Sweef Capital on investing in gender-forward growth-stage companies in Southeast Asia

Why did Sweef Capital decide to invest towards Gender Lens & diversity?

Research is increasingly clear that women are key to the workforce in growth sectors: they have increased buying power as consumers, and companies that realize gender equality perform better financially.

Our approach targets growth opportunities that provide scalable solutions and increase gender equality. We focus on high growth EBITDA positive SMEs in healthcare, education, sustainable food and consumer goods, business services and climate resilience.

These key areas of unmet need for access to goods and services link strongly to one or more of the United Nations Sustainable Development Goals and have a majority of women in the workforce. The evolving common thread in these sectors is the number of women choosing to branch out to develop their businesses.

Our experience is that investing in these businesses can play a key role in improving the lives and livelihoods of women and communities, including where we are based in Southeast Asia. Women’s economic empowerment is core to our work

We believe in the power of women as a lever of economic and social development. We understand the interwoven dimensions of institutional, cultural, economic, and political factors that have constrained women to become economically engaged, diminishing their influence and decision-making.

Southeast Asia holds significant opportunities, many of which are undervalued. Our professional experience reinforces a shared belief in the rich potential for capital to be directed to solutions for people in our region, particularly women.

Why is Sweef focusing on investments in Southeast Asia?

The underlying economic fundamentals are strong – the IMF projects 6.3% growth for ASEAN countries in 2022 compared with 4.4% in more advanced economies like the EU, and 4.9% globally. The prospects for the region are anchored on strong consumption growth fueled by its young population and growing middle-class, spurring urban development.

Despite COVID-19, there are significant growth opportunities in trade, digitization and sustainability, including responding to changing consumer behaviour brought on by the pandemic.

The potential is clear in the sectors we target with a high prevalence of women in the workforce and with business models designed to address a market inefficiency or gaps based on founders’ personal experiences.

For example, e-commerce, where women have thrived due to factors such as flexible work and market reach, has tripled to US$105B between 2015 to 2020, with forecasts for a further tripling to US$309N by 2025 based on current trends.

What are the challenges and opportunities of achieving equality and Gender Lens investments in Southeast Asia?

There is a significant demand for investment into SMEs in general. IFC data shows that $900B to $1.1Tn of SMEs’ credit requirements are unmet in East Asia, disproportionately impacting women entrepreneurs.

Access to finance is one of the biggest constraints on growth for all women-owned businesses. With most impact investments still concentrated in the microfinance sector, there is a huge gap for capital for women-owned SMEs.

Bridging the mismatch between the supply and demands sides has been impeding the growth of Gender Lens Investing. This is a concrete opportunity for investors willing to move from the sidelines and work with local teams and active managers who can access a pipeline of investable enterprises with strong growth potential and the right skills to be a trusted shareholder partner who can work alongside entrepreneurs to realize their vision.

What would be the main driver(s) for Gender Lens impact investing to become mainstream?

We see it as investing with entrepreneurs who are best positioned to meet the needs of 50% of the population. That said, we appreciate it is not yet business as usual for the investment sector, so we have made it a core driver of Sweef Capital to demonstrate that Gender Lens is a strong investment strategy that can deliver market-rate risk-adjusted returns and intentional social impact.

This includes institutionalizing the investment and impact frameworks for diversity and gender equality so more firms can take this approach. Building the evidence base on the links between diversity and performance and value creation is an important focus for our work.

We also believe it is a great way to align investment strategies with an appetite for responsible investing and alternatives that contribute to meeting the SDGs.

How do you integrate diversity and gender equality into the company selection process?

We are very focused and rigorous about this through the investment life-cycle. Sweef Capital’s investment strategy is to look actively for opportunities where diversity and gender equality factors can build value in the companies we select.

These are SMEs that meet one or more of 4 criteria:

1. Women-led businesses;

2. Companies in sectors with a high prevalence of women, especially in the labour force;

3. Companies that produce vital products and provide services that meet the unmet needs and wants of women and girls; and

4. Companies already demonstrating a commitment to gender equality.

We have a proprietary approach to assessing where companies are up to on several dimensions of gender equality and their potential for improvements connected to value creations. We look at the company leadership and its workforce, policies and practice, and value chains and how their work affects the broader community.

We’re calling this the Gender ROI™. This screening across 24 diversity indicators/metrics, is a key part of due diligence and selection. As part of our value creation process, we agree on a gender action plan with the entrepreneur to be implemented over the course of the investment holding period.

How do you engage and integrate impact with your portfolio companies?

Sweef Capital is an active investor. We work closely with our enterprise partners, and we have adopted a Gender Lens into its investment framework and measurement tools and, more importantly, in our investment processes.

We measure impact at the outset to set a baseline that informs gender action plans and work with the investment leadership teams to embed these gender actions in policies, processes, and procedures.

We monitor the implementation of these programs through periodic assessments, tracking progress or improvement in gender equality, to increase any company’s score through active gender intervention and value creation work, thus ensuring the sustainability of gender equality work after exit.

Financial literacy programs are one of the gender action plans we recently implemented for a company in the Philippines for its young professionals, opening up access to greater financial knowledge for these young professionals, building their experience and enabling them to make better and more informed financial decisions and avoid costly consequences of not managing their finances well.

What are some of your differentiating factors investors should know about vs other Gender Lens vehicles?

Sweef Capital are industry leaders taking an active role in developing impact frameworks and management systems to anchor the firm’s approach to investment, impact management and benchmarking. We don’t see many other funds – or investment firms taking this kind of integrated approach.

