woman scientist
Female chemical engineer develops clean energy storage solutions. (Image: @thisisengineering via Unsplash)

Women in cleantech are key levers for an inclusive recovery

How removing barriers for women entrepreneurs in the cleantech sector can ensure a green and inclusive recovery from the pandemic.

By Müge Dolun, Suzanne Biegel, Chitra Rajan and Vere Shaba

The clean technology sector1 with its potential for creating sustainable, resilient and inclusive employment is crucial for a green recovery from the global COVID-19 crisis and for building back better.

Women have already been playing an important role in the transition to a green economy, and can drive responsible consumption and production behaviours as well as pioneer a culture of circularity at many levels and in many countries – as consumers, entrepreneurs, innovators and designers. As women make decisions on or influence the majority of consumer purchases2, they can drive responsible consumption and production behaviour throughout value chains. In the business space, there is emerging evidence that not only women-owned or women-led companies tend to prioritize social and environmental benefits over mere shareholder value – companies with greater gender diversity on their boards are significantly more likely than others to reduce the company’s energy consumption, greenhouse gas emission and water use.3

This notwithstanding, why do we still find so few women in the driver’s seats of clean technology? The interrelated impacts of sector-specific challenges and structural gender inequality on women cleantech entrepreneurs has not been widely studied so far. That having been said, the challenges for women entrepreneurs seem to be compounded by the already well-known hurdles cleantech businesses generally face.  

Compared to the average start-up, cleantech ventures need a longer time to become profitable – partially because they often work in highly subsidized and therefore distorted markets, such as in energy. Also, cleantech start-ups often commercialize complex innovations and therefore need significantly more time and a diverse team to make the leap from academic research to commercialization. This long road from research to revenue is often referred to as the valley of death’ and tends to discourage early-stage private investment necessary for product development, manufacturing, and for attracting and retaining qualified personnel. Women entrepreneurs are especially affected by this challenge.

The cleantech venture ‘valley of death’ and the gender finance gap

Access to funds in a timely manner and at a reasonable interest rate is a key requirement for cleantech ventures to take off and to remain sustainable. However, women-led small and medium enterprises (SMEs) account for a disproportionate share of the SME finance gap, especially in emerging economies and low- and middle-income countries.4 One of the gender-specific hurdles for women entrepreneurs that make them less attractive for traditional bank loans are discriminatory land and property laws and the ensuing lack of collateral. In addition, many women do not have credit histories in their own names, which further exacerbates the difficulties women face in access to bank loans.

Lifecycle of a venture

Lifecycle of venture
Source: Adapted from UC Davis Center for Entrepreneurship

As regards the main source of funding for cleantech start-ups—notably seed funding for research and development and venture and private equity capital at later stages—the impact of subconscious bias and discriminatory gender norms continues to be a major obstacle for women entrepreneurs. Recent research shows that less than 3 per cent of venture capital was invested in women-led companies5, and only 11 per cent of seed funding capital in emerging markets went to companies with women in their founding team. The gender disparity in early-stage business financing cannot be explained by differences in education, experience or similar reasons.6

Research also reveals that male investors’ intent to invest in female entrepreneurs is lower than for their male counterparts, that they have more confidence in men simply because of their gender, and that women are offered lower valuations, causing them to give up more share ownership.7 This only intensifies the hardships for women cleantech entrepreneurs, especially since the majority of investors are men, and people are used to investing in and collaborating with people that look like themselves. Bias, stereotypes and prejudice continue to persist: many women entrepreneurs share the experience of walking into a boardroom and being asked who the founder or the leading engineer of their own company is.

The already limited investments in women-led businesses in the cleantech sector are concentrated in the early incubator stages, where less funding is required, rather than in later stages of acceleration, i.e. when moving from prototypes to commercialization, where the required amount of funding is higher. In other words, the gender financing gap in equity capital increases with a companys resource intensity, and this is where a lot of women innovators are forced to give up.

