In the rapidly evolving private market investment landscape, gender lens investing is gaining traction as a vital strategy to address the gender disparities prevalent in society and bring improved returns from diverse teams.
There is a need to move beyond describing the state of the gen lens investing (GLI) market and define implications and deliver tangible, actionable recommendations into the hands of fund managers, limited partners and ecosystem players. At the forefront of this movement is Project Catalyst, an initiative building on the foundations laid by Project Sage. The latest report ‘Tracking gender lens investing activity in private markets’, serves to bridge this gap between ambition and action, capturing information from 126 fund managers, who reported on a total of 175 funds.
In this interview, Juliet McFadden speaks with Macarena Machimbarrena, Director at Sagana Consulting and project lead on Project Catalyst, shares market insights, analysis of the new findings from the latest research, and the challenges and opportunities that lie ahead.
Could you share some of the key findings from Project Catalyst regarding the state of gender lens investing in private markets?
The most awaited data point was the market size. Project Catalyst showed the total AUM for gender lens funds has reached at least 7.9 billion USD, up from around 6 billion USD in 2021. While this growth is significant, particularly given the tough fundraising environment, what’s even more promising is the diversity of actors involved. Gender lens investing is gaining traction, with over 40% of surveyed funds raising or having raised capital for at least their second fund. Notably, 10% of fund managers have assets under management exceeding USD 500 million. We observed a broad range of vehicle types. Traditional closed funds still prevail, though 16% have open-ended structures and 12% are blended. The market is beginning to witness gender considerations in sectors that have traditionally been difficult for gender lens investors, such as manufacturing and transportation, highlighting a growing diversification in investment areas. This diversity highlights the growing appeal and innovation in gender lens investing, which also creates a range of options to meet different investor needs.
Both emerging and established fund managers, across various sectors, are embracing gender lens investing. The investor landscape is also more varied than expected, with 71% of funds having family offices and 59% having institutional investors in their LP base. This diversity indicates that gender lens investing is no longer a niche area but is attracting a broad range of actors.
What opportunities for future growth and impact in gender lens investing do you see?
The investment approach must keep up with where the capital is flowing. For example, there’s significant funding for climate projects, and it’s important to tie new instrument trends to a gender lens. Women are key drivers of climate solutions. When women are in leadership roles, sustainability outcomes often improve, such as lower CO2 emissions, highlighting the importance of gender inclusion in climate strategies.
Climate change also poses significant challenges that often disproportionately impact women. These women constitute the majority of the world’s poor and are more dependent on threatened natural resources, and yet their insights, particularly from grassroots movements, are crucial for creating effective and resilient climate solutions. By investing through a gender lens, investors can help accelerate this transformation. AI is another area with clear opportunities to position women as agents of change. Currently, the rapid surge in AI investments could potentially further marginalize women. Investments in AI must be gender-sensitive to avoid amplifying biases while leveraging its potential to improve our lives. Investors interested in leading the charge in gender-smart technology investments can take action by funding diverse teams, ensuring inclusive design, and demanding transparency.
Could you elaborate on actionable insights provided by Project Catalyst, especially for investors and fund managers?
For LPs, the primary recommendation is to invest in funds and fund managers that integrate a gender lens. There is sufficient pipeline for various LPs to find suitable opportunities, in addition to the USD 7.9 billion currently being invested, there is a demand for a further USD 6.2 billion in gender lens investment. LPs can also engage with fund managers on their gender strategies, holding them accountable for their impact performance. This involves asking questions about their gender strategy, its effects, and how data is being used. LPs need the skills to assess both financial and impact performance and to support fund managers in these areas.
Building on that, what are some of the most significant challenges you see facing gender lens investing, and how can stakeholders work to overcome these obstacles?
One of the key challenges lies in transitioning from merely measuring impact to actively managing it in ways that drive value creation. While over 80% of funds consistently track and report gender metrics—reflecting the field’s progress—it’s crucial for fund managers to leverage this data to enhance their practices and make informed investment decisions that catalyze meaningful change. To achieve this, LPs must play an active role by asking insightful questions and championing the strategic use of data. Creating incentives for data utilization and offering resources to act on the insights gained are essential steps. The shift from passive data collection to its strategic application is where the combined efforts of different stakeholders become pivotal. LPs can partner with fund managers to encourage the effective use of data, while fund managers can collaborate with companies to develop and implement gender action plans, ultimately leading to more impactful and value-driven outcomes.
Are there other challenges you see, and insights on how to mitigate them?
Another challenge is building an evidence base around what works and what doesn’t. Project Catalyst shows that innovative fund structures, such as blended or evergreen funds, are being explored to amplify gender outcomes. Over 10% of surveyed funds are either blended funds or evergreen funds and/or integrate impact-linked incentives in pursuit of gender goals. It’s important to study these structures to see if they generate market-rate returns and impact. The mindset can be one of exploration and risk-taking, accepting that some approaches will fail. The sector must learn from these experiments rather than avoiding risk, which can lead to paralysis and stagnation.
As the field continues to evolve, what areas require more research and exploration?
There’s an interesting role for researchers in gender lens investing. Data from Project Catalyst shows that funds incorporating a gender lens have a more gender-balanced team than the average fund manager . Of the funds surveyed, women represent 62% of Investment Partners, and 53% of Investment Committee members. Understanding what leads funds to adopt a gender lens and gathering performance data on these funds is crucial. This data can help build evidence that investing with a gender lens is profitable and delivers specific types of returns. More performance data around these funds, which have different characteristics from the broader ecosystem, is important for directing more capital to them.
Lastly, could you share examples of recent projects at Sagana that build on the work highlighted by Project Catalyst?
One of our projects with Chemonics addresses the challenge of insufficient capital reaching women entrepreneurs and fund managers in emerging markets. There’s a clear imbalance in the amount of VC and private equity funding that goes to male-led versus women-led or gender-balanced entrepreneurs . Women fund managers are more likely to invest in gender-balanced teams . To solve the imbalance at the entrepreneur level, we need to address the imbalance at the investor level. If women aren’t managing capital, women entrepreneurs won’t receive enough of it. We’ve conducted a multi-year study with Chemonics to understand the challenges facing women fund managers.
Another area we focus on is helping fund managers work directly with their portfolio companies on gender strategies. This involves not just gathering data but using it to build actionable plans. We’ve worked with various investors to interpret data and translate it into action plans. The impact is truly generated by the companies as they create value in their business models.
The findings from Project Catalyst clearly illustrate the growing momentum and diversity in gender lens investing, with innovative strategies and a broadening base of investors driving this field forward. As gender lens investing continues to expand, it offers significant opportunities create business value and to address societal challenges, especially in areas like climate change and technology, where inclusive solutions are urgently needed.
Download Project Catalyst: Tracking gender lens investing activity in private markets today.
About Project Catalyst: Tracking gender lens investing activity in private markets.
This report is as a snapshot of gender lens investing activity and builds on the previous four iterations of Project Sage, reported by Suzanne Biegel and the Wharton Social Impact Initiative, to track the growing field of venture capital, private equity, and private debt funds with a gender lens from 2017 to 2021.