LGT at ACEF 2014

Asian Development Bank, 17 June 2014

Public

Sustainable Energy for the BOP:LGT Venture Philanthropy’s Criteriafor Renewable Energy Investments

Energy for All Investor Forum 2014 | Session #3

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LGT Venture Philanthropy – Introduction: Our mission

Our mission is to increase the sustainable quality of life of less advantaged people

“All human beings should be able to live under dignified conditions and

be given a fair chance for personal development in their lives.

Wealthy individuals have an economic, political and moral responsibility

to champion the cause of disadvantaged persons. In developing

countries in particular, the scale of poverty is alarming and the need for

help is great. There are limits to the contributions that governments and

development agencies can make.

This means that helping the disadvantaged in developing countries and

assisting social advancement is also a challenge for the private sector. In

this respect, it is vital that the invested financial resources generate a

high and sustainable social return and do not create any false or

unnecessary dependencies nor distort local markets.”

H.S.H. Prince Max von und zu Liechtenstein

CEO LGT Group & LGT Venture Philanthropy’s initiator and board member

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LGT Venture Philanthropy – Introduction: Our challenge

4 billion people live on less than 2 USD a day; they need solutions that are scalable and sustainable

The gap is widening. We strive to narrow it.

8% of the world’s population owns

80% of the world’s total wealth.

4 billion people live on less than

2 USD a day.

LGT Venture Philanthropy: Our team

Our global team is based in six regions and passionate about creating societal impact

LGT Venture Philanthropy is supported by different competence centers within LGT Group such as HR, accounting, marketing, legal

department and asset management.

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Board members

Countries with local

team members

LGT Venture Philanthropy: Our impact

Since inception, 40 LGT VP portfolio organizations have improved the quality of life of more than 4.5 million less advantaged people

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2008 2010 2011 2012 2013Time

*Most organizations have several donors/investors; therefore, the # of people reached is not only correlated with our donations or investments.

Portfolio

organizations

Impact *

(cumulative)

1’100 lives

improved

300k

lives improved

900k

lives improved

1.7m

lives improved

2.7m

lives improved

4.5m

lives improved

USD allocated

(cumulative)

USD 2.2m USD 5.3m USD 8.3m USD 12m USD 16m USD 19m

# of

organizations

1 10 18 24 31 36

2009

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LGT Venture Philanthropy – We implement

Our venture philanthropy approach provides tailored long-term support for young, rapidly growing organizations

Venture

Philanthropy

Focus on few

organizations

Financing combined

with management

know-how and

networks

Intense local due

diligence to build

knowledge and

relationship

Continuous

controlling

Long-term

engagement

Tailored financing:

Equity, debt

and grants

Optimization

of long-term social &

environmental return

Young, rapidly

growing

organizations

“We want to be as

efficient and

transparent as possible

in our impact

investing/philanthropic

efforts.

With this objective in

mind we have applied

many proven principles

and processes from the

venture capital and

consulting industry to

our impact investing/

philanthropy

approach.”

H.S.H. Prince Max

von und zu Liechtenstein

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A multi-step investment process focusing on deep analysis to select the best organizations was applied thousands of times

Due Diligence 6 – 12 months

Main

activities

Preliminary review

Deal execution

Portfolio controlling &reporting

Exit

Tools/

Documents

Process

Timing 5 – 10 years 1 week – 3 months

Deal sourcing

� Monthly reports

� Quarterly KPI

� Annual report

� Post investment

monitoring

− Business, risk and

capabilities

assessment

− Depth and scale of

Impact assessment

�Continuous

support/meeting

(management

know-how and

networks)

� Each investment

manager covers on

average 5

investments,

spending min. 0.5

day/week with

each organization

� Business, risk and

capabilities

assessment

� Depth and scale of

impact assessment

� Termsheet

� Investment Memo

(~30 pgs)

� Contract(s)

� Intensive on-site

due diligence

�Reference calls for

each management

team member of

investee

� KPI and milestones

determination

� Final investment

decision

board/client

� Preliminary Review

(~7 pgs)

� Evaluation of

business plan/

proposal

� Intensive

discussions with

senior mgt team

members

� Stop-go decision

board/client

� Factsheet (~2 pgs)

� Capabilities

Assessment (light)

� Screening of

organizational

information

�Gathering of basic

information

�Calls or first

meeting with

senior mgt

members


team/partners

� Tracking database

� Quick-screen

checklist

� Sourcing of

potential deals

� Information

exchange with

cooperation

partner/ reference

calls


partners

� Contract(s)