Unequal access to networks and market opportunities

The same challenges limit women's access to networks and market opportunities. Since networks provide access to formal and informal knowledge, business opportunities and social capital, they are crucial for entrepreneurs’ success. The current male domination in the clean technology sector also implies a lack of mentors and role models for women, factors that have been shown to have a significant effect on womens career choices and retention rates. In fact, a study in Denmark found that mentoring was a more significant factor for a woman’s decision to choose and remain in a career in engineering than it is for men, who are motivated more by financial rewards.8

The combined impact of womens underrepresentation in STEM fields and their reduced access to knowledge and networks is also reflected in unequal access to market and procurement opportunities, especially early on in the proof-of-concept and early market entry stages.

Public procurement makes up 12 per cent of GDP in OECD countries, and accounts for 50 per cent or more of total government expenditure in some developing countries.9 In addition to the immediate business benefits, public procurement can also play an important role in creating trust in new products and services. For entrepreneurs in emerging economies and low- and middle-income countries, access to domestic markets can be a critical step in preparing for high-income countries’ more demanding export markets, especially with regard to meeting certification requirements and standards, marketing and distribution know-how, and the use of e-commerce and digital tools that necessitate higher levels of digital literacy and stable internet access.

Public Procurement

Note: Selected OECD countries.

Source: OECD.  

It is estimated that women entrepreneurs have only been awarded 1 per cent of government procurement and tenders worldwide.10 The European Unions public procurement likewise reflects gender inequalities: only 26.3 per cent of the EUs suppliers have female managers, and a mere 16.5 per cent of companies receiving large value contracts have a majority female management.11 It is safe to assume that this share is not higher in the cleantech sector, although no specific data is yet available.

How do we spur womens potential in cleantech?

Many programmes focus on the initial phases of cleantech companies. In supporting the transition to a green economy, the business sector—private investors, venture capital firms, investment banks and other financial institutions—needs to shift its paradigm from focusing primarily on quick revenue to providing more sustainable medium- to long-term capital investment. At the same time, these measures need to be combined with support for networks that are inclusive of women, sensitization of stakeholders on their gender-related biases, and the creation of more mentoring opportunities for women in the cleantech sector. Fostering a climate of inclusion would allow women cleantech entrepreneurs to benefit from various opportunities on an equal footing, and ensure that all cleantech entrepreneurs can fully contribute to greening the future.

The public sector plays an important role by expanding growth and investment readiness programmes, tax exemptions, and subsidies for cleantech entrepreneurs in a way that is gender-responsive. Again, these need to be combined with efforts to ensure that women in this field can access and benefit from these initiatives in the same way as men do, including through the elimination of discriminatory laws and gender stereotypes. Targeted outreach to women entrepreneurs, temporary special measures towards gender parity in companies, and overcoming the gender-specific hurdles related to collateral and credit histories play a key role in this regard. As a good example, the government and national financial institutions in India have been providing a range of state subsidies and collateral-free loans earmarked or with a specific quota for women entrepreneurs.12

Governments are also becoming increasingly aware of the need to use green technologies in the operation of public buildings, energy production, waste services and of other public infrastructure. Finland, for example, requires central government bodies to commit 1 per cent of public procurement to cleantech solutions.13 As regards gender-responsive public procurement, India, Kenya and South Africa have introduced respective quotas for women-owned businesses. In fact, the President of South Africa announced in August 2020 that the government would set aside 40 per cent of all public procurement for women-owned enterprises.14 There is a significant opportunity for governments to consolidate these programmes to bolster cleantech companies led or owned by women, but also for those companies that promote gender equality in general (through employment, supply chains, etc.), by giving them preferential market access for their products and for their financing needs.

The UN member states are expected to adopt bold measures to counter climate change and environmental degradation at the 26th UN Climate Change Conference of the Parties (COP26) in November 2021. The global community must bear in mind that gender equality, social equity and a sustainable circular and green economy are all pieces of the same puzzle. Advancing gender equality makes sense from all vantage points – human rights, business and climate action. We cannot afford to miss out on this opportunity.

