Can the business case save gender-lens investing from political backlash?

Angie Madara was poised to launch a fund to test a new credit scoring model designed to unlock investment in women microentrepreneurs in Africa when the bottom fell out last year. First, the USAID funding she had secured to underpin the fund evaporated. Then other funders she approached said they were on pause as they navigated the Trump administration’s potential threats to philanthropies. Some corporate backers withdrew entirely, saying they were no longer funding inclusion initiatives. “It’s been tough and I know it’s going to get even tougher,” Madara, a serial entrepreneur, told Devex. “We had to think without depending on anyone’s financing coming in, what can we do? How can we make money? And we never wanted to charge women entrepreneurs because I have been in those shoes.” She had been focused on helping women entrepreneurs in the informal financial sector scale their businesses, but the funding shock forced her to rethink the model to keep AthenaFundX alive. Madara developed a new analytical tool and will soon launch Athena Capital, a platform connecting banks, angel investors, and family offices with vetted women entrepreneurs running medium-sized businesses in Africa. The shift reflects a broader change in the market, Madara said. Just a few years ago, investors were “happily on the bandwagon” to expand women’s access to finance and support more women fund managers, she said. “What happened is there is a little bit of fear especially where the U.S. is involved and allies of the U.S. because now they have to sing from the same hymn book. It’s a harder conversation to have now,” she said. Her experience reflects the headwinds facing the gender-lens investing sector this past year, despite significant progress in the past decade. Political pressure in the U.S. has changed the tone of the conversation, though in some cases the shift is more about language than substance, Jessica Espinoza, the CEO of 2X Global, a global membership and field-building organization, told Devex. The environment in Europe is different, she added, but in general there is still engagement and commitment from both impact investors and purely commercial investors. “What I do see, though, is a reluctance from some actors, or for many actors, around how openly to talk about what they actually do in public, or how they frame it,” she said. Even investors who have focused on women for years are increasingly emphasizing the economic case rather than the equity argument, she said. “There is evidence to that but also it’s less likely that it would get politically hijacked or that there would be a political backlash because even if you only care about returns and economic metrics, this makes sense,” she said. Some investors have simply stopped talking publicly about the work, while others have shifted their language from gender lens investing to phrases such as investing in women or women’s leadership in business. 2X One initiative that helped build the gender-lens investing market is the 2X framework. Now there is 2X Global, an independent organization led by Espinoza, alongside the G7 2X Challenge. But the initiative’s roots lie in the U.S. government during Trump’s first term. The 2X initiative launched in 2018 with a goal for the Overseas Private Investment Corporation, or OPIC — the precursor to today’s U.S. International Development Finance Corporation — to invest $350 million in projects to support women. That included increasing financing to women-owned businesses, improving access to water, and creating job opportunities. At the time, OPIC told Devex it was the largest one-time commitment by a single U.S. agency for global women’s economic empowerment. “We want to change the market,” Kathryn Kaufman, OPIC’s then-managing director for global women’s issues, told Devex at the time. “We want to send a message to the market that gender matters.” Later that year the Group of Seven leading industrialized nations, or G7, launched the 2X Challenge, a much larger commitment to invest in women. The initiative now says it has mobilized $33.6 billion in gender-lens investments. In 2024, members of the 2X Challenge committed to investing at least $20 billion by 2027. When it launched, the initiative filled a void and created a framework that investors could use to embed gender-lens investing into the investment process, Maria Smith, British International Investment’s chief impact officer, told Devex. “It has been remarkable what it’s done in such a short period … because it’s really become an industry standard,” she said. Most development finance institutions now have targets linked — directly or loosely — to the 2X criteria, she said. British International Investment, for example, committed in 2022 that 25% of new investments would align with the 2X framework. While the latest figures have not yet been released, Smith said the institution expects to exceed that target. “Every year wasn’t consistently outperforming so it was a stretch for the organization and I think having this target and embedding the process really did affect behavior,” she said. And now as BII prepares to release its next strategy, 2X will remain central — with the target likely maintained at 25% or potentially increased, she said. And that comes alongside strengthened criteria introduced in 2024 after criticism that original 2X thresholds were too weak. “There’s clearly a disappointing movement from the U.S. and I think the domino on that is that there’s been less attention from some other developed markets on gender. I wouldn’t say following the same retrenchment, but others that aren’t being as proactive or intentional about it.” But the European DFIs continue to support 2X and women’s equality, she said. “Where gender might become out of fashion a bit, the actual interventions of helping women’s economic empowerment, the intention is still there,” she said. “I just don’t see it being a permanent trend backwards because it doesn’t make any sense.” The Trump administration has cut foreign assistance programs targeting gender and women, but 2X still exists at DFC, though some sources told Devex it has become less visible and is no longer a strategic priority. A DFC spokesperson told Devex that “As mandated by the BUILD Act — Section 1451, Women’s Economic Empowerment — DFC is required to consider economic impacts of its support on women’s economic opportunities and outcomes and prioritize the reduction of gender gaps.” The spokesperson pointed to an upcoming annual report that will detail the agency’s recent 2X-related investments. 2X transactions continue at roughly similar levels, though meeting the initiative’s broader targets may be more difficult — particularly given uncertainty around DFC’s role, historically one of the initiative's largest contributors, Espinoza said. The bigger picture Gender-lens investing goes beyond financing for women entrepreneurs, but also to businesses or investments that employ or serve women. The field is growing, though it remains unclear how the recent political backlash in the U.S. will impact the market. Efforts to ramp up gender bonds, including through guidelines developed by UN Women, the International Capital Market Association, and the International Finance Corporation, have led to a nearly eightfold increase in gender bond issuances between 2021 and 2025, said Robyn Oates, head of UN Women’s Sustainable Finance Programme. “It has broadened people’s aperture for what could be considered as gender responsive or gender lens investing because now it’s not just about a bank raising a bond in order to on-lend to women. It’s not just about lending,” she said. Investments in infrastructure, health care, and other sectors can also have significant impacts on women, she added. UN Women helped Iceland issue the world’s first sovereign gender bond. Oates said the process of bringing issuers and investors together to discuss how money will be used also increases accountability and transparency. 2X has also developed a gender bond certification process designed to lend credibility and verification to the growing market. But Espinoza said one of the challenges is striking a balance between mobilizing large-scale capital through public markets and stock exchanges without “falling into the trap of incentivizing” only large investments — when what’s often needed are smaller or more direct investments. Evidence shows women tend to have higher repayment rates, remain customers longer, and use more financial products, so the real question is how much business institutions are leaving on the table by not lending to women, Oates said. Even when institutions recognize a business case, however, some still need support to adapt operational systems and train staff on new protocols. Making the business case for investing in women is increasingly important to attract more financing, several sources told Devex. “The problem we’re trying to solve is not gender equality, but the problem we’re trying to solve is how to build a resilient economy,” Oates said. There is a lot of work to still be done, Oates said, including raising awareness among investors, building stronger accountability, improving capacity to scale gender-focused investments. “Even in the context of so much dismay and so much discouragement, this is an area where I feel there’s still energy, there’s motivation, there’s enthusiasm to work,” she said.