How sustainable finance can drive gender equality
In a world marked by inequalities and unsustainable models of development and growth, sustainable finance has emerged as a promising strategy to bridge social, environmental, and gender disparities.
Solving complex development problems – such as extreme poverty and gender inequality – requires innovative financing approaches and funds beyond traditional Official Development Assistance spending. To make significant progress, countries must continue increasing and committing to ODA funds. Currently, less than one per cent of the ODA funding goes to women’s rights organizations working towards Sustainable Development Goal 5, which aims to achieve gender equality and empower all women and girls.
Sustainable finance has emerged as an increasingly mainstream approach to foster investments in sustainable economic activities and projects with the potential to advance gender equality and women’s and girls’ empowerment. Sustainable finance focuses on making financial and business decisions taking into account environmental, social, and governance (ESG) considerations.
The journey of sustainable finance
Thirty years ago, the countries of the world agreed on a critical agenda to secure gender equality: the Beijing Declaration and Platform for Action. Despite progress across many areas of concern, its promise remains to be fulfilled. Lack of costing the agenda and inadequate financial resources have hampered efforts to close gender gaps in economic, social, and political spheres and achieve gender equality. Moreover, the impacts of geo-political crises, the climate and environmental emergencies, and cost-of-living, food, fuel, and debt crises have stalled and eroded hard-won gains in gender equality and women’s rights. In this context, sustainable finance offers an opportunity to secure the resources for closing gender gaps and reaching the SDGs.
Paving the way for sustainable development
In 2015, the Addis Ababa Action Agenda outlined a global framework for Financing for Development that aimed to match financial resources with sustainable development that benefits both people and the planet. The framework sought to align all financing flows – domestic and international, public and private, conventional and innovative – with the SDGs. A surge in sustainable finance and responsible investing (also known as impact investing) followed, driven by heightened awareness of environmental and social challenges paired with the recognition of the financial risks linked to climate change, social inequality, and poor governance.
For example, despite the COVID-19 pandemic, 2020 was a record-breaking year for the issuance of green, social, sustainability, and sustainability-linked bonds. The total amount issued topped USD 600 billion, which was nearly double the USD 326 billion issued in 2019 and triple the amount issued in 2018. However, only 1 per cent of these bonds were aligned with SDG 5.
UN Women’s sustainable finance programme
UN Women launched its Sustainable finance programme in July 2022 with funding from the Government of the Grand Duchy of Luxembourg. The programme seeks to mobilize private financial resources and bolster the volume of funding directed towards SDG 5 priorities, with the overarching objective of advancing gender equality and women’s and girls’ empowerment.
The programme takes a three-pronged approach: building partnerships, steering global sustainable finance standards and offering technical assistance to countries and companies seeking to implement innovative financial solutions.
What gender financing instruments have countries developed so far?
In June 2024, Iceland became the first sovereign to issue a EUR 50 million gender bond, with a 3.4% fixed rate coupon, and a 3 year maturity. The bonds are issued under the Annex to Iceland’s Sovereign Sustainable Financing Framework: Financing for Gender Equality, to which UN Women provided technical support. The issuance of this gender bond allows Iceland to use sovereign debt to advance gender equality and invest in projects that enhance women’s economic empowerment.
“By being the first sovereign to issue a gender bond, Iceland is using its international leading position when it comes to gender equality to set an important example for other nations with a new approach to mobilising financial markets and public finance to promote gender equality,” said Sigurður Ingi Jóhannsson, Minister of Finance and Economic Affairs.
The governments of Egypt and Colombia have both published Sovereign Sustainable Financing Frameworks, outlining how sovereign debt can fund gender equality and women’s empowerment projects.
In August 2022, with technical support from UN Women and the UN Women Colombia Country Office, the government of Colombia released a Framework for Sovereign Green, Social and Sustainable Bonds. Later that year, the UN Women Egypt Country Office announced that the Egyptian government had also published its Sovereign Sustainable Financing Framework. These frameworks explicitly indicate the possibility of raising sovereign debt to fund pre-defined gender equality and women’s empowerment expenditure and project categories.
Additionally, Kyrgyzstan issued its first gender bonds through the Bank of Asia with support from UN-Women, also in 2022. The Mexican government also issued a Sustainable Taxonomy the same year with support from UN Women. This policy instrument, the first taxonomy in the world to integrate gender considerations, directs investment towards defined sustainability goals that can also help close gender gaps.
Charting the path forward
Building on this progress to address immense challenges, we urgently need to raise awareness about the evolving financial landscape and the potential to advance gender equality.
An extra $360 billion annually is required to realize gender equality and women's and girls’ empowerment in developing nations. Sustainable finance and impact investing offer new avenues to address social and environmental challenges, including gender disparities. Sustainable finance isn't just a buzzword; it is a catalyst for real change that can steer the world toward a future where financial decisions prioritize both people and the planet.