So we should ask ourselves: a trillion dollars has moved in climate bonds in the last years, and there is an additional 23 trillion dollars needed to meet the commitments of the Paris Agreement. What if all of that had a gender lens? 

 

This article draws on the key messages of a side-event of the 65th session on the Commission on the Status of Women organized by UNIDO and the Government of Finland, which celebrated womens leadership for climate-neutral and circular industries. The article also references some of the findings of a recent Regional Academy on the United Nations (RAUN) study (2020) mentored by UNIDO, which conducted interviews with alumni of four Global Cleantech Innovation Programme (GCIP) country projects.

  • Müge Dolun is Gender Coordinator ad interim at the Gender Equality and Empowerment of Women Office of UNIDO.
  • Suzanne Biegel is Founder of Catalyst at Large and Co-Founder, GenderSmart Investing.
  • Chitra Rajan is Serial Entrepreneur and PFAN Advisor.
  • Vere Shaba is Founder and CEO of Greendesign Africa and Greendesign Capital.

Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).

References

  1. Also denominated as “cleantech sector”; broadly understood to cover all products, processes or services that reduce waste and require as few non-renewable resources as possible, i.e. including all resource efficient, climate-neutral/positive and circular product, processes and services.
  2. In various studies, between 65-85 per cent of consumer purchasing decisions are attributed to women. For example, see Silverstein, Michael and Sayre, Kate. (2009) The Female Economy. Harvard Business Review.
  3. Companies with greater gender diversity on their boards from 2013 to 2018 were 60 per cent, 39 per cent, and 46 per cent more likely than those without such diversity to reduce the company’s energy consumption, GHG emission and water use, respectively. FP Analytics. (2019) Women as levers of change: Unleashing the power of women to transform male-dominated industries.
  4. IFC. (2017) MSME Finance Gap: Assessment of the Shortfalls and Opportunities in Financing Micro, Small and Medium Enterprises in Emerging Markets.
  5. IFC. (2019) Moving toward Gender Balance in Private Equity and Venture Capital.
  6. IFC. (2020) Venture Capital and the Gender Financing Gap: The Role of Accelerators. pp15, 21-28.
  7. Ewens, Michael and Townsend, Richard. (2020). Are Early Stage Investors Biased Against Women? Journal of Financial Economics (JFE), vol. 135(3), pp 653-677.
  8. Kolmos, Anette; Mejlgaard, Niels; Haase, Sanne and Holgaard, Jette Egelund. (2013) Motivational factors, gender and engineering education. European Journal of Engineering Education, 38 (3). pp. 340-358.
  9. OECD. (2019) Government at a Glance 2019 – Size of Public Procurement, estimate based on OECD National Accounts Statistics; Knack, Stephen; Biletska, Nataliya and Kacker, Kanishka. (2017) Deterring Kickbacks and Encouraging Entry in Public Procurement Markets Evidence from Firm Surveys in 88 Developing Countries. World Bank Policy Research Working Paper No. 8078.
  10. Vazquez Elizabeth and Sherman Andrew (2013). Buying for Impact: How to Buy from Women and Change the World. Charleston, South Carolina.
  11. Fazekas, Mihály; Kazmina, Yuliia and Wachs, Johannes. (2020): Gender in public procurement: Extent, distribution, and impacts. EBRD Research paper.
  12. For a non-exhaustive list, see, e.g. Singh, Jayati. (2019) MSME Funding: Nine schemes which will give wings to women entrepreneurs. The Times of India. 20 June 2019.
  13. Government of Finland (2013). Government decision-in-principle on the promotion of environmental and energy solutions (hereinafter referred to as cleantech solutions) in public procurement, unofficial English translation.
  14. EWN. (2020). Ramaphosa: Govt to set aside 40% of public procurement to women-owned businesses. 9 August 2020.

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