Technical advisory facility (TAF) insights on opportunities for action: gender-lens investing in the climate risk insurance value chain
Technical advisory facility (TAF) insights on opportunities for action: gender-lens investing in the climate risk insurance value chain
Gender-smart climate risk insurance (CRI) investments hold potential to promote climate resilience building of those most vulnerable to climate change and contribute to gender equality and women’s empowerment. Impact investors and their investees in the CRI value chain, increasingly seek guidance on using gender analysis to deepen the positive social impacts of investments to close the financial protection gap.
This year the Centre of Excellence (CoE) on Gender-Smart Solutions under its Technical Advisory Facility (TAF), financed by Global Affairs Canada (GAC), has provided technical support to three entities to apply a gender self-assessment tool and generate recommendations and guidance for a short-term gender action plan. These were CLIMBS Life and General Insurance Cooperative, a micro-insurance provider in the Philippines that has received gender-lens grant funding from the InsuResilience Solutions Fund (ISF); impact investment manager BlueOrchard Finance Limited (BO), which manages the IIF PE I and II funds; and the international financial institution, the Multi-lateral Investment Guarantee Agency (MIGA). This process has generated insights on opportunities for action for gender-lens investing (GLI) in CRI from the perspectives of investor and investee. These include that:
- Development capital is increasingly targeting the climate risk protection gap; in parallel development finance institutions (DFIs) are committed to invest at the nexus of gender and climate gender. Multiple drivers highlight continued interest by DFI’s in allocating their capital to CRI that delivers on development outcomes including related to gender equality and women’s empowerment. In April 2024 the InsuResilience Investment Fund Private Equity II (IIF PE II)) managed by BlueOrchard welcomed British International Investment (BII) and Nordic Development Fund (NDF) as new investors, bringing the total committed capital for the fund to over USD 90 million, close to its target size of USD 100 million.1 This fund aims to protect vulnerable people and microentrepreneurs in emerging markets, from the impacts of climate change by providing access to climate insurance. Not long after, the 2024 Apulia G7 Leaders Communiqué reaffirmed their commitment to gender equality and welcomed “the new commitment by Development and Multilateral Finance Institutions to invest at least USD 20 billion over three years in gender lens investing, encouraging investments at the nexus of gender and climate”.2 In doing so, the G7 recognised the success of the 2X Initiative, which to date has mobilised more than US$33.6 bn in gender lens investments.3
- More can be done to ensure the convergence of gender and climate considerations in investment strategies, processes and post investment technical advisory support to CRI investees or financial sector clients. At an institutional level, all too often these factors are considered in isolation in investment strategies and investee engagement. This is despite the fact it is well established among investors and others that gender-dimensions to climate risk exist and that women’s economic empowerment is needed to support climate change adaptation and resilience building.4 Institutional investment and gender strategies need to acknowledge the gender dimensions of climate change and opportunities of climate risk insurance investments. At a practical level this means applying a gender lens throughout the investment process including post investment. For example, technical support can be provided to existing and new CRI investees to identify and act on their gender equality related risks and opportunities.
- Formalising gender-lens investing policies for CRI investments and creating tailored toolkits can guide investment managers and investees in their practices. For instance, BO is documenting its GLI policy for its IIF Equity Fund II, with guidance from the CoE. There are opportunities for internal GLI policies to cross reference and elaborate on institutional impact investment strategies and desired investment outcomes related to sustainable development and climate change. Toolkits can provide guidance to colleagues and investees, on the ‘how to’ of GLI from collecting sex-disaggregated impact investment data from CRI clients, to pitching the case for designing customer centric insurance products to investees or supporting them with human-centred design research. These approaches can help crystalise where these opportunities exist and ensure that the right questions are asked at the right time. This can generate better designed and delivered gender-smart CRI products from a commercial perspective, tap into female talent and the women’s insurance consumer market, and enable better impact returns.
- There are investor opportunities to leverage women as agents for change and promote women’s economic participation through investments in the CRI value chain. Targeting women as clients of CRI is only one way to support the resilience building of women. Opportunities should not be overlooked at promoting women in the direct or indirect workforce within the wider CRI value chain. This can contribute to women’s asset accumulation to build their economic resilience in the face of climate induced disasters. Employment opportunities include encouraging women’s participation in technical roles in maintaining sensors or in the satellite data providers for parametric insurance, as has been the case for a BO investee, or as insurance sales agents, an approach taken by CLIMBS. For instance, CLIMBS has considered barriers to women participating in its agent workforce in remote areas, and its implications to outreach to women clients in these areas. Employing women in these diverse positions can confer commercial benefits for insurers and other entities within the CRI value chain. Investors and investees can work in partnership to identify and leverage these employment opportunities through technical support accompanying investments, as is the case through technical assistance provided by MIGA in its political risk insurance investments.
- Sex-disaggregated data can be incentivised by investors to track beneficiaries, and positive and negative gender-related impacts of investments. Sex-disaggregated client data is useful for investors to ask about during the due diligence process when investing in CRI providers or financial institutions. Investors can establish sex-disaggregated client data gaps and system and capacity issues in collecting disaggregated client and impact data during the due diligence phase. During the contracting phase, there are opportunities to define and agree the scope of gender-lens related technical support post investment including related to sex-disaggregated beneficiary data and social impact data on any improvements to women’s climate resilience. For instance, CLIMBS provides sex-disaggregated beneficiary data to the InsuResilience Solutions Fund and was supported through the TAF to estimate the numbers of indirect male and female beneficiaries to contribute to its impact measurement and reporting.
- There is demand for peer learning between climate risk insurers on emerging approaches to tailoring parametric products to women’s differential climate risks and needs. There are opportunities for insurers and investees to compare notes on applying insights from gender analysis in existing parametric insurance solutions. For example, with CoE support, CLIMBS identified the opportunity to conduct a gender analysis of willingness to pay survey data for its Weather Protect Insurance to inform its future CRI product offerings. As innovation moves apace, there is demand from investors and companies to learn about CRI tailored to women’s specific needs in diverse economic segments. For instance, TAF grantees were keen to hear about pilots of extreme heat insurance targeting women in India: Climate Resilience for All through its Women’s Climate Shock Insurance and Livelihoods Initiative (WCS) is piloting a financial product combining insurance and cash payments for lost income due to extreme heat for informal women workers; and similarly Mahila Housing Trust provides index-based insurance for excessive urban heat targeting women in the informal sector.
To conclude, this third window of the CoE Technical Advisory Facility has shed light on a range of opportunities through GLI in CRI investments and solutions at all stage in the investment process by both investors and investees. Scaling up these practices should be encouraged as they hold potential to contribute to enhancing gender equality, women’s empowerment and climate resilience of the most vulnerable.
Find out more about the next window of the Technical Advisory Facility opening in late 2024 here
Read the CoE publication: Step by Step Guidance: Gender-lens investing in climate and disaster risk financing and insurance