When Professor Durreen Shahnaz, founder and CEO of Impact Investment Exchange, first envisaged the concept of a structured bond to connect underserved women to financial markets, bankers and financiers advised her against using the words ‘women’s livelihood’ as it might have driven away investors. They wanted her to call the instrument a ‘high yield bond’.
However, this was non-negotiable for Shahnaz. The bond’s overt gender lens may have been considered bold for the capital markets at the time, but it has since proven to be a hit among investors, mobilising more than $48m over three issuances and impacting over 815,000 women and girls across the global south.
The first-of-a-kind $150m Women’s Livelihood Bond, issued in 2017, is a series of innovative debt securities that aim to create sustainable livelihoods for over 3m women across the global south. It brings together a diverse range of public and private sector partners. The WLB unlocks capital for women-focused enterprises by pooling entities that are benefitting underserved communities.
The multi-country, multi-sector portfolio strategy diversifies risk and helps deepen impact. IIX has built in rigorous methods of assessing and measuring impact as the investments have rolled out, ensuring the voices of beneficiaries are tied to investment dollars, which holds everyone accountable to building an inclusive future.
The second WLB was issued in January 2020 and the third in December 2020. Even throughout the pandemic, the bond provided investors with an annual return of 5.65% from 2017-21, which compares favourably to the 2020 average of 4% returns for Asian high-yield corporate bonds, and 1% to 3% returns on social bonds.
The fundamental reason why WLB has seen such success is because IIX focuses on supporting women – as suppliers, employees, managers, entrepreneurs and customers – as we believe that women are at the heart of development. There is a tri-directional relationship between economic development, women’s empowerment and reducing the risk of financial instruments.
Research has found that women invest as much as 10 times more of their earnings than men do in their family’s wellbeing, in areas including child health, education and nutrition. This enables community-wide growth and economic development, which in turn makes the organisations working with these women less risky.
Innovative financing solutions like the WLB directly confront the enduring exclusion of underserved women from the world’s financial markets by unlocking untapped sources of private sector capital for women-focused enterprises that do not have access to large-scale international capital.
Incorporating a gender lens into active sustainable investing is also a strategic way to address climate action. In Asia, much of the labour force work in sectors impacted by climate change like agriculture, forestry and fisheries, with natural disasters costing the region $53bn in 2016 alone. These effects are felt most acutely by women, who are trapped in subsistence living due to high structural barriers to gaining self-sufficiency. Closing the gender gap could add up to $28tn to global gross domestic product by 2025, which is more than enough to close the climate finance gap.
Moving forward, the WLB continues to build momentum with the preparation of the fourth issuance: the Women’s Livelihood Bond 4 Climate, which will be a $50m bond. Having demonstrated scalability and replicability through WLB2 and WLB3, the WLB4Climate will be the world’s first intercontinental sustainability bond, expanding across the global south, starting with Africa.
Conrad de Jesus is Director, Research and Advisory, Impact Investment Exchange.
This article was originally publishing in the August edition of OMFIF’s Sustainable Policy Institute journal.