Tackling climate change effectively requires difficult decisions and changes to how we live and work. It also requires that we draw on the ingenuity and talent of all within society to develop and implement effective solutions.
Unless we ensure that the opportunities enabled by the green transition are open to all, we will not create sufficient incentives for societies to make the tough choices or provide the political mandate needed to effect major and rapid change. We will also forgo the potential for innovation, ideas and the development of effective solutions that come if everyone has a stake in the transformation. A greener future can only be achieved if it is also a more equal one.
Women are key economic actors. As business leaders, investors, employees and customers, they play a vital role in shaping the way that markets and societies behave. Research suggests that firms with greater gender diversity in their management reduce their carbon dioxide emissions by about 5% more than firms with predominantly male managers. Banks with more women on their boards tend to direct greater shares of finance towards sustainable investments. And countries with a higher representation of women in their parliaments are more likely to ratify international environment treaties.
However, women continue to face substantial barriers to fully participating in the emerging green economy. According to the World Economic Forum, progress to close the global gender gap in economic participation and opportunity has stalled over the past 10 years and even seen a slight reversal. About 85% of women-owned businesses remain unserved or underserved financially, equivalent to a $1.7tn credit gender gap. Across European Bank for Reconstruction and Development economies, out of 100 early-stage entrepreneurs only 37 are women. Women also only represent 32% of the workforce in the fast-growing renewable energy sectors.
At the same time, the opportunities are huge. And women entrepreneurs are the world’s largest emerging market. According to the European Institute for Gender Equality, improving gender equality could increase gross domestic product per capita by up to 12% in some European Union member states by 2050, amounting to over €3tn.
The good news is that women entrepreneurs are a highly profitable market segment – and companies are beginning to take note. At the EBRD, we have been working with over 50 financial institutions across 25 countries, including in North Africa, eastern Europe, the western Balkans, central Asia, the Caucasus and Turkey, to extend finance to more than 70,000 women entrepreneurs. What we found is that women are good clients. They tend to repay more consistently, return for repeat business and focus more on relationship banking but less on price. Ignoring them means leaving profits on the table.
So, what does gender-smart green finance look like? It aims to address gender disparities and better inform investment decisions, leading to enhanced business outcomes and inclusive economic growth during the transformation to net zero economies. This ranges from green credit lines aimed at women entrepreneurs to spur investments into climate technologies, to enabling women to access green skills and jobs in key growth sectors and promoting the integration of women into the design of green policies at company and national levels. In Kazakhstan the EBRD helped increase the share of women in the green finance portfolio of partner banks to over 60%. And 80% of our investments in green cities directly promote gender equality and equality of opportunity through inclusive transport and infrastructure design, equal access to green jobs and the integration of women into municipal decision-making.
To enable more investors to follow suit, we launched a gender-smart climate investment guide with our partner multilateral development banks. The guide covers a broad range of sectors, including water, transport, energy, infrastructure, financial services, manufacturing, biodiversity and green jobs.
Integrating gender into climate finance is a critically important impact amplifier as we race to limit climate change. It is not a trade-off but rather a trade-up.
Barbara Rambousek is Director for Gender and Economic Inclusion at the European Bank for Reconstruction and Development.
This article was originally published in the Sustainable Policy Institute Journal, Spring 2023. These themes will be further explored in the forthcoming Gender Balance Index 2023, publishing in April.