Beyond box-ticking: Why gender-responsive climate finance is effective climate finance

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This is the ninth entry of a ten-part blog series celebrating the Lab’s 10th anniversary. The series shares insights and lessons learned over the past decade, exploring practical knowledge from accelerating climate finance solutions in emerging markets. See all entries here.

September 3, 2024

Rosaly Byrd

Manager

In the climate crisis, women are disproportionately affected. The United Nations estimates that women make up 80% of those displaced by the adverse impacts of climate change, and women and children, particularly the poor and marginalized, are 14 times more likely to die than men in the event of a disaster.

At the same time, women are change agents for mitigation and adaptation action, particularly in areas where they have an outsized role in agriculture, forestry, and other land use (AFOLU), water, and energy. Women involved in agriculture, particularly smallholder agriculture, are often at the forefront of implementing climate adaptation measures and technologies.

Women also have a key role in making change as consumers, as they are responsible for 80% of household buying decisions worldwide. This is true in the corporate world, with a clear correlation between female board representation and company carbon disclosure.

From an investment perspective, disregarding the needs of women means disregarding half the market, reducing impact and returns.

Taking an intersectional approach to climate finance and incorporating a gender lens is an important component of the Lab. Our proponents have increasingly made gender a core part of their instrument models, culminating in the launch of the Lab’s first-ever Gender Equality stream in 2023 with support from FinDev Canada. Through this stream, the Lab sought financial solutions to advance gender equality and women empowerment as core objectives, in addition to climate change action.

Breaking down gender vulnerability and climate finance

Disregarding women’s specific needs, vulnerabilities, and capabilities in climate finance solutions can reduce investment returns and hinder the achievement of mitigation and adaptation objectives. Women’s adoption of new green technologies or sustainable practices is largely contingent on addressing these contextual gender differences, inequity, and inequalities early on.

Take, for example, the role of low-carbon public transportation in driving mitigation efforts. Applying a gender lens when investing in such measures is critical because women may be deterred from using new forms of public transit if their needs are not accounted for.

A 2019 study by CAF – Development Bank of Latin America and the Caribbean and the FIA Foundation found that more than 70% of women felt unsafe taking public transportation in the major Latin American cities of Buenos Aires, Quito, and Santiago. A 2018 report on Gender in Public Transportation in Jordan found that 47% of women reported rejecting job opportunities due to public transportation challenges, including having to use multiple modes of transportation to reach workplaces and the high cost of fares. By investing in secure, gender-responsive public transportation, more women can be encouraged to join the workforce.

Transportation is just one example of the importance of gender-responsive climate finance in reaching all beneficiaries, ensuring the sustainability of investments, and driving social and environmental impact. A gender lens must be used to design vehicles that finance safe, accessible, and affordable public transportation to ensure that intended beneficiaries use it.

A data-driven process

Despite its importance, engagement with the nexus between gender and climate finance for mitigation and adaptation remains nascent. CPI’s 2021 Global Landscape of Climate Finance data identified that only 2% of total climate finance flows were gender-responsive between 2019 and 2020. Meanwhile, Convergence data shows that just 22% of all blended climate finance deals identified in its Historical Deals Database had integrated some gender-responsive component into the overall transaction structure.

Improved understanding and tagging of gender-responsive climate investment would help increase the volume and effectiveness of these financial flows. For instance, data-driven evidence can support the gender-responsive climate finance business case, demonstrating to investors that their efforts yield financial returns while delivering social and environmental impact.

What’s more, embracing a data-driven process would help improve transparency and better track total finance flows. A lack of harmonization among data standards and definitions of gender-responsive climate finance has hindered the reporting and tracking climate actions that integrate women’s considerations and empowerment.

Although we are seeing more demand for solutions beyond a box-ticking exercise, particularly from development finance institutions, more efforts are needed to address this data gap. The 2X Criteria provide a global standard for gender finance and mark a significant step forward in helping stakeholders better understand gender-lens investing. More metrics specifically targeted at gender-responsive climate finance will allow for increased reporting and investments that support women and girls in the face of climate change.

Gender and the Lab

At the Lab, we believe it is critical to incorporate gender in the design of climate finance instruments from the start. This includes thinking through metrics that can be used for data-driven impact, both at the end-use point and throughout the investment chain. After all, what gets measured gets managed.

If treated as an afterthought, consideration of women and their needs will likely be less significant in these instruments, hindering real change.

In addition, Lab instruments should leverage local expertise to understand local gender issues better, as women’s perspectives and roles vary greatly across cultures and regions. Understanding such context is key to ensuring that beneficiaries and investors receive our approach well.

We have seen several encouraging trends in recent years, with proponents embracing gender-responsive climate finance and listening to local voices, particularly in the green housing space. Social Infra Ventures (SIV), a 2023 instrument under the Lab’s first-ever gender equality stream, is a first-of-its-kind gender-responsive platform for green and affordable housing in Northern Africa.

SIV plans to sell its rental portfolio through a strategic sale or listing on the Moroccan stock exchange to fund future phases, creating a self-sustaining housing finance ecosystem and institutionalizing green and gender-responsive housing, including rental. SIV also integrates gender mainstreaming into its program cycle. SIV has set up gender-responsive mechanisms across its operations through a Gender Action Plan that includes gender-responsive metrics for HR, procurement, monitoring and evaluation, and customer service.

Other proponents have increased their focus on gender as their instruments evolve. Endorsed by the Lab in 2022, Reall’s Green, Affordable Housing Finance (GAHF) instrument deploys construction and mortgage loan guarantees alongside targeted enabling interventions to foster a locally driven and self-sustaining, affordable housing finance ecosystem. Since securing funding from the SDG Impact Finance Initiative, Reall has focused on putting women and gender at the center of GAHF as it rolls out its pilot in Kenya, mainstreaming gender by using alternative credit assessments when evaluating loan applications from women due to their increased likelihood to occupy the most vulnerable categories of informal sector work. What’s more, GAHF is also modeling gender-positive guarantee products, bringing women to the construction sector, and broadening access to home ownership.

“By addressing the intersectionality between green, affordable housing and gender, we’re bringing in and reaching a formerly marginalized group. I think that is a fantastic way to reach a lot of women who did not have access to some of these opportunities to own homes,” said Naa Ayeleysa Quaynor-Mettle, Reall’s Climate and Green Buildings Lead.

Lab proponents such as SIV and GAHF have successfully addressed key climate finance sectors by embracing an intersectional approach and ensuring gender responsiveness within their theories of change.