Guest blog by Julie St-Pierre-Gaudreault and Susan Spronk, May 15, 2023
In order to address problems in the field of international development, and particularly to achieve its feminist objectives, the Canadian government is now promoting “innovative” financing tools that mobilize money from private actors. Do these “innovative” strategies better address development crises or are they a form of neoliberalization of solidarity?
International financial needs are increasing, whether due to climate change, widespread violence against women or successive economic crises. Yet, the proportion of Canada’s gross national income (GNI) that is redistributed to countries in the Global South has only slightly increased over the years. Canada currently allocates 0.37% of its GNI to development assistance, whereas the target adopted unanimously at the UN in 1970 is 0.7%, or twice as much.
Failing to meet this commitment, the Canadian government has proposed using some of its official development assistance to leverage private sector money. This new trend is known as “innovative financing”. The use of these different instruments such as blended finance and gender impact investing is being promoted by the government as a promising way to meet the targets of its Feminist International Assistance Policy and to achieve the United Nations’ Sustainable Development Goals.
A major problem is that the efficacy of these tools, while promoted by many in the sector, is unproven. Many critical scholars and activists have raised doubts about the real potential of these partnerships to reduce poverty and achieve gender justice.
Gender-impact investing and the Equality Fund
Take, for example, gender-lens investing, which is increasingly popular in development circles. It is part of a subcategory of “sustainable” or “ethical” investing that incorporates gender-related concerns and goals into investment strategies in order to increase returns and have a positive “impact” on gender equality.
This strategy is actually used by a Canadian organization that is attracting growing attention: the Equality Fund. The Canadian government created “a first of its kind partnership” in 2019 with this fund, which seeks to support feminist movements and organizations of the Global South.
The Equality Fund, with its rather complex structure and operations, has piqued the curiosity of many. Not only because it received a historic $300 million contribution from Global Affairs Canada, the largest one ever made to an organization supporting women’s movements, but also because it uses an investment portfolio that is 100% gender-impact oriented.
Nevertheless, many feminist activists around the world, including members of the Association for Women’s Rights in Development, question impact investing as an effective way to support women’s rights organizations. They argue that these types of tools, which encourage private sector involvement, risk diverting attention from the structural causes of gender inequality and may even exacerbate existing inequalities, rather than eradicating them.
Nothing innovative, nothing new
To what extent do these solutions and strategies really represent “innovation”? The research on the subject is clear: these solutions are not new.
Moreover, the involvement of the private sector, and now increasingly the financial sector, in international development has implications for the achievement of development goals and for the transparent, efficient and fair redistribution of wealth.
The problems associated with private sector involvement in development and the promotion of financial tools are the same as they were 30 years ago. Although they are known, they are not mentioned enough when presenting these types of “innovative” solutions to development problems and especially to feminist issues. Some of these shortcomings have been pointed out by members of the Blended Finance Project: “lack of transparency, high cost, complex tools to understand, unestablished standards of guidance and analysis, measures that benefit elites and almost never the ‘poorest of the poor’”.
Zimbabwean feminist activist Nancy Kachingwe of the Association for Women’s Rights in Development explains in a recent report, “Gender impact investing is a bigger trend of how corporate becomes at the centre of everything. I am predicting that the financialization and privatization will take over as more income streams are created from sectors like education, and by the constant move from the public to the private. This trend falls in line with the neo-colonial and recolonization agendas”.
Thinking about alternatives
Current trends in development financing exacerbate the fundamental contradictions of market-based strategies. A panel on these issues, to be presented at The Great Transition event in Montreal (May 18-21, 2023), is an opportunity to learn more about the shortcomings of these “innovative” tools and to discuss the Canadian position on financing for gender equality and the growing role of the private sector.
Julie St-Pierre-Gaudreault is a master’s student in International Development and Globalization with a specialization in Gender and Women’s Studies, University of Ottawa. Susan Spronk is an Associate Professor in the School of International Development and Globalization at the University of Ottawa. This article is a translated version of a text originally published in French in Le Pivot. Image: Businessman with coin stacks on white background by Marco Verch under Creative Commons 2.0 licence.