Not all Blended Finance Funds are made equal

04/10/2021 Blog

Not all Blended Finance Funds are made equal – BlueOrchard’s Valerie Harrington’s take on the latest OECD Survey on Blended Finance

Author: Valerie Harrington, Associate Fund Manager at BlueOrchard Finance

We at BlueOrchard believe there is no true impact without the ability to measure it – and that means “data is king” (or queen). This is why we find great value in the recent OECD “Blended Finance Funds and Facilities Survey”, which included this year for the first time data collected on gender.

Gender-smart investing has become even more imperative as the Covid-19 pandemic has proven to disproportionately affect women. The UN estimates that by 2021, for every 100 men aged 25 to 34 living in extreme poverty, there will be 118 women. A total of 435 million additional women and girls are expected to live in extreme poverty – with the poverty gender gap to further increase[1]. Therefore, it is good timing that this year’s OECD’s “Blended Finance Funds and Facilities Survey”[2] for the first time includes gender-specific questions, which allow us to explore the intersectionality of gender-smart investing and Blended Finance.

The results show, amongst others, that out of assets under management of the investment vehicles surveyed, 33% do not take gender equality into account in their investment strategies. More strikingly, a sizeable share does not report specific impact targets, showing the need for more transparency and better reporting. Out of the survey sample, 30% of gender focused vehicles and 60% of vehicles that mainstream gender considerations[3] do not report set impact targets.  

While the sample of this survey cannot be taken as a complete representation of the Blended Finance market, the lack of transparency around effectiveness and impact measures is a criticism often received from market participants. For mindful investors, this shows that not all Blended Finance vehicles are made equal. They can instead maximize the impact of their investments by choosing those managers that not only consider gender, as well as other social and environmental topics but are also committed to reporting on it.

Furthermore, the survey shows a 175% increase[4] in participation from institutional investors such as pension funds and insurance companies in Blended Finance vehicles. This is significant momentum for Blended Finance as the market evolves and investors recognize the benefits these types of structures provide in allowing them to achieve a high developmental impact that meets their risk-return appetite. It also means more capital is available for innovative structures that tackle gender inequality when it is desperately needed, given the disproportionate effects suffered by women during this pandemic. 

At BlueOrchard advancing gender equality in Emerging Markets and shaping the future of gender smart investing is a high priority. We highlight the importance of bringing gender into the forefront of the equation; ensuring the utilization of public funding is catalytic in further attracting additional private capital; and creating clear targets and providing transparency, as only with the latter will Blended Finance be able to reach its full potential.

[1] COVID-19 will widen poverty gap between women and men, new UN Women and UNDP data shows | United Nations Development Programme

[2] The 2020 OECD funds and facilities survey captured data on 198 blended finance vehicles representing USD 75 billion of assets under management. This edition of the survey includes blended finance vehicles that report on their investments at the end of the 2019 financial year or in 2020 (for those that report before the end of the year).

[3] According to the European Institute for Gender Equality, gender mainstreaming involves the integration of a gender perspective into the preparation, design, implementation, monitoring and evaluation of investments.

[4] Compared to the previous edition of the survey.

 

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