�Options for exit

are:

− MBO

− Sell to social

strategic buyer

− Sell to social

investor

− Exit is clarified

and agreed on

with the

organization

upon deal

execution (pre-

investment)

# deals

to date 700 70 40 30* 10*5‘000

Deal screening

* 24% grants, 17% debt, 39% convertible debt, 20% equity (including the Accelerator Program deals with average deal size USD 50k )

** Exit: 1 equity, 1 equity/ debt, 6 grants, 2 only intellectual capital

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Before engaging with an organization, we conduct detailed due diligence on the ground

Problem and solution

� Which problem does the organization want to solve? What are its root causes?

� What solution does the organization offer? Does it solve the problem?

Team

� What is the track record and experience of the team?

� Which capabilities are important to manage and grow the organization?

� Does the team have those competences? What is missing?

Risks

� What are threats to the success and impact of the organization?

� How can those risks be mitigated?

Impact

� In which way does the organization affect the lives of the beneficiaries?

� How can we measure the impact of the organization?

� What is the impact of the organization now? What can it be in five years?

Growth plans and needs

� Where is the organization now? How did it get there?

� What can the organization achieve in the next 5 years?

� What do they need to get there?

Model and market

� What is the business model of the organization?

� Which other organizations are undertaking similar work in that region?

� What are relevant macroeconomic factors, regulations, local challenges?

“We focus on few,

promising

organizations. Deep

analysis helps us to

identify risks and

understand what is

needed to create long-

term positive impact.”

To get a deep understanding of the organization, we ask many

questions, such as:

Analysis Impact

Risk# of organi-

zations

Inderpreet Singh

Investment Manager

India


We measure impact along two dimensions: reach & depth of impact – Depth of impact example Por Ti Familia

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*) [d ¦ i ] = direct or indirect beneficiary

[ l ] = long-term benefits on individual (built on the progress expected by the short-term outcomes)

[ s ] = short-term impact; this is default and doesn’t have to be added to the outcomes

LGT Venture Philanthropy – Accelerator Program

LGT VP launched the Accelerator Program to unlock the potential of social

enterprises, create the pipeline, and build the ecosystem of impact investing

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Social impact

Time0.5-2 YEARS 1-5 YEARS 3-7 YEARS

Early phase

Expansion

phase

Idea / start-up

phase

Mature phase

Financial

support

Grants, seed fundingUSD 2k – USD 50k

Angel investorsUSD 50k – USD 200k

Expansion fundingUSD 200k - USD 10M

Intellectual

support

Mentoring, business plan writing, strategy consulting

Research and development

With

early-stage support

Without

early-stage support

Accelerator

ProgramLGT VP Core

Investment Area

Organizational capacity-building, HR, systems and infrastructure

Institutional fundingUSD 10M and up

� Since 2007, LGT VP has evaluated more than 5’000 opportunities in 6 regions, but only invested in 26

� Young organizations struggle to scale-up due to lack of clear plans / strategies, unproven business models, and weak / inexperienced

management teams

� Angel investor networks for social enterprises are not yet functioning well in many regions

� Working capital needs of social enterprises / SMEs not completely met by commercial lenders (PHP 67 billion – 180 billion)*

*PhilExport and DTI

BLUEPRINT VALIDATE PREPARE SCALE

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LGT Venture Philanthropy – Portfolio organizations

M-KopaKenya

IMPACT

� Improved income opportunities for low-income households

� Re-directed energy expenditures from inefficient, wasteful and unsafe sources such

as kerosene lamps towards purchase and ownership of clean and affordable solar

home systems

� M-Kopa has sold over 61’000 home solar units to low income households across

Kenya

� M-Kopa estimates that the existing customers will saves a combined USD 30m in

projected energy expenditure over the next 4 years (*based on the average annual

individual savings in energy expenditure on lighting and phone charging)

� M-Kopa estimates that it provided about 23 million hours of bright, fume-free lighting

by December 2013 (estimate based on average of 125 hours of lighting per system

per month)

Improved material well-

being:

Increases household productivity and income

Improved physical well-

being:

Reduced health risk though cleaner energy and light

sources

Improved social well-

being:

