When private equity funds meet gender and climate

The latest Project Sage data, released in late December, reveals a rise in the number of private funds investing with both gender and climate in mind. This month we share a few of these funds’ approaches and learnings, supplemented with findings from our own working group. These are not investment recommendations, just illustrations of how other investors are approaching this theme.

In 2019/20, 28 percent of Project Sage respondents, or 39 funds, had a focus on SDG 13 (Climate Action) alongside gender. In 2020-21, it was 39 percent, or 81 funds. What’s more, while many funds are early-stage or first-time funds with innovative, high-impact theses, there was also a notable jump in the number of SDG13 funds managing over $100 million — from 5 to 18.

And if you add in the funds that explicitly mention sectors such as energy or cleantech, this brings the total up to 50 percent of the Project Sage universe. This suggests that climate and gender finance is indeed gaining mainstream traction, with influential allocators of all stripes.

Just looking through the lens of a single SDG or sector, however, doesn’t tell the whole story about gender lens funds and climate investments. For one thing, to be considered for inclusion in Project Sage 4.0, the gender lens had to be explicit. Yet there are other funds out there I’ve spoken to that are investing in climate with a gender lens but don’t talk about it, for reasons that could make for another article.

Integrated funds with implicit climate impact

There are also a number of investors seeking to have climate impact through less obvious leverage points, such as investing in girls’ education or digital inclusion. This is a holistic approach where there is a less-explicit focus on climate in their investment thesis, but climate outcomes are still part of the consideration.

There are those with multiple lenses — for example, the 22 Fund in North America, a growth equity fund with a primary focus on “technology-based, export-oriented manufacturing firms” led by women and Black, Indigenous and People of Color, or BIPOC, entrepreneurs and an outcome of creating good green manufacturing jobs in the United States. Similarly, Chloe Capital’s thesis is explicit about gender and diversity, yet the investment team signaled interest in supporting climate tech solutions in a recent partnership with Cornell University, and have several climate tech companies within its portfolio.

Intentional gender lens funds targeting specific climate outcomes

Then there are the funds who state a target of explicit climate outcomes. Of the larger (greater than $100 million) funds, women-led, U.S.-based AiiM Partners is a technology fund that addresses environment and equity at the intersection of land, water, air and energy. AiiM’s ambition is to offset at least 1 gigaton of emissions and the fund targets underinvested sectors, which could have a tangible impact on the oceans and climate.

Over 30 percent of portfolio companies have a strong gender lens. Circulate Capital is another fund investing in South and Southeast Asia, with a focus on tackling ocean plastics. Currently, 40 percent of the investment committee and 60 percent of the leadership team are women, and while it is currently developing a formal gender lens in its investment approach, Circulate asks questions about diversity and equity in its interactions with current and future investee companies, and is developing an engagement strategy on gender for those firms.

In Latin America, Eco Enterprises Partners is an impact fund with a largely women-led management team that invests in businesses that support biodiversity, such as sustainable forestry, non-timber forest products and sustainable agriculture. It has a strong gender lens, working actively with its portfolio companies to enhance women’s and indigenous communities employment and leadership opportunities. Others include Korea’s Envisioning Partners, which has a new dedicated climate solutions fund, and Nordic Impact Fund in Denmark and Africa.

There are also a number of smaller funds whose approaches to influencing gender and climate impact are worth following. In 2019, Root Capital started to assess the climate vulnerability of small and growing businesses in its loan portfolio and have been collecting sex-disaggregated data at a farming level to compare men’s and women’s access to resources and assets. This has helped to reveal causality behind both vulnerability and success, and to increase understanding of farmer resilience.

Root Capital trained the businesses on the importance of women’s climate engagement and helped them build gender action plans, as well as providing $20,000 grants to implement activities that supported women’s climate resilience. Its data shows that when women have equitable access to resources not only at the farmer level but the business management level, their enterprises have higher productivity, better gender outcomes and better climate-smart practices. And that this is a real risk mitigation strategy as a lender.

What’s most encouraging about all this is the sheer diversity of climate- and gender-lens funds we’re starting to see on the market. Some have a strong impact focus and frame their activity in terms of SDG outcomes. Others are more commercially focused. All recognize the opportunities in seeing and acting from multiple perspectives, and the investment risks inherent in ignoring women, whether as workers, customers or as innovators driving climate solutions. 

If you are a fund with a climate and gender focus that’s not on our list, I’d love to hear from you. For investors — see Project Sage 4.0, and learn more about the Climate and Gender Working Group