Women have a key role to play in combating climate change and achieving universal energy access, both as energy entrepreneurs and end-users. Yet both groups tend to be overlooked in today’s market and face huge challenges accessing finance, whether that be in the form of the funds businesswomen need to grow their companies or microfinance women end-users needs to purchase time-saving energy appliances. Here Camco Clean Energy’s Impact Manager Laura Lahti investigates the roots of these problems and shares her thoughts on what is needed to resolve them.
Gender inequality is common in the renewable energy space, holding back the sector’s growth while impeding the opportunities and prospects of women and girls. The reasons are multiple, complex and multisectoral, but within the sector itself, there are distinct opportunities to better address the needs of women that will go a long way to improving their quality of life and increasing income generation prospects.
To fully understand what these opportunities are and how to take advantage of them requires looking at the situation in terms of supply and demand. From the supply side, female renewable energy entrepreneurs are struggling to access the financing and business support they need to grow their companies. On the demand side, female customers are typically unable to pay for the time-saving energy appliances that could improve their livelihoods – or the products they require are not even made available to them in the first place.
Financing Shortfall Stifling Growth
Africa has a higher share of female-owned businesses than anywhere else, demonstrating the very active – and important - role women play in the continent’s commercial sector. However, women often find themselves excluded from financial markets, with the African Development Bank estimating in 2017 that there was a $42 billion financing gap for African women entrepreneurs across business value chains. In 2021, less than 1% of the funding raised by start-ups in Africa went to female-only teams, and only 18% to teams that received funding were considered gender-diverse (see Africa: The Big Deal) – meaning over 80% went to businesses owned and led by men. From my experience, this is partly the result of conscious or unconscious bias on the investor side, alongside cultural issues that might limit opportunities for women when engaging with lenders.
The gender funding gap exists on top of known regulatory, procedural, technical, and other financial hurdles that the renewable energy sector is facing in Africa as a whole. The combination of all these barriers is hindering opportunities to bridge the gap between finance and energy access, climate change, and gender equality. According to McKinsey Global Institute, Africa could add $316 billion - or 10% - to GDP by 2025 if each country advanced women’s equality to match South Africa, which is recognized as the country in the region that has achieved the most progress towards gender parity.
This is not to say that efforts are not being made to make the financial markets more accessible to women. The 2X Challenge for gender lens investing (GLI), for example, was founded as a call to action to “shift more capital towards investments that empower women in developing countries to access entrepreneurship and leadership opportunities, quality jobs, and products and services that enhance their economic participation”. It is a great initiative, and more and more companies are responding to the challenge by making 2X-aligned investments that fulfill at least one of four criteria, namely leadership, employment, entrepreneurship, and/or consumption. But at present, investments are still falling a long way short of what is needed, particularly with regards to investments in products or services that specifically benefit women, which I will return to later.
In the renewable energy space, and specifically the off-grid sector which provides solutions to end-user customers directly, there is a lack of early-stage and proof of funding capital, coupled with a shortage of technical assistance programs that would assist women to grow their businesses.
The needs of women as end-users are rarely addressed by both project developers and financiers, despite the multiple development benefits that could be achieved through meeting them. Currently, over 910 million people in West, Central, East, and Southern Africa still lack access to clean cooking facilities, relying instead on solid biomass, kerosene, or coal as their primary cooking fuel.
The day-to-day burden of this deficit falls predominantly on women in many African communities, who are to a significant extent responsible for household and community energy provision and spend much of their day performing basic subsistence tasks, including time-consuming and physically draining biomass fuel collection. In addition, unpaid care work also continues to fall disproportionately on women’s shoulders, which leaves women with even less time for income generation and paid work.
One might expect that this burden would be lifted for women whose homes are connected to solar power through access to clean electricity. However, it has been shown that many of these customers are regularly missing out on solar’s potential benefits due to inadequate community and customer consultations during the project development stage and the lack of access to loans from the solar companies that would make time-saving appliances more affordable (Ashden 2019). Project developers should consult women to, for example, define what accessories to include in a solar home system to help women perform their daily tasks, or where in the household to install lighting or sockets for appliances.
