Involve women more to beat economic slump
An op-ed by Isabella da Costa Mendes
Enhanced participation of women in economies could be the difference between countries emerging successfully or not from the Covid-19 and climate-change induced downturns.
Throughout the 25 years of my career, I have worked in bringing finance to much-needed projects in developing and frontier countries around the world. As a woman, I have witnessed first-hand the impact financing brings to the lives of women in these regions.
I have also seen impressive examples of how women contribute directly to their economies – from microfinance agents, CEOs of local banks to Finance Ministers – and the economic costs of failing to engage women.
First, the good news: Women in emerging markets have been embracing microfinance for many years. The benefits are many, with tangible changes happening in everything from economic development, to poverty reduction, to improved family cohesion.
Multilateral institutions are playing a large role in this growth, accounting for two-thirds of current funding. The vast majority of microfinance beneficiaries amongst the poorest are women.
Women field workers in Burkina Faso. Women make up a large part of the agricultural workforce and have been disproportionately affected by the pandemic. (Photo: Hector Conesa / Shutterstock)
But this is not enough on its own to address two of the world's main long-standing challenges: gender inequality and the income gap between nations.
Additional challenges have surfaced that make these issues more complex but, at the same time, present an opportunity for us all to go back to the drawing board and design a model of economic development and engagement that will have a concrete impact on women in less affluent countries.
One of these challenges is climate change, an issue that is increasingly in the public focus. The inequities of climate change – with the world's poorest and least responsible for CO2 emissions paying the highest cost – has heightened the need for global solutions, with a fair allocation of costs. Wealthy countries will also feel the impact; without action, climate migration will become an ever-growing problem.
And it is poor women who are certain to be particularly vulnerable to the impacts of climate change. From lower maize crop yields in Central America to the desertification of the Sahel region and floods in Mozambique, climate change is highlighting the very frail food security of developing nations.
Many countries will have the majority of their agricultural workforce represented by women and agriculture accounts for the most significant share of occupation of women in regions such as South Asia and Sub-Saharan Africa, according to the FAO.
The Covid-19 pandemic and women
The ongoing Covid-19 pandemic is only adding to the challenges the world faces. Although in the short run developed economies have shown most of the GDP contraction, most of the burden in the long run is likely to be borne by emerging and frontier economies, both in terms of death tolls and number of families falling below the poverty line. We risk years of progress being erased.
The pandemic has been a setback for the hard-earned progress made in gender equality in the past few decades. Women occupy many of the low-paid jobs closed first due to lockdowns – including in retail – while the global shutdown of schools made it impossible for some of them to continue working.
This highlighted a reality many know first-hand: women are still often the primary carers of their children, no matter how hard they work outside the home. The World Bank estimates that in Latin America and the Caribbean, women were 44% more likely than men to lose their jobs during this pandemic.
Most economies will come out of this pandemic with strained balance sheets and a limited capacity to invest. But there is increasing pressure to use this as a moment to take stock and redirect investment towards innovation, energy, mobility, and lifestyle solutions that prioritise green alternatives, as well as empowering women.
If this happens, momentum behind the poverty eradication of the past decade can be restored. But can the world come together to address the issues outlined above, and bring prosperity and sustainability to a broader group of people? The next decade will be crucial.
The past five years have seen more emphasis on environmental, social and governance (ESG) principles and the UN's Sustainable Development Goals in the investment world.
Corporations have embraced sustainability in their strategy and operations. Globally the broadly defined ESG investment market is likely to have reached $45 trillion last year, according to J.P. Morgan. It will grow even more in the coming years — and investor activism is playing a big role in this shift.
Many stakeholders will have to do their part in the new post-Covid world. Governments will have to make sound policy choices and regulatory changes – perhaps making unpopular decisions for long-term benefits.
DFIs will need to focus their investment power, acting as the catalysts of private sector involvement. Private investors will need to sponsor profit-making businesses that promote sustainable goals. The wider society will need to adapt to promote investment with outcomes that are fair and sustainable. A combination of taxation, regulation, investor and consumer activism will drive the change.
Where impact investing comes in
Impact investing is a broad concept. It involves not only investments that are good for the environment, but also those that create jobs and bring prosperity, reducing poverty and helping achieve the 17 SDGs.
As life begins its return to normal in the post-pandemic world, we need to make sure that female entrepreneurs go back to being the creative, dynamic, and productive force they were before – and create more opportunities for a new generation of businesswomen.
The transition of the global economy to address climate change will create a huge range of new jobs. I believe women are optimally positioned to take many of these new opportunities, if they are provided with the right education and training.
Investment in women needs to be holistic, starting from schooling up. Every dollar spent on girls' education can generate $2.80 in return. Girls should be given the opportunity to fully engage in a profession. After all, women represent half of the world's intellectual capacity, and in the next decade, using all available intellectual capital to reignite growth will be essential.
Companies with female founders and leaders have performed well in comparison to their male-led peers over the years. We need to offer more of these opportunities to girls.
Enhanced female engagement in the economy could add $20 trillion to the world's GDP by 2050, according to a Bloomberg study. The potential increase in GDP ranges from 2% in some developed countries to up to 30% in developing economies. With the right policy mix and support from investors, the impact could be truly transformational.
If all women – whether they work in retail or boardrooms – are properly encouraged to contribute to the economy with hard work, and diverse ideas, then we have a chance of addressing the world's problems.
Impact investing in the post-pandemic era will have a unique opportunity to start anew and help address many of the urgent issues of our century: climate change, poverty reduction, and gender equality. Women can take the lead: let's take that opportunity.
Isabella da Costa Mendes is Managing Partner at Catara Consulting (Europe) Ltd.
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