The potential of sustainable bonds to finance gender equality
When Agnodice was caught for courageously practising medicine in 400 BC Greece when women faced the death penalty for doing so, I would imagine even then that her supporters would not have expected that millennia later, gender equality would remain an issue. Unfortunately, many women around the world still do not have the same access to critical opportunities and essential services as their male counterparts. This extends to access to finance. More than 1 billion women still do not use or have access to the financial system, according to World Bank Group data. IFC has estimated that, worldwide, a $300 billion gap in financing exists for formal, women-owned small businesses, and more than 70 per cent of women-owned small and medium enterprises have inadequate or no access to financial services.
Global debt capital markets are the arteries of the global financial system. They are a crucial source of raising funds, especially to help close financing gaps. By connecting the supply of capital with priority areas of need, capital markets can play an important role in providing investment financing to achieve the United Nations’ Sustainable Development Goals (SDGs). The emergence of sustainable debt had offered a new way to exclusively drive finance to address social issues, including gender inequality; and investors are increasingly adopting strategies to intentionally, and measurably, use their capital to reduce the gender gap.
In spite of some progress in bridging this gap, debt capital flows are not on track to meaningfully contribute to the UN Sustainable Development Goal (SDG) 5: “Achieve Gender Equality and Empower all Women and Girls”. Additionally, the COVID-19 pandemic is disproportionately impacting women, widening the gender gap, and making the need for financing to address gender inequalities even greater. Pre-existing gender gaps have amplified the crisis asymmetrically between men and women, even as women have been at the frontlines of managing the crisis as essential workers. The hardest-hit sectors by lockdowns and rapid digitalization are those where women are more frequently employed. Combined with the additional pressures of providing care in the home, the crisis has halted progress toward gender parity in several economies and industries. 
At the same time, the market for debt linked to sustainability targets has boomed since the pandemic, yet less than 12% this year is aimed at addressing inequalities between men and women. Gender-focused bonds remain relatively rare even as the market for sustainable debt -- including green and social bonds -- grows at a record pace. There has been $305 billion worth of debt sales linked to sustainability performance indicators this year, with just $35.1 billion including targets for female staff, empowerment or women in management and on boards, according to data from BloombergNEF. 
The Climate Bonds Initiative posits that in 2020 the average size of a social bond issuance was $273 million and the average size of a sustainability bond issuance was $630 million. Conversely, gender themed bond issuances range from $5 million to $500 million. Though the market is growing, few such bonds have been issued so far: less than 80 gender focused bonds aligned with the Social and Sustainability Bond Principles have come to the market since 2013 and these are mainly issued by multilateral development banks and banks to mostly large institutional investors. 
With the objective of broadening the scope of sustainable finance to direct capital at scale to reducing the gender gap and to increase wider take-up beyond the financial sector into the real sector, IFC, in partnership with UN Women and the International Capital Market Association, developed guidance for the purpose. The information provided in the guide - Bonds to Bridge the Gender Gap: A Practitioner’s Guide to Using Sustainable Debt for Gender Equality - provides guidelines based on existing frameworks to aid the ecosystem of the debt market including new and existing bond issuers, borrowers, underwriters, arrangers, and external reviewers to take action to integrate gender equality objectives into sustainable debt products in both the public and private sectors. It is also a resource for investors seeking to understand and support projects and strategies that are designed to advance gender equality.
Given that the Social and Sustainability Linked Bond Principles are globally the most referenced framework for sustainable finance, the guide complements the Principles and importantly it can be applied across asset classes. In particular, the guide also highlights its relevance to the loan market.
As highlighted in the guide, debt instruments such as Social, Sustainability, and Sustainability Linked Bonds and Loans provide financing opportunities for market participants that want to advance gender equality. These bonds, for example, can provide capital to fund projects to create better social outcomes for target populations in areas such as education, healthcare, or financial inclusion. These products can also shift the typical relationship between issuers and investors that centers on the exchange of financial data toward one that also focuses on accelerating organizational change to advance social impact. In the bond market, particularly, the demand for gender-related sustainable bonds remains high among investors—higher than the current supply. 
