Our investment philosophy
The goal of LGT Venture Philanthropy is to improve the quality of life for disadvantaged people, both in the long-term and with long-lasting effect. We achieve this through the support of organizations that are efficiently implementing an effective solution for a social or ecological problem.
We follow a clear investment philosophy:
- Thorough screening and selection of the supported organizations
- Tailored and purpose-driven financing
- Ongoing monitoring and support of the organization
- Regular measurement of performance
1. Thorough screening and selection
We always assume that our engagements will be long-term, and we like to bring management know-how and relevant contacts into each engagement. It is therefore imperative to understand and know the prospective organizations well. Each engagement is preceded by an intensive and thorough 6- to 9-month due diligence process. In this examination phase our local team gets to know the organization, especially its team, and seeks to build up a relationship of trust. In this process we examine the quality of the management, the business model of the organization, the market that it is active in, the competition, the distribution strategy, marketing, PR, strategic planning, the financial situation, and, above all, the positive social and ecological impact of the organization’s work.
2. Tailored and purpose-driven financing
Together with the organization, we decide on the most appropriate type and amount of financing based on the size, growth projection and business model of the organization that is required for reaching its long-term goals. Generally we do not use grants to fund organizations whose business models allow for generating income, but prefer loans or equity investments. We do this because we want to strengthen local markets and not distort them through donations. Additionally, we like to encourage financial discipline and other potential means for the organization to become financially independent from donated money in the long term. Grants are used where profit-oriented models are not feasible or reasonable.
Each financial engagement, be it grants, loans, or equity , is structured around each engagement and is linked to clear performance related milestones.
3. Ongoing monitoring and support of the organization
A considerable portion of our work consists in monitoring and supporting the organization with management know-how. Our local teams act as mentors to our organizations and spend around half a day per week with each organization for the purpose of supporting them in their growth phase. Furthermore, with our LGT Impact Fellowship we connect social organizations lacking entrepreneurial know-how and experienced with professionals from industry and business, who would like to use their expertise to make a positive difference.
This trusted relationship with the supported organizations also ensures regular and high-quality reporting, which helps us and our customers to closely follow the development of the organization and the created impact.
4. Regular measurement of performance
Creating impact is at the core to what we do. It is important for us to measure the achieved impact. A year-end or final report at the end of our involvement is insufficient for us. We have to be continuously informed about what is being achieved and about possible problems that might arise in the short-term. For this reason, structured, monthly reporting is standard practice. The key performance indicators of the impact and progress of the organization which are defined during the due diligence process — for example the number of trained youths, the number of households receiving renewable energy, or the number of newly-founded small businesses — are the foundation for such reporting. This data, along with regular ongoing communication, allows us to monitor whether the organization is reaching its long-term objectives. Only ongoing, regular and trusting exchange makes it possible to provide timely corrective and supportive intervention.