results we want both from a commercial point of view and from an impact point of view.
What advice would you give another institutional investor at an earlier stage of the journey about how to progress?
When I am talking to people about lessons learned for building a successful gender lens investment approach, I highlight a few key elements: 1) leadership, 2) walking the talk, 3) bringing in tools and resources like the 2X criteria (which is the mainstreaming piece) and as I said earlier 4) engage, engage, engage internally.
If you don’t have all of those elements in place from the beginning, it can be helpful to build the network externally and bring it in. It's very hard to be a lone voice. This is true for the only woman sitting on a board, and it's true for some lone gender champions within an investment shop trying to make the case. Having a network of peers who are also driving the agenda, sharing evidence and helping build the case can be very helpful. This is what the 2X network and the Gender Smart Investing community have provided for us over the past few years.
Finally, I think it takes a lot of personal resilience to drive a change agenda. There will always be hard conversations, there will always be people who don't buy it. The more data you can get in your back pocket, the easier these conversations will be.