What will you be watching in the year ahead? #BigIdeas2023

I loved the latest roundup by LinkedIn on what to expect in the year ahead. Here are some additions on what we at Lebec Consulting expect to be the #BigIdeas2023. We anticipate an exciting wave of world-changing women-owned and led start-ups, businesses, and emerging fund managers in emerging economies that are playing a vital role in creating climate-resilient communities and cities, responding to the unique consumer needs of 51% of the world’s population, and accelerating the transition to net zero. Expect to see an influx of highly innovative women-led businesses reimagining key industries such as agriculture, healthcare, fashion, and energy in emerging markets, and disrupting traditional business models and supply chain challenges.

Why? Because women in developing and emerging economies are on the frontlines of climate change.

They are responsible for finding water, food, and critical goods and services for their families. They understand their families’ needs—and thereby key consumer trends—and are the ones finding solutions when there are extreme droughts, heatwaves, and floods in their communities. 

I recently spoke to Sebastian Shehadi of Investment Monitor about all of this. People living in poverty and in the most vulnerable climate-impacted economies such as Bangladesh, India, Kenya, and Pakistan are already experiencing severe climate realities. Among them are women. They are the ones who walk for hours to find water for their families when a drought strikes; they lead many agricultural businesses that feed entire families and communities; they design and distribute locally-made sustainable fashion that inspire entire generations of women; and they oversee their families’ basic needs.

As such, women have unique insights on what local households want and need—from solar powered refrigerators and cleaning products, comfortable and affordable fashion, menstruation products for their daughters, to other essential goods such as water and food. They understand how to reach last-mile, low-income families—entire groups of consumers that traditional businesses will need to appeal to in order to operate and succeed in a climate vulnerable global economy. 

Women in emerging markets, where six billion people live, are turning to entrepreneurship at a record pace to fully exercise their power, respond to women and family consumers in these markets.

And given that many creative ideas and innovative solutions typically come from a place of scarcity and adversity–-watching this trend is essential for investors and business leaders. Getting access to these startups and the women-led, emerging fund managers investing in them is key to getting ahead of the market on larger trends and having an “in” among the most relevant and bankable portfolio of innovators over the next decade.

Indeed, the female economy is already the world’s largest emerging market, with the potential to add $12 trillion to global GDP by 2025. Latin America and the Caribbean have the world’s highest rates of female entrepreneurship, while the Middle East and Africa continue to see a rise in women entrepreneurs and about a quarter of micro, small, and medium enterprises (MSMEs) in Southeast Asia are owned by women. The data tells us that women-led businesses, including in emerging markets, outperform the market and generate undeniable and critical value and impact for their families and communities. 

Venture capital trends in the U.S. reflect this. From 2009-2018, 69.2% of the top-quartile-scoring U.S. venture capital funds included female decision-makers. Additionally, when U.S. firms increased their number of female partners, they saw 9.7% more profitable exits. As Lisa Carmen Wang, founder of BAD BITCH EMPIRE, wrote in Fast Company, "the raw power and potential of women in venture capital and leading their own businesses could not be clearer. When women move money, funds outperform. When women invest in other women, they create a chain reaction of exponential impact on women and the world."

Yet, in addition to the 18% of venture capital that goes into men and women founded businesses, and the meager two percent that goes into women-owned and led businesses—with a Series B and C raise close to impossible for most women-led startups, including in emerging economies—there is an estimated unmet credit need of $1.7 trillion for women-owned micro, and small to medium enterprises (MSMEs) in developing and emerging markets. And so here lies the opportunity. An uncrowded investment opportunity that is on the front end of accelerating our global progress toward reducing the impacts of climate change. There is no net zero without significantly larger investments in women-owned and led businesses in emerging economies, including at key stages of growth where traditional investors have failed to see opportunity. 

By investing in women-led ideas and businesses in these markets, capital markets will reach new consumers and have healthy financial returns in places they have never looked at before and in completely new ways.

They are also more likely to avoid the next ESG greenwashing scandal and pave the way for a more sustainable future across key industries. I believe we’ll see impact, venture capital, and institutional investment markets adopt a more creative approach in order to move more capital in this direction—including to female fund managers—and respond to this need and opportunity.

Look no further than Mastercard Foundation and MEDA (Mennonite Economic Development Associates)'s recent announcement of a $200 million Africa Growth Fund —a much needed Fund of Funds strategy that will strengthen and de-risk African investment funds committed to supporting women entrepreneurs and advancing gender equity in entrepreneurship on the continent. 

In short, investing in women’s entrepreneurship is not just a moral imperative: it’s good business practice. And doing so in emerging markets across Africa, Asia, and Latin America is critical for our net zero aspirations and to adapt to climate change today. I have a hunch that these entrepreneurs will be the next capital market greatness as impact, venture capital, and institutional investors become more motivated to back their innovations that are prioritizing the planet and people alongside profit. According to Marisa Drew, Chief Sustainability Officer at Standard Chartered, every dollar invested in climate adaptation and resiliency efforts generates five to seven times that investment in avoided risk or GDP degradation. Women-owned and led businesses in emerging economies are a big piece of this investment opportunity.