Gender lens investing, a deliberate intentional approach of integrating gender lens in investment approach, ensure that all the investment processes are geared towards ensuring equitable investment opportunity for all genders. The traditional investing approaches are “gender neutral” or not particularly favouring any gender. However, the data suggests that these approaches have led to considerably low funding outcomes for women entrepreneurs.

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As per recent 10X Women Entrepreneurs in India 2023 report, women founders show similar odds of success compared to male founders. However, despite equal capabilities, gender equity remains a distant goal in the Indian start-up ecosystem.

"Only 18 percent of the startups in the ecosystem have female founders. The inequity faced by women founders is reflected in the low-ticket size of deals that they receive. Disparity in ticket size caused women founders to face an investment loss of about $3.7 billion (Rs 303 billion) over the past 3 years. It is also observed that women-founded startups may take longer to get ready to Series-A funding stage as compared to their male counterparts. In short, gender-neutral approach of traditional investing has not worked and hence a deliberate, intentional gender lens mainstreaming is required," said Avishek Gupta, MD and CEO at Caspian Debt.

Objectives of gender lens investing

The primary objective of the gender lens investing is to ensure that all things being equal, a company founded by a person of any gender has equal chance of being considered for funding and equitable amount of funding. It can start a virtuous cycle for society in general and women in general.

"If women entrepreneurs are given equal shot a funding and building large businesses, it encourages many more women to take a shot at entrepreneurship. It creates role models and fuels aspirations and improves acceptance in society and change happens," Gupta told CNBC-TV18.com.

Types of investments considered under gender lens investing approach

Gender lens investing approach can be applied to all investment vehicles, investment thesis and funding instruments.

As per Gupta, some funds focus only on women-led businesses and businesses, which impact women as producers, consumers or employees. Some funds can mainstream gender in their processes without changing the focus or sectors of their investments which also have positive impact on improving funding outcomes for women entrepreneurs.

How gender lens investing impact corporate practices

For incorporating gender lens investing approach, the funds have to begin with themselves--by promoting diversity in their investment teams. This requires them to be deliberate about hiring women, ensuring the workplace policies and infrastructure is geared towards retaining them.

"The gender lens investing approach also requires funds to collect gender desegregated from the companies they are evaluating. The data is likely to lead to insights about diversity in teams, retention, women customer feedback leading to a virtuous cycle of promoting diversity in fund teams and integrating gender lens in their investee companies as a result improving diversity across the eco-system," Gupta told CNBC-TV18.com.

Challenges faced when integrating gender considerations into investment decisions

Integrating gender lens begins with an intention to ensure equitable funding outcome for all genders. The challenges which investors face in mainstreaming gender lens investing, according to Gupta, are dealing with the social conditioning, low work force participation rates, very few women entrepreneurs, no established data driven evidence in India for business case for investing in women-led companies, costs of changing processes and understanding of gender lens.

How gender lens investing initiatives or funds impact financial returns and social outcomes

While there is absence of data on outcomes of gender lens investing in India, Gupta said, VC firm First Round reported that its investments in female-founded companies performed 63 percent better than those in all-male venture teams.

"Women also run more capital-efficient companies achieving 35 percent higher ROI," he added.

How can individual investors or institutions incorporate a gender lens approach into their investment strategies

Evolving landscape of gender lens investing and future trends

Gender lens investing is slowly gaining momentum. Some of the general trends which are positive is improvement in education outcomes, participation in STEM education and higher education for women.

"The dampening factors are reducing workforce participation for women. However, there is generally higher acceptance in society for entrepreneurship and we expect to see this result in more number of women taking up entrepreneurship. There is higher uptake of women in junior positions in VC industry which in a few years will reach to the decision-making levels and move the needle. We remain hopeful. The future is entrepreneurship and future is women," Gupta told CNBC-TV18.com.

(Edited by : C H Unnikrishnan)