Increased social interactions due to micro-enterprise

activities

Improved security: Secure access to electricity and light

Improved freedom: Greater freedom of choice of products through pay-

per-use system

PROBLEM

� Over 63% of Sub-Saharan Africa’s population are rural, lower-end consumers with small

inconsistent incomes/revenue streams. These masses can barely afford basic goods

and services but nevertheless spend up to 70% of their income on inefficient, low-

quality goods

� For example, about 110 million households across Africa spend USD 160 or more

annually on kerosene for lighting despite the poor quality of light provided by kerosene

lamps alongside the related health risks of smoke fumes

SOLUTION

� M-Kopa primarily targets low-income consumers in emerging markets, enabling them

to purchase productive assets like solar systems through an affordable and convenient

pay-per-use system that matches their income and expenditure patterns

� M-Kopa’s inaugural product, a home solar system, will seek to address the energy

needs of low-income households, with plans to reach over 300’000 un-electrified

households with clean, affordable solar energy

ENGAGEMENT OF LGT VENTURE PHILANTHROPY

� USD 500’000 debt and USD 37’500 equity investment to fund roll-out of M-Kopa’s

inaugural commercial product targeting low-income households

� USD 1m in debt funding from LGT VP clients towards M-Kopa’s working capital

requirements

� M-Kopa has access to LGT Venture Philanthropy’s ICats Program, LGT Venture

Philanthropy’s network as well as ongoing mentoring support

Depth

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Husk Power Systems (HPS)Bihar, India

IMPACT

� Cost savings by using electricity instead of kerosene for lighting households

� Improved lighting conditions and elimination of indoor air pollution caused

by kerosene lamps

� Employment generation in villages

Improved material well-being: Increased income

Improved physical well-being: Relief from indoor air pollution

Improved social well-being: Enables education, entertainment

Improved security: N/A

Improved freedom: N/A

PROBLEM

� Approximately 480 million people in India across 125’000 villages (44.5% of

the population) do not have reliable access to electricity

� Indian government has designated 18’000 villages as “economically

impossible” to reach via conventional means of grid electrification

� Current power options such as kerosene lanterns or diesel generators are

detrimental to people’s health, environmentally unfriendly, and uneconomical

SOLUTION

� HPS has developed proprietary technology to convert locally produced

agricultural waste (like rice husk) into electricity

� HPS generates and distributes electricity from its mini-power-plants (35kWh-

100kWh) and micro-grids, targeting the villages in India’s “Rice Belt” consisting

of the states of Bihar, West Bengal, Orissa, Uttar Pradesh, and Madhya

Pradesh


� Convertible note of USD 300’000 in 2010 for scaling up to 67 plants; in 2012

follow-on investment of USD 700’000 as part of Series-A for further

expansion

� HPS has access to LGT VP’s ICats Program, its network as well as ongoing

mentoring support

2012 2013 2014e

# of power plants 41 35 54

# of connections 9’661 9’800 34’125

Depth

Reach

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One Renewable Energy Enterprise, Inc. (‘OREE’)Philippines

IMPACT

� OREE makes solar energy available to low-income households, increasing

productive work days and improving income opportunities for them.

� OREE enables households to increase savings of at least USD 94 p.a. from

reduced spending on kerosene, etc.; reduces risk from smoke inhalation

and house fires and increases time to study and operate businesses.

PROBLEM

� Approx. 3.1 million Filipino households (16% of the population) do not have

access to electricity. Given the Philippines’ archipelagic nature, connecting all

citizens to the grid would be costly and difficult to maintain. Hence,

electricity prices are among the highest in Asia, and access is particularly

limited in rural / remote areas.

� Kerosene lamps are currently used as a substitute, but have negative effects

on the environment and people’s safety / health.

SOLUTION

� OREE distributes, installs and maintains solar PV products across the

Philippines. OREE’s 3 business lines are: (1) Wholesale trading of solar lamps

and solar home systems, (2) Turn-key projects for solar lighting systems,

water pumps, etc., and (3) Service projects, i.e. design, installation and

aftersales support.

� OREE delivers triple bottom line impact by providing renewable and

affordable energy to rural low-income households, and reducing

environmental damage through larger renewable energy projects.


� USD 50’000 convertible debt to fund operational expenses, marketing and

inventory, enabling OREE to take advantage of upcoming business

opportunities.

� OREE has access to LGT Venture Philanthropy’s ICats Program, LGT Venture

Philanthropy’s network as well as ongoing mentoring support.

