Bridging the gender gap in the bond market

By Patrycja Drainville, Associate Director, Sustainable Finance, Scotiabank

In recent years, investors have sharpened their focus on gender and diversity, with corporates committing to change with meaningful Diversity, Equity & Inclusion goals. Research has long shown the correlation between gender diversity and share price. Now, we see increasing proof that gender equality leads to more effective risk management, resiliency and innovation, improved culture and overall positive societal and economic impact. Gender equality is the right thing to do and it’s good business.

Recognition by capital providers of the importance of gender equality as well as action by organizations has taken a foothold; however, the efforts to date are not yet widespread and progress towards parity remains patchy. In late 2021, the International Capital Markets Association (ICMA) identified that the bond market has tremendous untapped potential to fund the advances in gender equality essential for sustainable economic development. As a result, and as part of a broader effort to bring greater clarity to bond market participants, ICMA, in partnership with the International Finance Corporation (IFC) and UN Women, published a guide¹ on how sustainable debt instruments can be used to advance gender equality in both the public and private sectors.

Sustainable finance offers innovative ways to drive capital markets activity to address important societal issues. Similar to the way green bonds are used to promote investment towards improving a company’s environmental footprint in areas like waste management or emissions reductions, focused debt instruments can be useful to drive greater impact on social issues, including building gender equality. Across the world of labelled issuance, issuers have different options for the types of instruments they deploy to deliver on important sustainability outcomes, such as use of proceeds bonds or sustainability-linked bonds (SLBs). Specifically, social bonds can be used to direct proceeds raised in financing to address gender equity challenges in their workforce or across their supply chain. SLBs, which are performance-based instruments, can be used to encourage issuers to achieve a sustainable outcome and when linked to core, relevant and ambitious gender-related objectives, they can be a powerful catalyst to advance change across the organization.

Investors are looking for innovative financial instruments that address social issues. Leading organizations and institutions have taken to labelled financing to bring focus to their commitment to sustainability through dedicated capital. As an example, the Asian Development Bank, which has identified accelerating progress in gender equality in Asia and the Pacific as one of its seven operational priorities, launched back-to-back gender bonds in both the Canadian dollar maple market and the Australian dollar kangaroo market in April 20212. Also in April, Scotiabank participated in a Gender-Focused Social bond issuance from FEFA (Fondo Especial para Financiamientos Agropecuarios), a development institution for the agricultural sector in Mexico, which plans to finance credit for women and women-led businesses. In the corporate sector, Southern Company, a large U.S. based power and utility company developed a Sustainable Financing Framework which includes a category for dedicated expenditures as part of any issuance towards enabling opportunities for diverse and small business suppliers including female owned businesses³. And in late 2021, Scotiabank broadened its sustainable finance framework from green to incorporate social categories including gender focused use of proceeds towards women-owned businesses⁴.

At Scotiabank, we recognize the important role financing can play in gender equality, in both the public and private sectors. Investors and issuers alike can tap into sustainable finance tools, such as social or SLBs, to further sharpen their efforts and investments on achieving gender parity and advancing socioeconomic impact for women. For issuers, these solutions offer an opportunity to demonstrate leadership on gender equality, diversify their investor base, and as importantly, leverage new sources of financing to accelerate progress today, for every future.

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