In his role at LGT Group, the world’s largest family-owned private banking and asset management firm, YPO member En Lee is a skilled, values-led investor and a passionate advocate for sustainability. His path there, however, was not a direct line. It was the result of diverse personal and professional experiences that led him to find his “ikigai,” a Japanese concept that aligns passion, purpose and strengths into a meaningful role.
As Head of Sustainable and Impact Investments in Asia, Lee invests intentionally to solve global challenges and works with companies to create positive social and environmental outcomes alongside economic returns. Compelling examples include PharmEasy, India’s largest omni-channel health care platform and Aye Finance, a leading tech-enabled lender for micro and small enterprises in the “missing middle” — companies too large for microfinance, yet too small for banks. Other innovative examples include CMR Surgical, which produces cutting-edge surgical robots, and Lilium, which is developing the world’s first electric vertical take-off and landing car (which he likens to the cars from the futuristic cartoon show, The Jetsons).
Lee insists, “Amid two existential threats — the global pandemic and climate change — investing sustainably is no longer an option. It’s an imperative. Sustainable investments have a future-orientation that not only reduces risks but creates long-term value. COVID-19 has demonstrated the resilience and outperformance of sustainable investments over traditional counterparts.” To that end, he is generous, patient and enthusiastic about helping the sustainable-curious with investing.
But first, ikigai
Ikigai is a Japanese concept in which one evaluates their passion, purpose and unique strengths to find an enduring vocation or a “reason for being.”
The four questions in the ikigai-discovery process are fueled by deep introspection:
- What do you love? “Start with your passion,” says Lee. What inspires you and what do you love doing? What do you care about the most? What change do you want to make?
- What does the world need? Do you want to identify solutions in health, education, food and agriculture, renewable energy, climate change or environmental conservation? In emerging or developed markets?
- What are your strengths? Are you good at sourcing opportunities, analyzing investments, raising capital, negotiating deals or scaling solutions?
- What role will sustain you? Ikigai can be particularly useful at the start of a career or during a career transition. When job hunting, Lee says, the tendency is often to see what jobs are available, and then “reverse-engineer” your passion, purpose and strengths to fit that job. Ikigai serves as a north star to find a meaningful vocation that is closely aligned with one’s skills, values and personality.
How to approach impact investing
As impact investing is an intentional investment strategy, “I would start first with the geographical and sector focus,” Lee says. “You can’t be nonchalant; you need to be informed and understand the contextual landscape, its opportunities and challenges. If you could start with one or two key sectors, which would they be and where?”
The next decision is asset class. Impact investments encompass a broad range of asset classes from public to private markets. Some prefer liquid instruments such as thematic or ESG (Environmental, Social and Governance) funds that are traded publicly. Others may prefer company-direct private equity or private debt investments. The allocation needs to align with your risk-return profile.
Lastly, says Lee, is the question of impact — what kind of impact do you want to make? What social value are you adding; what value are you adding as an investor? Can you contribute financial, social (e.g., networks) or intellectual capital (e.g., expertise)? Who are your intended beneficiaries, and do you prioritize scale (i.e., quantitative) or depth of impact (i.e., qualitative)?
Evaluating opportunities: Impact versus traditional investment
Before his foray into sustainable finance, Lee worked at Goldman Sachs. His experiences there taught him the fundamentals and informed his approach to evaluating investment opportunities.
“Goldman showed me the transformative potential of finance, good and bad,” he says. “We’ve seen a whole bunch of scandals, but we’ve also seen how finance can lift economies, empower communities and create sustainable livelihoods.”
When evaluating impact-driven investments for LGT, Lee relies on the same robust investment process from deal origination, due diligence, execution, portfolio management to exit. However, in striving to shift the financial system from shareholder to stakeholder capitalism, where both the company and society benefit, the investment process includes a clear “impact thesis” that integrates impact and ESG analysis as well as value creation for key stakeholders. He looks for authentic and effective solutions where they “walk the talk” at every level, from the management to the suppliers to the customers.
— En Lee, Head of Sustainable & Impact Investments Asia at LGT Group share![twitter]()
“Character and caliber are often what we look for not just in the CEO, but across the whole management team,” he says. “There should be consistency. In other words, if you meet an impressive CEO who has character and caliber, but if the mission is not hardwired into the management team, you’re going to have a disconnect. A solid business has a shared purpose, strong culture and close value-alignment across the team.”
He adds, “Investing is a people business. Many investors will tell you [if they pass on an opportunity], it’s not because the model didn’t add up. Quite often, it’s that the team was not the right team.”
Ultimately, after all the careful vetting, every investment requires “a leap of faith,” Lee says. “It’s a bit like dating for marriage. You try to get to know each other in a very open and authentic way to determine whether you can work together as long-term partners to create mutual value. And that’s essentially what due diligence is.”
Challenges and future potential
As impact investing becomes more mainstream, it faces a few challenges. One potential pitfall is the lack of standardized and comparable impact metrics and data.
“Sustainable and impact investing has become so hot that many claim to be experts in impact,” Lee says. “One thing I would say is to take the time to learn about the sectors, solutions and their impact on local communities and ecosystems.”
Another challenge is the potential for impact or green washing, in which a company purports to be raising capital for socially or environmentally beneficial projects but doesn’t follow through.
Nonetheless, Lee is optimistic about the growing global momentum for sustainable and impact investing and its promising future. Among other positive tailwinds, he cited increasing investor awareness and demand, greater convergence of ESG and impact metrics, and forward regulatory force.
“There is increasing disclosure,” says Lee. “In many markets, the focus has been on ESG and sustainability reporting. With greater disclosure, you can have more data, transparency and accountability.”
He adds, “There is also a shift in focus from measuring activities to outputs and outcomes. For example, millennial consumers don’t just want to know what they are eating but how it’s sourced and produced, and whether it leads to better health and improved nutrition.
Whether you’re a large institutional investor, asset manager, bank, family office or individual, you’re all investors that exert influence,” he continues. “If you, as impact investors, can shape the companies that you invest in – have that value alignment, and drive not just financial returns, but positive social and environmental outcomes – then you’re going to change the status quo of how companies exist and thrive. We have a rare opportunity to build back better for a more resilient, inclusive and sustainable future.”