Depth

2011a 2012a 2013a 2014e

# of units sold 493 8'106 5‘678 8’584

# of beneficiaries 2’465 42’995 28’390 42’920

Savings p.a. (USD ‘000s) 46 808 1’296 1’340

Reach

Improved material well-being: Increases productivity hours leading to a potential

increase in household income

Improved physical well-being: Replaces the use of kerosene, which results in

improved public health

Improved social well-being: Improves health and longer studying hours help

attain higher education

Improved security: Improves physical security of people, property

and well-being

Improved freedom: Provides independence from high electricity rate,

increases access to information and opportunities

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LGT Venture Philanthropy: Contact

Contact information

It all starts with a personal conversation. Contact us to arrange a meeting. We look

forward to learning about your organization.

Joan Yao Phone: +63 917 811 5831

Investment Manager Email: [email protected]

Yoshitaka Tabuchi Phone: +63 917 856 7890

Accelerator Manager Email: [email protected]

Website: www.lgtvp.com

Support

LGT Venture Philanthropy is funded through substantial contributions from each of the following LGT Group companies: LGT Bank Ltd., LGT Bank (Switzerland)

Ltd., LGT Bank (Austria) Ltd., LGT Bank (Singapore) Ltd., LGT Capital Management Ltd. and LGT Capital Partners Ltd.

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Legal Information

This document is intended solely for the recipient and may not be duplicated, distributed or published either in electronic or any other form

without the prior written consent of LGT Group Foundation. This publication is for your information only and is not intended as an offer,

solicitation of an offer, public advertisement or recommendation to buy or sell any investment or other specific product. Its content has

been prepared by our staff and is based on sources of information we consider to be reliable. However, we cannot provide any undertaking

or guarantee as to it being correct, complete and up to date. The circumstances and principles to which the information contained in this

publication relates may change at any time. Once published, therefore, information shall not be understood as implying that no change has

taken place since its publication or that it is still up to date. The information in this publication does not constitute an aid for decision-

making in relation to financial, legal, tax or other consulting matters, nor should any investment or other decisions be made on the basis of

this information alone. It is recommended that advice be obtained from a qualified expert. Investors should be aware that the value of

investments can fall as well as rise. Positive performance in the past is therefore no guarantee of positive performance in the future.

Forecasts are not a reliable indicator of future value developments. The risk of price and foreign currency losses and of fluctuations in return

as a result of unfavorable exchange rate movements cannot be ruled out. There is a possibility that investors will not recover the full amount

they initially invested. We disclaim without qualification all liability for any loss or damage of any kind, whether direct, indirect or

consequential, which may be incurred through the use of this publication. This publication is not intended for persons subject to legislation

that prohibits its distribution or makes its distribution contingent upon an approval. Any person coming into possession of this publication

shall therefore be obliged to find out about any restrictions that may apply and to comply with them.

It is up to potential investors to obtain comprehensive information and appropriate advice in their home country, country of residence or

country of domicile about the applicable legal requirements and any tax consequences, foreign currency restrictions or foreign exchange

controls and any other aspects that are of relevance prior to any decision to subscribe to, purchase, own, exchange or redeem such

investments, or enter into any other transaction in relation to same.

The securities and rights mentioned in this document may not be purchased or held by investors or for investors domiciled in the USA

and/or with US citizenship, nor may such securities and rights be transferred to them.

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Picture description

"Double Portrait of Emperor Joseph II (1741–1790) and his Brother Leopold, Grand Duke of Tuscany (1747–1792)"

POMPEO GIROLAMO BATONI, WORKSHOP 1708–1787

In March 1769 Emperor Joseph II undertook an unofficial visit to Rome together with his brother Leopold, Grand Duke of Tuscany. During this visit, Batoni's workshop produced a double portrait, for which the two aristocrats posed for the painter. Because of its representative character, this is not so much a memento of a grand tour, but rather an official portrait of rulers. The portrait shows the brothers shaking hands, wearing the simple uniforms of their regiments without the insignia of power. They are standing on a terrace, with Castel Sant'Angelo and St. Peter's Basilica visible in the distance behind Joseph's II shoulder. The Emperor is supporting himself by leaning his left arm on a statue of the goddess Roma. In the foreground, an unfurled map of the City of Rome hangs over the edge of a writing desk, indicating that the two are strangers to the city. The workshop copy of the portrait probably came to the Princely Collections as a gift of the Imperial Family to their advisor Prince Joseph Wenzel I of Liechtenstein.

© Sammlungen des Fürsten von und zu Liechtenstein, Vaduz–Wien LIECHTENSTEIN. The Princely Collections

Investor Relations

LGT at ACEF 2014