There is growing evidence that women play a key role in achieving climate goals, both as leaders and beneficiaries of advancing climate solutions. There is therefore an urgent need for more investment in gender- and climate-sensitive deals.
However, mainstreaming a gender perspective into climate tools often encounters many obstacles. This is particularly evident in blended finance markets, where only 22% of the 550 or so climate blended finance transactions in the Convergence Historical Transaction Database (HDD) are gender-sensitive, a much lower proportion than the overall trend in blended finance markets. 31% of deals promote gender equality. Recognizing this, the Catalytic Climate Finance Facility (CC Facility) Learning Center recently published its first report on gender-responsive blended climate finance transactions in the energy sector. The report analyzes the data behind these transactions and highlights case study examples. It also explores the challenges of successfully launching gender-energy hybrid transactions and makes recommendations for investors and practitioners to help improve the efficiency with which they implement these transactions.
A commonly discussed challenge is to address both climate and gender goals in the same deal. Often, investors treat each goal in isolation, understanding one but not being proficient in another type of influence strategy. This is especially true for small funds without large technical assistance (TA) facilities or for institutions with limited resources and who must prioritize impact measurement and monitoring of a single or small set of goals.
The lack of standardized frameworks and indicators for these dual goals further complicates the effort. While climate indicators, especially those for climate change mitigation, have become more mature, investors and practitioners have repeatedly cited a lack of standardization of gender-related indicators as a significant challenge in structuring and investing in gender-responsive climate deals. Furthermore, limited or unclassified data can render globally recognized indicators and standards neither useful nor relevant.
The report proposes several ways to overcome these challenges, integrating gender and climate into transactions. The first is to monetize the gender co-benefits of climate tools through gender points. Co-benefits are the additional advantages climate solutions provide in helping to combat climate change. Articulating the gender co-benefits of climate deals can be strategic because it capitalizes on investor demand for climate while increasing the gender equity premium. The second approach is to use both technical assistance and financial inducements to hit gender key performance indicators (KPIs) in climate deals.
Monetizing gender co-benefits
Two cases illustrate how gender co-benefits can be monetized through the sale of gender points.
The first is the Clean Impact Bond (CIB) launched in 2022 by Sistema.bio. . It does this by leveraging upfront capital from small and medium-sized enterprises (SMEs) that manufacture and distribute these appliances. As a result buyers will buy into the health and gender co-benefits of using these appliances as a credit. Considering that women are primarily the ones positively affected by clean cooking, shared gender well-being can play an important role in such a tool.
CIB demonstrates that there is a feasible way to monetize gender co-benefits in climate finance markets by achieving two key outcomes: i) it provides data-driven metrics to quantify gender and health impacts and monetary value, ii) It provides data-driven metrics to quantify the impact and monetary value of gender and health. In this way, the CIB provides a starting point for determining revenue sources for gender points and for determining the presence of outcome funders.
The second case that reflects the use of gender points is the W+ standard released by WOCAN. The W+ standard allows programs to demonstrate quantifiable contributions to women’s empowerment and emissions reductions. For example, a carbon reduction scheme that benefits women could add the W+ standard to its existing scheme and then sell it at a premium to carbon buyers, pursuing the co-benefits of gender equality/women’s empowerment or achieving sustainable development Goal 5 (Gender Equality). One point is equivalent to a 10% improvement in the lives of women in the project community (for more information on how these points are measured, visit the W+ website). The W+ standard requires that at least 20% of the credit price sold be provided to women in the project community to support their self-determined goals. In general, incorporating gender credits into deals can encourage more rigorous tracking and reporting of gender-related outcomes, thereby increasing transparency and accountability on how investments impact women and gender equality.
Use technical assistance and financial incentives to incorporate a gender perspective
A further recommendation in the report for integrating a gender perspective into climate deals is to jointly deploy technical assistance and financial incentives to achieve complementary objectives. One barrier to incorporating a gender perspective is a lack of knowledge on how to do this; targeted technical assistance can provide the necessary training to help deal sponsors develop and measure gender outcomes. Financial incentives can be an important tool in encouraging companies to adhere to and achieve these stated goals.
One example of a deal that achieves this is the Beyond Finance Asia-Pacific Facility, a blended finance initiative that enhances women’s access to finance and essential services in Asia Pacific and sub-Saharan Africa. Beyond Finance uses TA to help integrate a gender perspective into the development of climate adaptation products. When the KPI is reached, a reduction in interest rates will be triggered for investment objects.
Meanwhile, fund manager Deetken Impact uses TA to improve the gender scores of its portfolio companies. As part of the due diligence process, Deetken designed a gender scorecard covering five key principles: women’s participation in leadership and governance, workplace equity, women’s professional development programs, value chain and advocacy, and community engagement. Through their technical assistance training programs, they improve outcomes in each focus area, deepening impact and going beyond simple headcount. Deetken uses TA to improve gender outcomes in large-scale solar projects, while working with Inter-American Development Bank (IDB) Invest, which provides financial incentives in the form of lower interest rates to encourage deals to reach their climate and gender milestones.
These cases demonstrate that while financial incentives can be powerful incentives to prioritize gender outcomes, advisory support supported by technical assistance is a necessary prerequisite for creating and achieving reasonable and customized targets based on the specific circumstances of the transaction.
in conclusion
Whether deals leverage gender points to monetize gender co-benefits in climate deals or incentivize gender-lens investments by deploying both financial instruments and technical assistance, blended finance deal sponsors have the opportunity to break down silos and achieve dual social objectives. Gender Points can help investors create a scalable, standardized framework for understanding the impact of investing from a gender perspective. Meanwhile, gender advisory support can help deals meet key performance indicators and even unlock financial incentives, such as reduced interest rates, to create momentum towards achieving gender targets. By employing these strategies, investors can more effectively align their financial goals with broader social and environmental impacts, driving just and resilient transformations.
