Gender bonds: a far-reaching solution towards empowerment and climate resilience

 

In 1908-15,000 women marched through New York City, USA, demanding for shorter hours, better pay and voting rights.

In 1911 – International Women’s Day was observed for the first time, marking the start of a century-long struggle to uphold the rights of women to be treated fairly and without discrimination.

Fast forward to 2023 – Latest Sustainable Development Goal (SDG) #5 data: “Women’s representation in positions of power and decision-making remains below parity. Only 47% of data required to track progress on SDG 5 are currently available, rendering women and girls effectively invisible. Nearly halfway to the 2030 endpoint for the SDGs, the time to act and invest in women and girls is now.”

With statistics like that – we all know that we have to do something immediately to accelerate investments which will improve gender equality. We have to implement aggressive strategies that may be unconventional but will narrow the gender empowerment gap.

Internationally, we are pleased by the depth taken by UN Women; “Generation Equality is one of the world’s leading initiatives to accelerate investments and implementation on gender equality.

This initiative is spearheading solutions-focused conversations with leaders from across governments, business and civil society organisations, which are very inclusive and have enough teeth to make a difference in bridging gender inequality.”

Our capital markets should lead in a two-prong robust strategy that focuses on gender equality as well as climate resilience. We all know that climate related shocks result in disastrous economic consequences.

Just look at the situation here – massive flood and mud slides resulting in billions in damages. And, sadly women enterprises tend to be the worst hit due to their inability to cope with financial shocks from climate damage as they still face huge structural barriers to financing. So, a double whammy.

Our belief is that we need to sponsor and empower women enterprises in order to build a holistic ecosystem.

So, what exactly could we do differently here in order to improve the availability of financing for women enterprises?

There is a nascent growing trend of gender bonds. We have seen the issuance of these specific bonds designed to empower over two million underserved women in our part of the world with sustainable livelihoods.

The primary aim of gender bonds or special financing for women enterprises is to build women’s financial resilience through access to affordable credit.

By developing products and providing easy access for women enterprises, the women bonds could further help climate resilience by including key terms in the lending facility:

•  disaster insurance schemes
•  sustainable agriculture support
•  clean energy usage points
•  reduction on carbon emissions scoring
•  reduction on pollution and wastage points

As such, special financing vehicles or bonds for women should ‘effectively change the dominant narrative, from seeing women as victims of inequality and climate change, to viewing women as solutions towards equality and climate action.’

There are various ways that these special financing vehicles can be supported:

•  Governments remove all taxes on investment income received from Gender Bonds or women investment products that promote women’s empowerment combined with climate resilience.
•  Governments and financial institutions manage risk sharing mechanisms (guarantee programmes with insurance)
•  Regulators can specifically task the market with incentives to issue gender bonds to finance women enterprises with a focus on climate resilience.

“The capacity of gender bonds to scale up women enterprises as well as sustainable, climate-smart agriculture has been shown to increase employment opportunities, grow incomes, improve resource efficiency and elevate productivity to allow for less time spent on subsistence activities”.

If we zoom out and look at where gender priorities sit within the broader ESG conversation, the view is a little less rosy.

“Global ESG bond issuances were projected to have exceeded US$1.5 trillion during 2022. However, against this backdrop of increased demand for sustainable and green financing, the availability of investment products dedicated to addressing gender issues and promoting gender equality remains limited. Only US$17 billion in global assets relate to gender-labelled financial products – this is a tiny fraction of the global sustainable investment universe of over US$40 trillion.”

There is increasing international investor demand for financial products which integrate gender-based factors such as women’s leadership, women enterprises and climate resiliency into investment strategies.

The products can be bespoke and easily marketed globally; emphasis needs to be prioritising gender equality while tackling climate resilience as these two areas represent an opportunity for issuers to differentiate themselves and satisfy growing investor expectations in this area.

This is the time to implement a holistic financial blueprint of gender debt instruments here in Malaysia – so we can build a very much needed bold ecosystem that will achieve two successes of solving gender empowerment as well as climate resilience.

Happy International Women’s Day. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.