Gender bonds: A promising solution to accelerate SDG5

With the Sustainable Development Agenda deadline only seven years away, there is still much work to be done to achieve SDG5, which calls for gender equality and the empowerment of all women and girls. UN Women research indicates that at the current rate of progress, it will take centuries to reach this goal. However, gender bonds offer a promising solution for direct financing towards projects that reduce gender inequalities and promote women's empowerment. 

A year ago, UN Women and the Luxembourg Stock Exchange (LuxSE) joined forces to promote sustainable financing for gender equality. The partnership aims to raise awareness on gender bonds and encourage greater capital allocations towards tackling the economic and social inequalities that persist between women and men across the globe. To accelerate progress on this crucial issue, the partners have launched a new Case Study Series called "Innovative Financing for Gender Equality via Bonds." The series aims to catalyze action among bond investors and issuers by providing key information on the use of this financing instrument to reduce gender inequalities and promote women's empowerment. 

Here are three things to know about gender bonds: 

Gender bonds: A promising solution to accelerate SDG5

Gender bonds can accelerate gender equality and women's empowerment projects.

The approaching 2030 deadline for the Sustainable Development Agenda has led to increased interest in sustainable bonds as a means of mobilizing private capital. According to global guidance from the International Capital Market Association, the International Finance Corporation, and UN Women, issuers of sustainable bonds can integrate gender equality objectives into the bond's use of proceeds or key performance indicators. To achieve this, the guidance recommends connecting bonds to policies and programmes that enhance women's well-being and reduce inequalities, as well as tracking and verifying the bond's impact. These bonds are known as "gender bonds" if they focus exclusively on gender equality. The market has also seen the introduction of social or sustainability bonds that pursue broader objectives in addition to reducing gender gaps. 

Gender bonds can tackle diverse issues related to gender equality.

Around the world, investors are using gender bonds to finance interventions targeted at specific gender equality issues, such as financing loans for women-owned small businesses or increasing procurement spending from black women-owned businesses. In Spain, a subnational government raised capital via a sustainability bond to improve services to victims of gender-based violence. In Tanzania, a commercial bank issued a gender bond to finance small businesses and committed to reporting on jobs created for women. Themes that are essential for progress towards SDG5 and that could be leveraged more by bond issuers include: increased investment in the care economy, elimination of the gender pay gap, supporting social protection measures for workers in the informal economy, or increasing the offering of assistance services to victims of violence against women. 

Gender bonds can channel new resources to organizations that make gender equality a strategic priority.

To be effective, these bonds need to be linked to credible strategies, programmes, and policies that ambitiously tackle gender inequality. Investors in thematic bonds will review additional information to assess their expected contribution to sustainable development, along with the risk profile of the bond issuer. It is important to raise the level of ambition in tackling gender inequality, act on commitments, and report on the effective reduction of the identified gaps. 

Sustainable bonds that integrate SDG5 objectives have attracted interest from investors worldwide. See for example, the global reach of gender-focused bonds in a new market study by the Luxembourg Stock Exchange released in parallel to the case study series. Gender-focused bonds are in demand and interest is growing in introducing gender equality objectives as a core element of sustainability financing in regions such as Europe, the Americas, Asia, the Pacific, and Africa.