Strategy & deal origination
Embedding a gender and climate lens into your organisational strategy and theory of change, and establishing a strategic commitment to increase your delivery of gender smart climate finance, are important first steps that should precede the investment cycle.
This could include screening potential deals for gender and climate impact, creating specific targets and metrics to track your progress. Firm-wide strategic goals and commitments can include:
Developing ambitious goals for climate and gender impact
Setting a gender finance target
Setting a climate finance target
Combining the two to create (or just track) gender and climate finance investments (i.e. those that qualify as both)
Building gender smart climate finance pipelines is an integral part of the inclusive shift to a net zero and resilient economy (read more about the business and impact cases for investing with the gender-smart climate finance lens here).
Deal origination is a critical starting point for building a gender-smart climate finance pipeline. In order to source deals, it is important to (a) Have a good business network in order to source and maintain a robust pipeline; and (b) have a thoughtful strategy for identifying and evaluating investments that have a gender and climate focus.
Traditionally, pipelines are created through informal referrals or recommendations made from within networks. Research shows that an increase of women on deal teams not only lead to better financial performance (Calvert Impact Capital, 2018) but also lead to an increase in investments in female-led businesses (IFC, 2019). It is therefore important for fund managers and investment professionals who are looking to source gender-smart climate finance deals to assess and mitigate gender biases in their networks, and apply a proactive gender smart lens to building pipelines and investment strategies.
In order to tailor both your origination and wider organisational strategy while aligning with your existing market priorities and strategic goals, you can take a sectoral and regional focused approach. These sector briefs provide sector specific questions that you can use during the sourcing of gender and climate focused investments.
Next, you can build a database of prospective investee companies based on or wider research, industry lists, or platforms such as Equilo which has partnered with 2X to create a gender assessment and deal making tool for investors and enterprises.
Introduction
Spotlight
EIB
EIB has integrated gender into its climate bank roadmap and adaptation plan and incorporated climate in its gender action plan. Moreover, for every deal, they record climate action, environmental sustainability percentage, and contribution to gender equality through a gender tag (informed by 2X aligned gender criteria and the OECD gender marker). This way EIB can track how many of its investments are gender-smart climate finance.
Creating a strong business network
Relationships with gender and climate aware business leaders, bankers, accountants, financial advisors, and those involved in supply chain management can all be important sources of deal flow.
An example of a proactive strategy to source a gender-smart climate finance pipeline would be to leverage the 2X Global community of practice, support women led climate accelerators and incubators, proactively attend and present at women and climate focused entrepreneurship events, mentor women entrepreneurs to build relationships, and actively ask deal teams for referrals of women-led climate focused businesses.
Developing a process for screening and evaluation
Next, it will be important to develop a process for evaluating and screening potential investments.
Negative screens are used to minimise potential financial, operational, and reputational risks resulting from lack of gender and climate adaptation and/or mitigation gaps and should include screening out investments which are not Paris aligned and that have unmitigated risks (see step 2, screening and due diligence).
Positive screens are used to proactively create a portfolio of companies that are already demonstrating or are willing to implement a gender and climate lens. See BII’s Gender-smart Investing Guide for Fund Managers for an example of a gender lens framework, and MDB climate finance methodology for adopting a climate lens.
Upskilling investors and deal teams
Investment teams and decision-makers should also be knowledgeable on gender and climate in order to identify investees, conduct impact and financial due diligence ultimately leading to the final selection of the investee companies. Examples of training resources include Certificate in Climate & Investing (CCI), Kite Insights’ Climate School or toolkits such as How to Invest for a Gender Equitable World: A 15-Step Guide.
Does your organisational strategy commit to gender- smart climate finance?
Do you have an internal set of criteria to assess investments based on credible gender and climate taxonomies?
Is the representation of women in your investment team aligned with 2X thresholds, to better enable you to source a diverse pipeline of companies?
Have you identified climate smart solutions or opportunities that can help tackle known gender gaps, promote women’s empowerment, or enhance women’s adaptive capacity, and prioritised these in your deal origination process?
Questions to consider