What Opportunities Do Gender Bonds Have to Raise Funds for Gender Equality? – World Problems

• An idea by Jemimah Njuki, Vanina Vincensini (new York)
• Tuesday, August 06, 2024
• Inter Press Service

So, what are the gender bonds? Gender commitments are commitments that include the goals of gender equality or women’s empowerment. Gender bonds follow the Social Bond Principles established by the International Capital Market Association and contribute to the United Nations Sustainable Development Goal 5 (SDG 5), and are confirmed by private organizations, known as second party opinions.

In 2021, ICMA, IFC, and UN Women published the first gender bond guide. The guide provides practical guidance on how to use gender bonds to finance gender projects and strategies and includes examples of gender-based targets for issuers and the types of projects that can be financed by private and public sector issuers.

The focus on gender bonds, or debt securities to support gender equality, is due to many factors, one of which is that the share of funding for the development of gender equality has decreased after ten years of progress—from 45% in 2019-20 to 43% in 2021-22.

As ODA declines towards gender inequality, the ability to mobilize resources from multiple sources including both public and private to advance gender equality goals becomes increasingly critical. But important questions remain about how we can mobilize and hold capital markets accountable to address systemic gender inequality.

Major market opportunities

The world’s capital markets are large and diverse, featuring a variety of instruments including stocks, bonds, and other financial assets. and institutions that facilitate the flow of money. As of 2023, the global bond market was estimated at $100 trillion, the same size as global GDP according to the OECD.

This market includes government bonds, corporate bonds, municipal bonds, and other debt instruments issued by various businesses. Despite the significant size of the bond market, the allocation of funds directly to gender equality remains very small. Gender bonds are still in their infancy, but their growth is promising.

By the end of 2023, the global capital invested in gender bonds had reached about $14.5 billion. Although this is a small fraction of the entire bond market, it shows a growing recognition of the importance of gender-focused investments.

Gender bonds are increasingly recognized as an innovative tool that can be used to tap into capital markets to support gender equality. For example, last year Latin America and the Caribbean saw 26 gender bonds totaling $2.25bn, led by issuances in Mexico, Chile and Colombia. In Africa gender bonds have been issued in Morocco, Tanzania, Rwanda and South Africa.

Despite this, the potential of gender bonds is yet to be fully realized, and challenges remain on how to ensure that they lead to gender equality, and that they address gender inequality. There is a risk of “pink washing” with bonds that are labeled gender but have no gender equality objectives or contribute to gender equality.

For gender bonds to be truly effective, we believe that three important things are needed.

The first is to increase the use of income to address the structural causes of gender inequality. Most of the gender bond issues to date have gone towards funding women’s businesses.

The National Microfinance Bank of Tanzania’s Jasiri Gender Bond launched in 2023 provides finance and resources to 3000 women-led small and medium enterprises.

The most recent issuance, the Bolivian bond of BancoSol $30mn, announced on June 20, aims to finance up to 4,500 micro and small businesses led by women in the country and aims to contribute to closing the country’s gender funding gap, where the majority of the country’s capital. of all businesses in Bolivia are led by women, yet only 24 percent of economically active women are able to get credit.

But bonds can go beyond bridging financial gaps. Eligible projects for Iceland’s gender bond, according to their bond framework developed with technical assistance from UN Women and in line with the goals of the gender bond, include the provision of decent living standards for women and gender minorities, which increases the provision of affordable housing for the less fortunate. -earning women, and efforts to increase the maximum payments during parental leave that enable both parents to exercise their equal right to paid parental leave.

Second, establish comprehensive accountability mechanisms to ensure gender commitments lead to sustainable and transformative impact on gender equality. Investors need assurance that their investments are making a real difference. And these tools can only make a difference in the lives of women and girls if we know that gender-specific outcomes are being achieved.

That is why bond issuers are encouraged to comply with the voluntary guidelines developed by ICMA, IFC and UN Women, which include recommendations on clear structures for bonds, opinions and second-party verification, and annual reports on the use of funds.

Impact reports that include sex-disaggregated quantitative data and qualitative data can build investor credibility, gender bond credibility, ultimately encouraging more investment in projects that have a direct and positive impact on gender equality.

In Argentina, the first gender bonds issued in the country created new jobs for women entrepreneurs and their employees. In South Africa, purchases of black female-owned suppliers by corporate bond issuers increased from 13.8% to 16.26% in the first year.

Third, very high stakes can have a significant impact on gender equality due to their scale and reach, if they are supported by sound policies, action plans, and credit management strategies..

Unlike other financial instruments, sovereign bonds can mobilize large sums of money, which can be channeled into national programs and policies aimed at reducing the gender gap.

Additionally, the reliability and stability associated with government-issued bonds make them attractive to a variety of investors. But the condition for releasing independent gender bonds is political will, sound debt management strategies, and strong gender equity investment and action plans.

Governments must demonstrate a strong commitment to gender equality by integrating gender analysis into their financial planning and policies.

They also need to ensure that government spending is aligned with gender equality goals. In the case of Iceland, the country’s programs to close the persistent gender gap, its long-standing practice of gender budgeting, strong fiscal stance and fiscal discipline provide an ideal environment for the successful issuance of a gender bond.

Many countries can follow Iceland’s example in the context of the 2025 international financial system that will mark the 30th anniversary of the Beijing Declaration and Platform for Action (considered the most progressive framework ever to promote women’s rights) and the fourth International Conference on Financing for Development. , which will take place in 2025 from June 30 to July 3 in Spain.

And while gender bonds have great potential, they are not a panacea for addressing the glaring gap in funding for gender equality. Public financing is needed to deliver meaningful and transformative gender equality and gender responsibilities are only a fraction of a larger effort to close the $360B annual funding gap for gender equality.

Vanina Vincensini a global expert in sustainable and inclusive finance. She advised Iceland on its first private gender bond proposal, setting a precedent for gender-focused financial solutions around the world.

Jemimah Njuki is Chief, Economic Empowerment at UN Women and New Voices Fellow. She writes extensively on issues of gender equality and the empowerment of women and girls.

© Inter Press Service (2024) — All Rights ReservedOriginal source: Inter Press Service