What is Gender Lens Investing?

What is Gender Lens Investing?

Gender lens investing (GLI) is an investment strategy that intentionally incorporates gender-based analysis into financial decisions to advance gender equity while generating competitive financial returns. It spans multiple approaches: investing in women-owned or women-led enterprises, allocating capital to companies with strong gender diversity metrics, directing funds toward products and services that disproportionately benefit women and girls, and structuring investment vehicles that address systemic barriers to women's economic participation. The term was coined by Sarah Kaplan and Jackie VanderBrug in their foundational work on the intersection of gender and capital markets.

Why It Matters

The economic case for gender equity is among the most robust in development economics. McKinsey Global Institute estimated that advancing women's equality could add $12 trillion to global GDP by 2025—a figure that has only grown as the deadline passed with the gap still largely unaddressed. At the firm level, companies in the top quartile for gender diversity on executive teams are 25% more likely to achieve above-average profitability, according to McKinsey's 2023 Diversity Matters Even More report.

Despite these data points, women remain dramatically underrepresented in capital markets. Female founders received just 2.1% of venture capital funding in 2024, according to PitchBook data—a figure that has barely moved in a decade. Women-led firms access smaller loans at higher interest rates than male-led counterparts with comparable financials. The capital allocation system is not gender-neutral; it reflects and perpetuates structural biases that gender lens investing explicitly targets.

Institutional investors are moving. The number of GLI funds and vehicles tracked by Project Sage (the Wharton Social Impact Initiative's biennial survey) grew from 58 in 2017 to over 400 by 2025, managing more than $29 billion in assets. Japan's Government Pension Investment Fund—the world's largest pension fund—adopted gender diversity criteria in its ESG index selection. The Dutch pension fund ABP integrated gender pay gap analysis into its stewardship priorities. These are not marginal players making symbolic gestures; they are systemically important institutions responding to evidence.

The regulatory environment is reinforcing this trajectory. The EU's Corporate Sustainability Reporting Directive requires disclosure of gender pay gaps and board composition. California's SB 826, though legally challenged, catalyzed a wave of board diversity requirements across US states. The UK's gender pay gap reporting mandate has created a transparent dataset that investors actively use in screening and engagement.

How It Works / Key Components

Gender lens investing operates across asset classes and investment strategies. In public equities, it manifests as positive screening (selecting companies with strong gender metrics), negative screening (excluding companies with poor records on gender-based violence, pay equity, or representation), and thematic investing (funds specifically constructed around gender criteria). The SPDR SSGA Gender Diversity Index ETF and the Pax Ellevate Global Women's Leadership Fund exemplify this approach in listed markets.

In private markets, GLI takes the form of venture capital and private equity funds targeting women founders, gender-focused microfinance vehicles, and gender bonds. The 2X Challenge, launched by G7 development finance institutions in 2018, mobilized over $15 billion in commitments toward investments meeting gender criteria related to entrepreneurship, leadership, employment, and consumption. The 2X Criteria have become a widely adopted framework for defining what qualifies as a gender lens investment.

Due diligence in GLI extends beyond surface-level representation metrics. Sophisticated practitioners examine wage equity data, parental leave policies, sexual harassment prevention mechanisms, supply chain gender impacts, and whether products or services address gendered needs. Criterion Institute's work on gender-smart investing emphasizes that the lens should be applied to power dynamics within investment structures themselves—who sits on investment committees, whose risk assessment frameworks dominate, and whose networks determine deal flow.

Performance data consistently defies the assumption that gender-focused strategies sacrifice returns. A 2024 analysis by Morgan Stanley's Institute for Sustainable Investing found that GLI funds performed in line with or above their benchmarks across most time periods and asset classes. The IFC's Banking on Women program, which provides credit lines to financial institutions serving women entrepreneurs, has maintained a near-zero non-performing loan rate—evidence that the perceived risk premium on women-led businesses is a bias, not a data-driven conclusion.

Council Fire's Approach

Council Fire incorporates gender analysis into our advisory work across climate resilience, ocean conservation, and sustainable business strategy. Women in coastal and marine communities are disproportionately affected by climate change while simultaneously holding critical knowledge about ecosystem management and community adaptation. We advise clients on designing investment strategies and programs that recognize gender as a cross-cutting variable in sustainability outcomes, ensuring that capital flows support equitable climate solutions rather than reinforcing existing disparities.

Frequently Asked Questions

Is gender lens investing only relevant for impact investors?

No. GLI has evolved well beyond the impact investing niche into mainstream asset management. BlackRock, State Street, and UBS all offer gender-focused investment products. The rationale is straightforward: gender diversity correlates with financial outperformance, better risk management, and stronger governance. Fiduciary investors who ignore gender dynamics in their portfolios are not being prudent—they are overlooking a material factor. The framing has shifted from "gender investing is a nice thing to do" to "failing to apply a gender lens represents an analytical gap in your investment process."

How do you measure the impact of gender lens investments?

Measurement frameworks typically combine quantitative metrics (percentage of women in leadership, gender pay ratios, female founder rates in portfolio companies) with qualitative assessments (quality of parental leave policies, existence of anti-harassment mechanisms, gender-disaggregated outcomes data). The 2X Criteria provide a structured threshold-based framework. IRIS+, managed by the GIIN, offers standardized gender metrics for impact measurement. The frontier challenge is measuring systemic change—whether GLI capital is shifting market norms and institutional behaviors rather than just picking winners within a biased system.

Does gender lens investing apply to fixed income and real assets?

Yes, and this is one of the fastest-growing segments. Gender bonds—debt instruments where proceeds fund projects meeting gender criteria—have been issued by the World Bank, the Asian Development Bank, and private sector issuers. In real assets, gender lens principles apply to affordable housing investments that address women's housing insecurity, healthcare facilities focused on maternal health, and agricultural investments structured to benefit women smallholders. The Social Bond Principles issued by the International Capital Market Association provide a framework for gender-linked bond issuance, and sovereign issuers are beginning to explore gender-linked sustainability bonds.