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Is there a disconnect between impact investing and gender lens investing? It’s complicated

Not that kind of gender lens. March 30, 2017 Category: FeatureFeaturedFundingLong
What exactly is gender lens investing?

Wharton Social Impact Initiative (WSII), for one, is paying particularly close attention to the impact investing strategy this year, with a report about it set to come out any time now and the recent announcement of WSII acquiring all the content from Women Effect, a “hub for thought and strategy around gender lens investing.” The initiative is also dedicating part of its upcoming conference to the topic.

A conversation with Annarie Lyles, president of Investors’ Circle (IC) Philadelphia, the local chapter of the national network of social impact investors, shed light on how complicated it might be to find a concrete definition.

But first: Women Effect states in its basic rundown of gender lens investing (also known as “women effect investing”) that it’s a “new field, and it’s evolving” while those working in the field “have slightly different definitions” of the concept. The gist of it seems to be that gender lens investors consider these frames when looking at what companies are, or aren’t, doing:

  • “Demonstrating gender equality throughout the value chain
  • Founded or run by women entrepreneurs
  • Offering products and services which have a positive impact on women and girls
  • Working to dismantle structural gender inequality
  • Addressing urgent human rights or social justice issues
  • Women as investors”

When asked about whether or not IC considers itself a gender lens investor, Lyles said the network of individual investors does not.

“Our lens is impact,” Lyles said. “We don’t really invest with a gender lens, and I personally don’t, but I have invested in a lot of companies that are led by women. It may have something to do with the fact that we’re impact investors — it’s a little bit more holistic way of looking at things.”

From our Partners

Yet nationally, the investing of venture capital in companies with at least one female founder is at 16.9 percent (as of 2016), whereas IC’s investing in this category is at about 43 percent among the group’s most active investors. Therefore, the group is fulfilling at least two of those aforementioned lenses: investing in more companies “founded or run by women entrepreneurs” and  “working to dismantle structural gender equality.”

Some of the local women-led or women-founded companies IC Philly has invested in include Sustrana, MilkCrate and edtech company KickUp.

Annarie Lyles.

Annarie Lyles. (Courtesy photo)

Not to mention that IC’s membership nationally has “traditionally been at” 30 percent women. That kind of diversity both within IC and its portfolio companies — and not just diversity of gender — is something Lyles said the group values in becoming “better investors and giving us better opportunities.”

Some impact investing groups, such as Golden Seeds, intentionally only invest in women-led businesses. But for those that don’t, gender lens investing could be seen as a restriction of sorts, and Lyles believes IC as a group wouldn’t take up that mantle.

As an individual investor within IC, though, anything’s game, and Lyles, who doesn’t consider herself a gender lens investor, said she notices when it’s all guys on the management team or board of a company.

“I think they may not be quite as strong [as a company] and I would probably ask questions as to why it was,” she said. “I might still decide to invest in them but it would be a red flag for me.”

At the end of the day, maybe Lyles is a gender lens investor — Women Effect states that some people can be women effect investors without even realizing it. But Lyles makes clear the difficulties she sees with this kind of investing, the biggest being with how limited angel investing already is.

“If you think about the big pool of businesses wanting funding, only a subset are suitable for angel investors,” she wrote in a follow-up email. “At [IC], we only look at the subset of these that have promise for social and environmental benefits, as well as profitability. Within the Philly IC network, we usually also further select the fraction that have Philadelphia connections. Within this small fraction of businesses that are suitable and seeking angel funding plus being for-benefit and local, any additional screening based on gender or other diversity lenses would leave us with too little deal flow for our members.”

Since we’re going with the lens imagery, Lyles compared it to a camera — every filter added makes it harder for an image to be captured as clearly. As if measuring social impact wasn’t complicated enough.

Instead of outright rejecting a company seeking funding just because it happens to be all-male, Lyles suggested steps that can be implemented after investing, such as asking a company to take on a women member from the investment group to become an advisor on its board, which she said IC Philly has done before.

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