According to UN Women, it will take centuries to achieve Sustainable Development Goal (SGD) 5 – global gender equality and the empowerment of women and girls – if we continue to progress at our current rate. With the SDG deadline falling in 2030, serious initiatives and work are needed to empower women and promote equality.
However, in 2021 UN Women unveiled a series of innovative financing strategies, in collaboration with the Luxembourg Stock Exchange (LuxSE), to promote gender equality through bonds.
A bond is when an investor loans money to a government or company and receives a certain amount of interest back called a coupon rate. Bonds will also meet a maturity date after which the investor’s loan is repaid in full.
The guidance publication, titled “Bonds to bridge the gender gap: A practitioner’s guide to using sustainable debt for gender equality,” aims to help people “use sustainable bonds to credibly access financing for projects and strategies that advance gender equality objectives and achieve lasting impact.”
Two years on, some bonds are close to their maturity date whilst others are still in the first year of trading. UN Women has begun to release case studies by country that detail how the initiative is going. The case studies are free to download and read here.
In Mexico for example, a bond of approximately $150 million USD was issued by the Fideicomisos Instituidos en Relación con la Agricultura (FIRA) [Trust Funds for Rural Development] with a coupon rate of Interbank Equilibrium Interest Rate (TIIE) +27 basis points (bp). This bond is set to reach maturity in October 2023 so FIRA issued a second one of approximately $175 million USD with a coupon rate of TIIE +16 bp.
The proceeds were used to grant credit recipient status to women and businesses run by women, therefore increasing financial inclusion. The proceeds also meant women and women-ran businesses were able to claim loans for themselves as well as loans helping them to secure productive infrastructure.
In terms of reaching women in Mexico who may be less financially educated, UN Women tell Impakter: “The funds raised on capital markets are strictly allocated to rural women who typically face restrictions such as the lack of productive assets and resources, access to credit, networks of producers, inputs and guarantees for loans that are necessary in the agricultural sector.”
"Along the way, I started building my new identity and began rediscovering the world," says Mervat Azzmy, a small shop owner selling women's products in Egypt.
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Via @unwomenarabic pic.twitter.com/SKvSflBAzJ
— UN Women (@UN_Women) May 10, 2023
How do gender bonds actually help?
The guidance will help bond issuers integrate gender equality objectives into the use of proceeds and key performance indicators, as we are now seeing in Mexico.
The use of gender bonds in Mexico is contributing towards achieving several SDGs: Goal 1, Goal 2, Goal 5, Goal 8 and Goal 10. By ensuring that everyone has the same access to economic resources, regardless of gender or income, the belief is that this ensures a “level playing field” so that the levels of poverty and hunger can be expected to decrease.
Gender bonds are also meant to increase women’s participation at all levels of decision-making in political, economic and public life, ensuring women, men and young people can have decent employment opportunities with fair pay regardless of ability.
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All of this is designed to help reduce inequalities stemming from gender, race, age, religion or any other factor within the country as well as between separate countries.
A country where gender-targeted bonds are making a notable impact is Finland – perhaps helped along by a very egalitarian society that has long been used to sophisticated financial instruments. Here, impact investor Finnfund issued a bond of €75 million with a coupon rate of +125 bp. The bond will reach maturity date in October 2025 but the proceeds are already helping to meet the requirements of multiple SDGs.
As well as financial inclusion, ensuring affordable health care and bridging the digital gender gap, the bond in Finland is helping to create more sustainable food systems by training women in agribusiness.
In addition to all the SDGs that the Mexican bond is aligned to, the proceeds from the Finnish bond also help to meet SDG 9 – innovation and inclusive, sustainable industrialisation. This is being achieved by levelling up access to the internet and helping small-scale industrial businesses access financial services such as affordable credit.
Inspiring exchange with CEO of @LuxembourgSE @BeckerLuxSE on the place of gender focused bonds in the sustainable bonds market, #AI, #genderfinance and the representation of women in an inclusive society. @LuxembourgSE is a key driver in these fields in🇱🇺. pic.twitter.com/FTus2bXEBK
— Luxembourg Ladies Ambassadors Club (@LLAC_Luxembourg) May 15, 2023
Using financial instruments to help meet SDGs, however, implies that many conditions for success are already in place, in particular, familiarity with instruments such as bonds and what they can do. There is potential for bonds to be much more successful in countries where there is already a relatively high degree of gender equality.
The case study for Tanzania states that the bond issuer “had to find an innovative way of reaching out to specifically communicate with and lend to women.”
UN Women say they place “special focus on innovative programs to drive the financial independence of women, including rural entrepreneurs who are typically less included in the formal economy.”
Some countries, UN Women notes, “are in high risk of debt distress or already in debt distress.” This means that introducing the bonds initiative here is more complicated. In order to mobilize foreign capital into these areas, UN Women “plan to continue raising awareness about these instruments and build capacity in the region.”
“Working with the private sector can also allow accelerating the mobilization of financing flows and seeing more gender bonds come to market,” UN Women say.
These case studies, and the SDGs they are addressing, are showing that gender equality is a keystone objective when it comes to meeting many SDGs. By focusing the proceeds of bonds onto communities of women in business or helping them to access financial support, we could be unlocking a fast track to satisfy multiple SDGs at once.
Editor’s Note: The opinions expressed here by the authors are their own, not those of Impakter.com — In the Featured Photo: CROWN PRINCESS MARY OF DENMARK RAISED A FLAG FOR GOAL 5, GENDER EQUALITY. Featured Photo Credit: The United Nations