2X Impact Rewards: Incentivising Better Gender Impact
2X Global, Roots of Impact and the Swiss Agency for Development and Cooperation (SDC) are partnering to introduce 2X Impact Rewards – a model investors can use for rewarding companies that have obtained 2X Certification with financial incentives for achieving improved gender outcomes.
What are 2X Impact Rewards?
2X Impact Rewards combine two powerful approaches: 2X Certification and Impact-Linked Finance. While the 2X Certification demonstrates excellence in an organisation's gender practice across its entire value chain, Impact-Linked Finance embeds financial rewards for achieving positive social outcomes beyond business as usual. Combined, this represents 2X Impact Rewards. In short, 2X Certified companies raising investment can be rewarded for achieving specific gender outcomes. The higher the 2X Certification Level, the higher the rewards.
More about 2X Certification and Impact-Linked Finance.
How does it work?
Providers of Impact-Linked Finance seeking to optimise their gender impact select their investees according to their criteria. The application of 2X Impact Rewards follows a simple process:
2-3 gender-related impact metrics are selected in coordination with the organisation (focusing on materiality / highest impact potential).
The reward scheme, including incentive amounts and targets, is tailored to the context of the company.
These metrics are independently monitored; improvements beyond the baseline are rewarded over a pre-defined period.
If the enterprise has obtained 2X Certification and been awarded a 2X Certificate when the first incentive is due, it can benefit from higher rewards: the higher the 2X Certification Level, the higher the rewards (multiple). The reward can be a cash payment, an interest rate step-down, or any other type of financial incentive.
The multiple for the 2X Certification Level "Advanced" is 1.1x, and for the 2X Certification Level "Best-in-Class" 1.2x, corresponding to a premium of 10% and 20% respectively.
Figure 1. Application of 2X Impact Rewards
Example:
| Investment amount | US$ 10-20Mn |
|---|---|
| Maximum impact incentives without 2X Certification | US$ 500k |
| Maximum impact incentives with 2X Certification Level “Advanced” (multiple 1.1x) | US$ 550k |
| Maximum impact incentives with 2X Certification Level “Best-in-Class"(multiple 1.2X) | US$ 600k |
There is no entitlement to rewards from companies that have been issued a 2X Certificate. The decision to provide rewards is the sole responsibility of the investors who provide Impact-Linked Finance. The pioneers and first providers of 2X Impact Rewards are Roots of Impact and SDC as part of the Impact-Linked Fund for Gender Inclusive Fintech, the B-Briddhi Program in Bangladesh, and other funds in the pipeline. Furthermore, Roots of Impact is committed to applying 2X Impact Rewards across all its gender-related transactions.
More investors and funders are in the pipeline, and everyone is welcome to apply this methodology.
What’s next?
2X Certification is available to the market, and the practice of Impact-Linked Finance is gaining significant traction among investors, development finance institutions and catalytic capital providers. If you want to learn more about Impact-Linked Finance, join the ILF community of practice facilitated by Roots of Impact.
The partners 2X Global, Roots of Impact and SDC will report on their experiences implementing 2X Impact Rewards.
For additional inquiries on 2X Impact Rewards, please contact us.
