Investing for COVID-19 recovery in mature markets
Last month, I published an article detailing five areas gender-smart investors should be looking at in emerging markets if we want to pave the road to recovery and rebuilding post-COVID-19.
I argued that COVID-19 was not solely a health crisis but also a social and economic crisis, and that if we want to make sure the coronavirus doesn’t leave women further behind, we need to be paying attention to its impacts on arenas such as care and unpaid labor, young women’s pathways from education to employment, financial inclusion, access to technology, and energy.
The same is true in the world’s wealthiest countries, where the coronavirus has also had a disproportionate impact on women and people of color, and where there are plentiful opportunities to move your capital in ways that create impact and enhance equality.
Read on for six areas you should be paying attention to in developed markets if you want to invest for impact in this moment.
- The Care Economy and the Impact of Unpaid Work.
The care economy was also the first item on my list for emerging markets, and for good reason. Around the world, women perform a disproportionate amount of care work and other unpaid community and family labor. As families have lost access to paid child care, elder care, and public school systems, the dramatic increase in care work has not fallen to women and men equally, forcing many women to scale back their hours at work or even leave altogether. As economies begin to reopen but access to childcare remains uncertain, experts believe this divide will only deepen.
Women (and women of color, especially) also comprise the majority of paid care workers in developed economies, many of whom suddenly lost their jobs due to the COVID-19 shutdowns, or who have been forced to choose between risking exposure to the virus and losing work and income.
How you invest to solve these challenges depends partly on the existing public policy and spend on care work where you’re investing. Japan’s Shinsei Bank has been ahead of the curve, announcing in 2019 a fund dedicated to solving the country’s social challenges, including investing in childcare, after-school care, education, and other household support — recognizing these services as essential to both women’s economic participation and businesses’ ability to access and retain top talent. In the US, tech start-up Care Academy, a virtual training provider founded by two women of color, just closed a $9.5 million Series A round.
Investors can also use their influence to push businesses to invest in their employees’ continued participation and wellbeing throughout the COVID-19 crisis, be it through childcare credits for parents of school-aged children, timeshifting work hours, or other solutions. We can also move our capital to businesses that have demonstrated a commitment to supporting their staff with caregiving responsibilities (see the Invest in Parents pledge, recently signed by SalesForce, PepsiCo, and Pinterest, amongst others).
2. Black- and Brown-owned businesses.
Women of color are the fastest growing demographic of entrepreneurs in the United States: the number of businesses owned by Black and Hispanic women grew by 518 percent and 452 percent, respectively, between 1997 and 2016. Yet, women of color continue to be vastly underrepresented in venture capital, with Latinx women-led startups raising only 0.32 percent of all capital raised over the last decade and Black-women led start-ups raising only 0.0006 percent, according to Kapor Capital. Indigenous women are also woefully underrepresented.
Black and brown mainstreet businesses have also been disproportionately impacted by COVID-19, systematically excluded from PPP loans and their equivalents that went mostly to white-owned businesses, and by intermediaries that were incentivized to prioritize large clients over small businesses. The long-term consequences of this exclusion may be brutal. As Nathalie Molina Niño writes, “We can expect to see a full 50 percent of all Latinx businesses go under and not come back.” In the UK, a report from Black South West Network found that 90 percent of BAME-led businesses had faced significant financial loss, and 67 percent had been forced to temporarily close their businesses.
In the venture capital space, the number of gender-lens funds that are also paying attention to race has grown considerably — Project Sage is now tracking 30–40 funds with a dual focus on women and people of color. But investors can also have a lot of impact by investing in CDFIs, which cater to small businesses, microenterprises, and nonprofit organizations, and are much better placed to serve the mainstreet black and brown businesses that are being left behind in the COVID-19 economy than traditional VC. Notable examples in the field include Founders First Capital Partners, which in 2019 secured $100 million in funding to loan to underrepresented entrepreneurs, C-Note, and Calvert Impact Capital.
3. Health and wellbeing.
The coronavirus has sharpened existing challenges around reproductive healthcare, making it harder for women to visit doctors to refill prescriptions or access longer acting contraceptives, and riskier to visit pharmacies to pick up medication. With 40 million Americans now out of work, affordability is an increasing concern as well: if you have limited funds, are you going to pay for rent, food, or birth control?
RH Capital from Rhia Ventures is a new venture capital fund that was specifically created to solve these challenges, investing in solutions that make contraception and maternal health care safer and more accessible for everyone. As we process the lessons of the COVID-19 crisis and prepare for future pandemics, it may be smart to invest in birthing centers and other resources that make it easier for women to give birth outside of hospitals.
COVID-19 has also demonstrated how much of our existing healthcare system can be done just as well remotely, making healthcare more accessible and time efficient for both medical professionals and patients. Businesses like IESO Digital Health, which provides online cognitive behavioral therapy from home, were relevant before the pandemic, and continue to be relevant now.
There are further opportunities to invest in women-led businesses working on testing and treatment of COVID-19 itself: think Valor Ventures’ investment in Physician360, a female-led company that is working towards providing rapid testing for COVID-19. And as countries have moved towards reopening, we need to increase the availability of PPE — not just for health workers, but for restaurant workers, grocery workers, and other workers with high levels of contact with the public built into their jobs, many of whom are also women of color.
4. Financial inclusion.
Financial inclusion isn’t solely an issue in emerging markets. The FDIC estimates that 25% of US households are unbanked or underbanked, and the World Bank reported 138.6 million unbanked people in Europe as of 2017. Financial exclusion is both linked to poverty and an exacerbator of poverty: people may be unbanked due to their immigration status, criminal history, lack of financial literacy, or simply because they can’t afford to pay bank fees. Even in households that are banked, women can still be financially excluded if utility bills, loans, and other financial expenses are in a male family member’s name, restricting their capacity to build a credit score.
Lack of financial inclusion makes women financially vulnerable at any time, but during the COVID-19 pandemic, being outside the formal financial system is likely to keep you from accessing stimulus payments or universal basic incomes, or from accessing loans to help keep your business afloat.
Gender-lens investment opportunities in this arena include funds like Calvert Impact Capital, as well as fintechs such as Acumen investments EarnUp and Esusu. If you’re looking for philanthropic ways to engage, Accion invests in businesses accelerating financial inclusion, while Grameen America helps women below the federal poverty line access capital to start businesses.
5. Public markets.
The stock market has been volatile over the last few months, but one positive signal has been seeing ESG funds outperform their mainstream counterparts, taking in tremendous flows of capital in the process.
Investors are waking up about social and environmental issues, and rethinking where they put their money. In the context of the COVID-19 economic crisis especially, I know that I am paying attention to which companies are responsible employers. Who just furloughed half their employees but kept paying the CEO the same salary? Who just disproportionately fired their women and POC staff? Who is giving workers the flexibility they need to manage additional home responsibilities while still doing their job? Who is bringing a gender lens to how they support and retain employees through this crisis?
The world may not wake up for a while yet about valuing companies that do better by their employees, because from a short term profit standpoint, you don’t get to see the benefit of it. It only plays out over time. But as an investor with a gender lens who is thinking about all the things that COVID-19 has revealed, it is increasingly clear that the companies with better gender policies and workplace practices are the ones that people want to work for, buy from, and do business with.
6. The New Frugality.
Finally, as we endure what looks like it will be a prolonged economic contraction, it will pay to consider what people will buy and consider essential in a post COVID-19 environment. What companies are solving real problems? What will businesses like yours continue spending money on? What are the small luxuries, like chocolate, that consumers will want to hold on to? What can be done more cheaply and efficiently without sacrificing on quality or fairness?
And which businesses are making interventions to make life more affordable for their customers? One intriguing example of a vehicle meeting this need is Kairos, a venture-builder that incubates and invests in startups working to make basics like housing, food, and care — already a stretch for many of what they call “Generation Broke” — more affordable.
Where are you putting your money?
We don’t have space here to write about every challenge and opportunity that is urgent at this moment, but other sectors to be paying attention to right now include climate and the Green New Deal, online education, the future of work, and digital media and entertainment. Stay tuned for more on these.
As you look to move your capital for impact and equality in the COVID-19 crisis, what issues and sectors feel most urgent to you? Share your thoughts and ideas in the comments below — I’d love to hear them.
There are so many funds and investment vehicles across all asset classes where you can have impact, from VC to direct community investments. Now more than ever is the time to double down.