For issuers, these bonds offer an opportunity to demonstrate their leadership in advancing gender equality. They also offer issuers the opportunity to diversify their investor base and leverage new sources of financing, as well as the potential to be included in sustainability indices. For public sector issuers  , integrating gender objectives into bond frameworks is a powerful way to raise financing to address the structural causes and consequences of gender-based discrimination at the national or sub-national level.
With this in mind, social and sustainability bonds are categorized under the use-of-proceeds approach, whereas Sustainability Linked Bonds and Loans come under the performance-based approach.
Under the use-of-proceeds approach, social bonds are used to finance projects with positive social outcomes, as defined by the Social Bond Principles. In the context of gender, social bonds can be used to finance projects that address gender inequalities. Guidance around issuing social bonds for gender has been outlined in the SBP which specifically identifies women as an eligible target population for social bond projects. It also includes a list of common project categories such as socioeconomic advancement and empowerment, specifically: “equitable access to and control over assets, services, resources, and opportunities; equitable participation; and integration into the market and society, including the reduction of income inequality.” The list of project categories in the SBP is not exhaustive, however it allows issuers to identify other categories of projects related to gender equality, if desired.
When incorporating gender equality objectives into a use-of-proceeds bond, issuers have three options. The first option is making gender the sole objective of a Social Bond, which is often referred to as a gender bond. For example, financial institutions can issue gender bonds to fund ongoing loan portfolios that are intended for women entrepreneurs. Gender bonds could also be issued by a public sector issuer that intends to direct the proceeds entirely toward implementing the country’s National Action Plan for Gender Equality and Women’s Empowerment.
The second option is to include gender alongside other social objectives in a broader Social Bond. For example, a Social Bond that includes a number of eligible project types could be a good option for a private sector issuer that, in addition to projects specifically focused on advancing gender equality, would like to use the bond’s proceeds to finance its projects for other target populations, such as low-income individuals, persons with disabilities, sexual and gender minorities, or other groups. Similarly, a Social Bond may be a good option for a public sector issuer that seeks to address gender equality under SDG 5, as well as tackle issues related to decent work and economic growth under SDG 8.
And the third option is to include gender alongside green objectives in a Sustainability Bond, which is used to finance a combination of green and social projects.
Under the performance-based approach, Sustainability-Linked Bonds enable issuers to demonstrate their high-level commitment to advancing gender equality by committing to achieve one or more gender related KPI and SPT. For those bond issuers without a sufficient pipeline of eligible projects, this approach can be a good alternative to nevertheless include gender equality objectives in a funding program.
The ultimate aim of this guide is to unlock tremendous funding opportunities presented by sustainable debt instruments that can be used by market participants to accelerate financing solutions that drive gender equality. As the late Kofi Annan put it, gender equality is more than a goal in itself. It is a precondition for meeting the challenge of reducing poverty, promoting sustainable development and building good governance.
This article is also published in ICMA Quarterly Report. Energy Voices is a democratic space presenting the thoughts and opinions of leading Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.
 Martin, Ronan, 2021, “Gender bonds get new rules to spur sales in ESG boom”, Bloomberg, November 16, 2021
 Morrison, Catherine, 2021, “Gender bonds haven’t been a hit globally, but a Japanese bank may change that” PassBlue, December 6, 2021
 Isjawara, Rebecca. 2021. “The ‘S’ in ESG here to stay after pandemic-induced surge in social bond sales.” S&P Global Market Intelligence. July 29, 2021.
 Public sector issuers include national (sovereign), regional, city, and local governments; specialized government agencies; and public development banks.
About the author
Esohe Denise Odaro is a leading figure in the development of the sustainable bond market and heading investor relations globally for International Finance Corporation. She is also the Chair of the Steering Committee of the Green, Social and Sustainability-linked Bond Principles administered by International Capital Markets Association, a Member of the ESG Leadership Council of S&P Global and the co-host of the sustainability podcast "Climate-Biz". She was named “Personality of the Year” in 2020 by Environmental Finance Magazine.