The 2X Challenge mobilised US$11.4 billion for women and girls between 2018-2020. As the people behind the initiative look to develop a “2X Certification” mechanism our gender and development finance institution teams have looked back through the data to see how successful the 2X approach has been so far in channelling funds to women and girls. And the truth is, we can’t tell you. There’s a big transparency problem. Below we share some insights and recommendations which will form the basis of our contribution to the consultations on the Certification process to be held in mid-December.

Introducing the 2X Challenge

The 2X Challenge was launched at the G7 Summit in 2018 as a bold commitment to inspire Development Finance Institutions (DFIs) and the broader private sector to invest in the world’s women. The 2X Challenge has certainly galvanised support for gender lens investing across both DFIs and institutional investors. Initially the G7 DFIs set themselves a target to invest US$3 billion with a gender lens. This target was surpassed in 2020 with DFIs committing US$6.9 billion while private capital and “other” capital provided another US$4.5 billion. The majority of leading bilateral DFIs are members of the initiative including the US Development Finance Corporation (DFC) and the UK’s British International Investment (BII). In 2019 the European Investment Bank (EIB) adopted the 2X criteria; in 2021 the European Bank for Reconstruction and Development (EBRD) and International Finance Corporation (IFC) joined the initiative. The 2X Criteria have quickly become the global standard for gender lens investing. A broad range of investors and investee companies are now adopting the 2X criteria. A new US$15 billion target was announced at the 2021 G7 summit.

The 2X Challenge criteria

To qualify as 2X eligible, investments must fulfil at least one of the 2X criteria. Here we provide an overview of the areas covered by the criteria:

• Entrepreneurship – 51% women ownership or the business is founded by a woman
• Leadership – 30% women in senior leadership or 30% women on the Board or Investment Committee
• Employment – 30-50% share of women in the workforce (depending on sector) and one “quality” indicator beyond compliance
• Consumption – Product(s) or service(s) that specifically or disproportionally benefit women
• Investments through financial intermediaries – 30% of the DFI loan proceeds or portfolio companies meet the 2X criteria

The question of whether these criteria are sufficient or could be more ambitious is a larger topic that should involve a range of stakeholders. However, as we scoured what data is out there we were surprised by some of the qualifying investments. For example, in the case of two investments in hydrocarbons companies, one of which is based in a tax haven and the other in the global north, it is unclear how they fulfil any of the above criteria. Again, we are not focusing on the criteria here, but rather what we can and can’t see about the investments that make up the US$11.4 billion mobilised to date.

Transparency problems and recommendations

• The majority of 2X investors don’t currently identify their qualifying 2X investments. As such it’s impossible to break down the US$11.4 billion number.
• For those which do, not all identify the criteria by which the investments qualify. As such it’s not clear whether 2X is driving funding to firms owned, managed, or staffed by women, or whether it’s driving funding to firms which serve female customers.
• Despite being aligned with multiple impact investing metrics[i] it’s not possible to see how 2X investments are utilising these. For example, we could not find any investments which showed which of these metrics were being used as indicators, and what the targets for these might be.
• In instances where we have been able to identify 2X investments, the large majority of them have been made in financial intermediaries (FIs). Our previous research has demonstrated that DFI FI investments are significantly less transparent than direct investments, often functioning as a “black box” and making it impossible to see the impact of 2X FI investments. The general lack of transparency across 2X investments and the systemic lack of transparency in FI investments therefore combine to exacerbate each issue further.

When you can’t see the investments, or how they qualify, it raises a lot of questions. For example, what is the impact of these investments for advancing gender equality? Is this new funding or is a proportion of the US$11.4 billion due to investments which were already in the pipeline and which just so happen to meet the 2X criteria? What is the detail behind the mobilisation numbers – is this funding from other DFIs, investee collateral, or the private sector? As such we recommend the following steps be incorporated into the certification process:

• 2X certified investments must be published on investor websites and a central repository should be housed by the 2X Collaborative[ii]
• 2X certified investments should provide data aligned to the requirements of the DFI Transparency Tool which is quickly being adopted by leading DFIs to ensure transparency and accountability
• Impact – and learning from 2X investments – should be at the heart of the work going forward. Publishing results and evaluations is critical to identifying what investments are catalytic and – just as importantly – what didn’t work and why.

Act before it’s too late

We strongly agree that investing in women and girls is vital and urgent. “Invest in women, invest in the world” is the strapline of the 2X Collaborative, the new global industry body that will oversee the development of the 2X Certification. However we implore stakeholders to consider our findings and incorporate them into the certification process. If funds are going to be raised in the name of women those funds must be transparent and the process rigorous.

[i] The 2X criteria and metrics are aligned with the GIIN’s IRIS+ indicators, HIPSO, UN Women WEPs, OECD DAC Gender Marker.

[ii] Open data standards, such as that used by major DFIs – the International Aid Transparency Initiative open data standard, should be reviewed and potentially adopted to ensure harmonisation and comparability of reporting