Companies also need to better understand the barriers women face in accessing products at the community level. High upfront connection charges or the requirement of land titles to access finance, for example, could prohibit a woman from gaining a connection in their name (WB 2017). Designing – and providing access to financing for - products that meet women’s specific needs would allow more time for education and income-generating activities.
But the pressure on women’s time and physical resources is not the only issue. Women are also most vulnerable to climate change as the result of several social, economic and cultural factors, with the UNDP estimating that around 80% of people being displaced by climate change are women. This is partly because they make up a large majority of the world’s poor and often depend on small-scale farming, which is particularly vulnerable to climate change. Climate change is and will continue to intensify existing structural and social gender inequalities, which is why the Paris Agreement called for gender-responsive adaptation action. COVID-19 has served to deepen those inequalities due to the significantly higher rate of female job losses as a result of the pandemic and by disproportionately increasing the time women spend on family responsibilities.
Climate and gender lens investing are not new to impact investing, as seen with the 2X Challenge and subsequent 2X Collaborative. But while the initiative is making considerable inroads in some areas, the fourth GLI criterion - “consumption - product(s) or service(s) that specifically or disproportionately benefit women” - has been significantly overlooked in the renewable energy sector, with just 18% of funds invested as part of 2X Challenge aimed at enabling women’s social empowerment through products and services, such as access to finance.
For companies to successfully design and deliver products and services that better serve women’s needs, it is imperative that they understand the existing social and gender norms that determine the roles of women and men in households and communities, as well as in labor markets across energy value chains - and what kind of barriers these norms create. To give an example, a woman may be denied access to credit because of the lender’s requirement for providing collateral before issuing credit, even though a cultural norm may have prevented the woman from possessing collateral in the first place. Or the discrimination may be refusing to assist female customers outright. In 2017, ADB estimated that only 16-20% of women in West, Central, East, and Southern Africa had access to long-term financing from financial institutions.
It is also worth considering the gender make-up of the companies themselves. Currently, women represent only 30% of the renewable energy workforce and are in the minority on the boards of most private sector firms. Aside from the fact that across the economy, companies with higher representation of female decision-makers financially outperform their peers (McKinsey 2018), women in leadership and management are more likely to hire women and design solutions for women!
Turning the Dial on Gender Equality
As we have seen, women face enormous challenges accessing sustainable modern energy services and finance – both from the perspective of female clean energy developers looking to grow their businesses and that of women end-users wanting to improve their access to energy. But what actions need to be taken to level the playing field so that more products and services that benefit women can be made available by and to them?
Shape societal norms and practices - whether in financial markets, legal institutions or at the renewable energy project development or community level - through building greater awareness around gender bias, gender equality, and prohibiting discriminatory behavior. This is an extremely difficult challenge, but gender equality can only occur if attitudes towards women their role in society are addressed.
Investors need to provide uncomplicated access to finance so that women entrepreneurs and customers can receive the finance they require to grow their businesses or purchase products. Financiers and governments should encourage women entrepreneurs by providing easy access to credit in order to undertake various economic activities without restrictions.
In addition, there is a specific need for earlier-stage funding and complementary technical assistance focusing on business readiness to help companies grow. Proof of concept funding is required for business models that solve the gender equality challenges in energy access, as well as the underlying financing needs and challenges of the end-users.
Hire women! The is a need for more gender-diverse teams, whether in finance and legal institutions or at the renewable energy project development and implementation level to develop innovative and inclusive solutions.
On the demand side, it is important that companies identify the roles and the activities carried out by women in households and within the community, as well as the barriers women face in accessing products at the community level. This knowledge will then help inform the design of their products and services to meet women’s needs.
The social, economic, and environmental benefits of increasing the ability of female renewable energy entrepreneurs to grow their businesses, and enabling women as end-users to enjoy the benefits afforded by clean electrical appliances in the home, cannot be overstated. By unlocking the financial and cultural barriers stifling progress the sector can capitalize on women’s expertise, experience, leadership, and purchasing power, delivering transformational impacts not just for women, but for society as a whole.
Join Laura Lahti on 9 February 2022 for an interactive online forum hosted by Camco Clean Energy and 2X Collaborative that will be exploring what financiers and clean energy developers can do to provide products and services that specifically benefit women in Africa. For more details and to register click here.