This means SWEEF investments can systematically target opportunities where impact is integral to the product and/or service created and how the company is led and operated, and its value chains.

Strong environment, social and governance (“ESG”) practices inform effective identification and management of multi-factor risks, which arise from exposures. This integrated approach enables us to set ambitious and realistic goals for investment returns and net positive impact.

Our thought leadership and approach to convening different values-aligned stakeholders enables us to draw mainstream capital providers to Gender Lens investing. The long-term partnership we are forging with PBU, the Danish pension fund for early education teachers, is a great example.

Their anchor investment in our first fund, SWEEF, is values-aligned and has provided access to Southeast Asian markets on the basis that made sense for them. Sweef Capital’s investment in building the evidence base also sets us apart.

We are very excited about an academic partnership with a leading international business school to test and refine the methodology for the Gender ROI™ and create a global database that can inform the correlation between gender equality and diversity as a value driver and evidence of business performance.

This opens the opportunity for stakeholders to also be applying the benchmarking and improvement of diversity and gender performance in their own businesses.

Could you explain how Gender ROI™ is used in the evaluation of companies?

Sweef Capital’s gender value thesis is that embedding and improving gender equality at the enterprise level will:

We are very deliberate about evidence-based decision-making, alignment of incentives and refinement of decision useful data over time.

(1) improve the way that the enterprise is led and operated to drive value creation;

(2) build value through its value chain; and

(3) improve outcomes material to women’s economic empowerment and well-being across intersecting domains of resilience, opportunity and inclusion.

A matrix of indicators (“Gender ROI™”) informs and provides key data points to test, track, and correct the Gender ROI thesis. The matrix verticals speak to the ROI vectors: Resilience, Opportunity and Inclusion.

● Resilience – Building resilience as measured by diversity in leadership, workforce safety nets, environmental protection and income and business performance.

● Opportunity – Creating opportunities and putting women in a position of influence as measured by women’s workplace participation, improvements in education and skills and professional development, avenues for advancement, and access to capital and resources.

● Inclusion – Enabling inclusion and diversity as measured by pay equity, integration in value chains and addressing gender norms.

The horizontal vectors speak to the different levels of the value chain, namely leadership, workforce, value chains and society. The vertical and horizontal vectors form a matrix of diversity indicators and intersecting relationships, measuring the overall success of diversity programs as a value driver.

Sweef Capital is building its best practices library in Southeast Asia from its collaboration with different investee companies and other partners. Sweef Capital recently worked with a gender consultant to develop a model Employee Manual for our own firm and our portfolio companies, which integrated leading practice around diversity policies and contextualized them for Southeast Asia.

How do you report about Gender Lens and diversity to your LPs?

We report to our LPs on performance against the gender action plans agreed for our enterprises in the same way we do for financial performance as part of the quarterly reporting cycle. Over the lifecycle of our investments, Sweef Capital monitors the financial performance of the portfolio companies through critical performance metrics to assess overall portfolio health as well as the success of the value creation plan, including the Gender ROI™ and other applicable impact metrics, on a quarterly basis.

We publish our impact report for our LPs, investee companies, partners and the public to document our progress in Gender Lens Investing and sharing best practices that have contributed to positive outcomes.

Is there any standard framework or affiliation to measure gender equality?

We have worked on these frameworks for a number of years and focused on developing a next-generation tool in the Gender ROI™. The development has drawn on leading work from women’s economic empowerment organisations, including UN Women and Oxfam, and Gender Lens Investing pioneers, including Gender Smart and Criterion Institute.

We’ve learned a lot from gender specialists, in agencies from DFAT to UN Economic & Social Commission for Asia and the Pacific to IFU and others.

Sweef Capital’s approach translates that into frameworks that can be used and useful to enterprises and investors and inform consistent and comparable measurement and benchmarking.

We’re currently refining the Gender ROI™ as the next generation framework that incorporates all we’ve learned. This will be the closest thing available to a rating system, using 24 indicators to demonstrate how diversity and gender equality link to improvements in business performance and value creation.

This aspect of Sweef Capital’s work also amplifies the voices and experiences of women about what matters to them. This work is being shaped to develop global datasets and an actionable evidence base to inform research on the linkages between diversity, performance and value creation over time.

Do you have any requirements to integrate Gender Lens when exiting a company in the portfolio?

Gender considerations are deeply ingrained in our investment processes, including exits. At the outset, we invest in a company where women’s economic empowerment and gender equality are integral parts of their business model and a key enabler of the company’s financial success.

We seek alignment with the entrepreneur and co-investors (if any) on the impact and strategy, and we incorporate these in legal structures and documentation.

During the investment lifecycle, we support the entrepreneur through active technical assistance and value creation work, including gender intervention plans, ensuring the sustainability of value creation even beyond the duration of the investment.

Jointly working with portfolio company management, we inculcate positive diversity and gender equality policies and practices reflecting the principles of the Gender ROI™, as measured by the 3 pillars of resilience, opportunity and inclusion impacting leadership, workforce, value chains and society.

Our close engagement with entrepreneurs ensures that there is alignment on the company’s strategic direction also in the exit. The close engagement reflects on how we are moving towards the agreed direction.

“Coming to the critical phase of exit, where timing considerations are key, the selection of buyer will be informed. The new partner for the company should have an appreciation of value in the business model and share the vision for growth alongside sustained impact.”

– Jennifer Buckley, Managing Director, Sweef Capital –

The full Impact Report by Phenix Capital Group can be downloaded from the link below: