The global financial landscape is transforming, with a growing emphasis on sustainable and socially responsible investments. According to the Global Sustainable Investment Alliance (GSIA), sustainable investment is rising globally, with management assets surging from $30.7 trillion in 2018 to $35.3 trillion in 2020.
As defined, the Orange Bond is the world’s first asset class for gender-lens investing (GLI), built for and by the Global South. Inspired by the UN’s Sustainable Development Goal 5 for gender equality, these are debt securities focused on empowering women and girls in nations where most of them have limited or inadequate resources. After introducing Green Bonds, a mainstream form of investment, Orange Bonds aims to create a similar but more focused impact on gender equality. Launched on International Women’s Day 2022 by the Impact Investment Exchange (IIX), the Orange Bond Initiative (OBI) seeks to mobilise $10 billion to empower 100 million women, girls, and gender minorities by 2030. The OBI is gaining momentum with 76,000 signatories from 6 continents.
How did Orange Bonds come to be?
Before 2022, the financial landscape lacked a specific bond classification focused on gender equality. This ambiguity was a setback for both investors and issuers. At the time, less than 1% of GSSS bonds explicitly prioritised gender equality. Furthermore, these bonds were often categorised as subsets of broader social or sustainability bonds, limiting the extent of their impact. As a result, financial resources dedicated to achieving the United Nations’ SDG 5—gender Equality—were significantly lower than environmental goals like clean energy or climate action.
Owing to the need for a clear definition, institutions based in developed nations dominated developing standards for gender-lens investing. This led to a narrow focus on issues like women in leadership positions or women-owned businesses. While these fields are important, such a perspective overlooks the multifaceted challenges women face in developing countries and the intersectionality of gender with other factors like race, climate, and economy. This Western-centric approach skewed the impacts of GLI towards the Global North while ignoring the Global South, where the need is more desperate. Besides, the broader sustainability investment industry grappled with concerns over transparency and greenwashing, leading investors to withdraw billions of dollars from sustainable investment portfolios owing to scepticism.
In response to these challenges, the concept of Orange Bonds emerged. By providing a distinct category for gender-focused investments, Orange Bonds aimed to address the underfunding and misrepresentation of gender equality within the financial market.
A Potential Solution for Bangladeshi Women and Gender Minorities
While the Orange Bond Initiative is active in countries like the Philippines, Vietnam, India, Kenya, etc., facilitating women in agriculture, farming, and small business, it has yet to bring forces in Bangladesh. Many women struggle to attain their livelihood through agriculture, working in tea gardens, RMG sectors and running different MSMEs. Experts emphasised the importance of sustainable finance and gender equality in overcoming these challenges, highlighting the disproportionate impact of climate change on women-headed households. A recent roundtable in Dhaka, co-hosted by UNDP and IIX, brought together stakeholders to discuss strategies for introducing Orange Bonds in Bangladesh, including structuring a $100 million women-focused bond, attracting global investors, and creating a supportive ecosystem for women-led businesses (Source: Dhaka Tribune). While Bangladesh has made progress in women’s empowerment, there’s a recognition that more needs to be done to harness the potential of marginal women.
Mainstreaming Orange Bonds in Gender Lens Investing
The integration of Orange Bonds into the mainstream investment landscape is very promising. Evidence suggests a strong correlation between gender equality and robust financial performance. For instance, women were 1.8 times more likely to drop out of the workforce during COVID-19, but if added back in recognition of the solutions, 28 trillion dollars could be added to the global GDP. Companies demonstrating higher levels of gender diversity often exhibit superior profitability, return on equity, and earnings per share. They are designed as a cross-cutting asset class, capable of addressing a wide range of sustainability challenges, from environmental resilience to social empowerment and peacebuilding, that result from the lack of gender-inclusivity. This comprehensive approach differentiates Orange Bonds from traditional social or sustainability bonds, positioning them as a powerful tool for driving positive change.
How Orange Bonds Operate
The Orange Bonds Initiative (OBI) employs a “triple helix” framework to embed a gender lens into the debt capital market. This framework is anchored by three core principles: Gender-Positive Capital Allocation, Gender-Lens Capacity and Diversity, and Transparency in the Investment Process and Reporting.
Impact Measurement and Investor Role in Orange Bonds
Effective impact measurement is central to Orange Bonds. By employing a data-driven, bottom-up approach, issuers collect detailed information on how beneficiaries experience gender-related changes. Issuers must provide annual reports to investors detailing the gender impact achieved. These reports should quantify the impact and qualitatively describe the changes experienced by beneficiaries. This data, presented in gender-disaggregated metrics and transparent annual reports, builds investor trust and ensures continuous improvement. Investors are fundamental to Orange Bonds. As they provide capital, they rightfully demand accountability. Investors in orange bonds are typically drawn to the opportunity to generate financial returns and positive social impact. They seek investments that align with their values and contribute to a more equitable world. Active investor engagement in shaping standards and practices is crucial for the growth and effectiveness of GLI.
Challenges and Opportunities for Orange Bonds
The journey towards mainstreaming Orange Bonds is fraught with challenges. A fundamental issue is the persistent perception of women as passive beneficiaries rather than active agents of change. This narrow framing limits the scope of impact assessment and hinders the development of strategies to maximise the effectiveness of capital allocation. Moreover, the absence of prompt feedback mechanisms from end beneficiaries creates a disconnect between investment risk, return, and impact, potentially impeding the growth of the Orange Bond asset class.
However, the landscape also presents significant opportunities. To facilitate the impacts of orange bonds, a collaborative approach involving governments, multilateral institutions, private sector entities, civil society, policy support, financial incentives, and capacity building is essential.
The Orange Bond Initiative aims to create a thriving ecosystem for gender-lens investing. As the initiative evolves into an Orange Movement, it seeks to galvanise a broader community of stakeholders committed to advancing gender equality through finance. The Orange Bond movement can become a powerful catalyst for a more equitable and sustainable future by overcoming obstacles and capitalising on opportunities.
Author Tasfia Tahiat Umme
