Reducing the gender gap in the world economy
By Julie Becker, CEO of the Luxembourg Stock Exchange
The United Nations Sustainable Development Goals (UN SDGs) set out 17 goals that must be achieved to make a more inclusive and sustainable world a reality. Among these 17 goals is UN SDG 5 - “Achieve gender equality and empower all women and girls.” Given that women and girls make up half of the world’s population, if UN SDG 5 is not achieved, there is risk of stalling progress on the remaining 16 goals.



In many parts of the world, women are still excluded from economic activities and financial services. It is estimated that only 1 in 4 women have access to financial services, indicating that women still face a disproportionate number of structural, cultural and financial obstacles in their day-to-day activities. Even in developed countries, women’s rights have deteriorated significantly recently.

Gender-lens investing, and gender finance more broadly, address this issue by linking gender and finance. The overall objective of this new financial focus is to reduce the gender gap in the world economy and create a society where women and girls will have the same access to education, financial services, choices and opportunities as their male counterparts. More broadly, the goal is that the “gender lens” will be taken into account for all projects that are dedicated to the population at large, such as the accessibility and safety of public transport for instance, to make sure different needs are addressed.  

Linking gender and finance

Gender finance – finance that advances gender equality and promotes women’s empowerment – is an area of sustainable finance that has started to gain traction throughout the world. This new trend emerged on the back of multiple studies suggesting that women and girls are being disproportionately affected by the negative consequences of climate change and the COVID-19 pandemic. Some studies indicate that the pandemic alone led gender equality to reverse by as much as 10 years in some parts of the world.  

To counteract and proactively contribute to UN SDG 5, issuers from different sectors are turning to international capital markets to seek financing for projects or strategies that advance gender equality and women’s empowerment. Sustainable debt instruments that contribute to these goals are referred to as gender-focused bonds, and are gaining ground. 

In May this year, the Luxembourg Stock Exchange (LuxSE) signed a Memorandum of Understanding with UN Women committing to join forces to advance gender finance and strengthen awareness of the role that finance plays in achieving a more gender-equal world. 

As part of this action plan, LuxSE has added a specific flag to gender-focused bonds displayed on the Luxembourg Green Exchange (LGX), to bring further visibility to such bonds and make it easier for investors to identify debt instruments that include a component that specifically support women and girls. Gender-focused bonds can be social, sustainability or sustainability-linked bonds, and allocate all or a portion of their financing to concrete projects and strategies that contribute to gender equality objectives.  

Towards a gender-balanced economy

Currently, a gender-focused bond can take four different forms. 

Firstly, it can be a social bond with a sole financing objective to raise funding to advance gender equality. When 100% of the bond’s financing is dedicated to such projects, this is also known as a gender bond as defined under the A Practitioner's Guide to Using Sustainable Debt for Gender Equality published by UN Women, the International Finance Corporation, and the International Capital Market Association in 2021. 

Secondly, a gender-focused bond can be a social bond that allocates a part of its use-of-proceeds to financing a gender equality-related project alongside other social objectives. The African Development Bank (AfDB) opted for this approach for its EUR 1.25 billion social bond issuance, which aimed to secure financing for its ‘Science and Technology Development Project’ in Angola with a portion of the overall use-of-proceeds dedicated to financing the secondary school scholarships of 125 girls in the country, along with other social projects benefitting women and girls.  

Thirdly, a gender-focused bond can also be a sustainability bond which uses a portion of its financing to fund a gender equality-related project alongside other green and social projects. Brazilian private sector bank Itaú Unibanco provides a good example of this structure. In January 2021, the bank issued a USD 261 million sustainability bond and allocated USD 80 million towards growing women-owned micro, small and medium enterprises (MSMEs) in the South American country. Through this gender-focused bond issuance, the bank provides many women with access to financing and an opportunity to build their own business. 

Finally, gender-focused bonds can come in the form of sustainability-linked bonds (SLBs), which set at least one clear key performance indicator (KPI) and/or measurable sustainability performance target (SPT) relating to reaching pre-defined gender equality or women empowerment objectives within the bond's funding programme, by a set deadline. The Swedish investment firm EQT issued an SLB in 2021 and used this EUR 500 million issuance to commit to improving gender balance among its investment advisory professionals and portfolio companies, among other sustainability objectives. By the end of 2026, according to EQT’s commitments, women will make up 28% of EQT’s investment advisory professionals, and 36% of the members of the board of directors of EQT’s portfolio companies will be women.

A new megatrend

These examples of gender-focused bonds, all listed on the Luxembourg Stock Exchange, displayed on LGX and flagged as gender-focused bonds, illustrate the diversity of investment opportunities that advance gender equality and support women’s empowerment in different ways.

Gender finance is a business opportunity and issuers need to be aware of investors’ expectations as they increasingly consider the gender driver to be as important for their investment decisions as digitalisation and climate change. Gender equality cannot be taken for granted. This was demonstrated by the recent ruling by the US Supreme court eliminating the constitutional right to an abortion, a decision which is expected to have far-reaching consequences for women across the US and beyond, and increase inequalities in the country. 

At the Luxembourg Stock Exchange, we believe gender finance and gender-lens investing will see exponential growth in the coming years, as everyone will benefit from a more gender-equal world. 


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