How can investors work together to build responsible businesses?

Using common industry standards can help investors identify which companies to support and track the progress of their investment based on recognised and responsible criteria.

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As investing for impact grows as a sector, it is crucial to establish common standards to help build responsible businesses. As an example, the 2X Challenge, an initiative by G7 development finance institutions to support the economic empowerment of women, is establishing standard criteria across the industry to define ‘gender smart’ investments. These include whether businesses are owned or founded by women; the proportion of women in senior leadership; the proportion of women in the workforce; and whether products or services benefit women.

These criteria are aligned with other industry frameworks through a suite of indicators, thus creating a standard all investors can use to measure progress and identify successful financial commitments in women’s economic empowerment. Since launching in 2018, the 2X Challenge has committed and mobilised a total $4.5 billion in such investments and increased its membership from seven to fifteen development finance institutions. It plans to set an even more ambitious financial target and to grow its membership.

For our part, since the initiative began, we’ve invested $430 million that meets the 2X Challenge standard, and we’re aiming to make at least $1 billion of investments that do so by the end of 2022. These remarkable overall results show what development finance institutions and private sector investors can do in emerging markets to promote gender equality and women’s economic participation.

  • who

    GOGLA

  • where

    Global

  • What

    • Established consumer protection principles which 32 off-grid solar companies have committed to
    • Twenty investors and other industry stakeholders have endorsed the principles

32

off-grid solar companies have committed to GOGLA's consumer protection principles

In a similar vein, creating industry standards in the off-grid solar power market can be good for protecting customers. It’s a fast-evolving market, with many relatively new entrants and providers. Using a pay-as-you-go financing model, it provides affordable energy for low-income customers by allowing them to pay for solar home-systems over time.

But offering these new products to more-vulnerable, first-time customers can create risks the industry must manage as a whole. For example, how do we ensure customers understand the contract, or costs and terms are reasonable, the quality of the products or service, or whether warranties are honoured? And how do we safeguard customer data?

To mitigate these risks, the industry body GOGLA (Global Off-Grid Lighting Association) has developed a common set of consumer protection principles that 32 providers have committed to, and that have been endorsed by 20 investors and other industry stakeholders. Now we, and other investors, use these as part of our due diligence for off-grid solar investments.

We are a founding member of the 2X Challenge. We use our role as an investor to help close the gaps between men and women, and demonstrate the social and economic value of investing in women to the wider investment industry.

We’ve supported GOGLA, the global association for the off-grid solar energy industry, to develop and test its consumer protection principles.

Both of these initiatives have been supported through funding from our technical assistance facility, CDC Plus.

  • who

    2X Challenge

  • where

    Global

  • what

    • Mobilised $4.5 billion in investments in women's economic empowerment
    • Membership of the initiative has increased from 7 to 15 development finance institutions since 2018
    • Gender-smart investing standards agreed across various industry bodies
    • $430 million of CDC investments meet the 2X Challenge standard

$430 million

of CDC investments meet the 2X Challenge standard