Entre­pre­neu­rial mind­set and courage for grea­ter phil­an­thro­pic impact

What moti­va­ted you to get invol­ved in philanthropy?

Peter Wuffli: I was inte­res­ted in globa­li­sa­tion from a young age and it inspi­red me back then to study deve­lo­p­ment econo­mics in St. Gallen. Above all, howe­ver, I am inte­res­ted in how the powerful process of globa­li­sa­tion works and what influence where we are born has on how wealthy we are. Anyone like me who was born in Switz­er­land and can have a career is lucky. That means we have a respon­si­bi­lity. Today, there is a lot of know­ledge about how to fight poverty. So we can no longer say that poverty is destiny. We know what we can do about it. So the fact that two billion people are still living on less than three dollars a day is unac­cep­ta­ble to me.

Thomas Schmid­heiny: It was the expe­ri­en­ces I had at age 25 when I embarked on my career in Peru and Mexico. I worked as a plant mana­ger for Holcim in cement plants in very rural loca­ti­ons. There, I saw poverty first-hand in ever­y­day life. These expe­ri­en­ces are the foun­da­tion of my social entre­pre­neur­ship. The second thing I took away from that time was the combi­na­tion of finan­cial and perso­nal commit­ment. Apart from emer­gency finan­cial aid, such as in the event of a flood, I am oppo­sed to helping with money alone. It’s more effec­tive to make a perso­nal contri­bu­tion and take respon­si­bi­lity, too. This is crucial in philanthropy.

You empha­sise your own perso­nal expe­ri­en­ces. What do you bring to phil­an­thropy from your care­ers in the private sector?

TS: Ever­y­thing we do should be sustainable. In entre­pre­neur­ship, this is key. The same goes for phil­an­thropy. Sustaina­bi­lity must not be unders­tood in isola­tion for indi­vi­dual aspects; we must consider it holi­sti­cally. At Holcim, we have around 80 plants world­wide. If we don’t run a plant sustain­ably over­all, we don’t get an opera­ting permit. We work closely with local part­ners to ensure that we meet local expectations.

Do you involve local people?

TS: Yes, in my time at Holcim, we placed great empha­sis on a lear­ning culture. What worked in the Phil­ip­pi­nes, for exam­ple, we then expor­ted to Mexico. This applies not just to the tech­no­logy, but also to the phil­an­thro­pic commit­ment rela­ting to the plants. We took the best, trans­fer­red it and adapted it to condi­ti­ons in the rele­vant country.

PW: During my time in the private sector at UBS and Part­ners Group, I took away with me the idea of inves­t­ing in entre­pre­neu­rial solu­ti­ons. Focus on demand is what distin­gu­is­hes entre­pre­neurs from public servants. And I see the importance of combi­ning phil­an­thropy with impact and profes­sio­na­lism. After all, I’d alre­ady learnt values like part­ner­ship in colla­bo­ra­tion at McKin­sey: what matters is the quality of the argu­ment and not the hier­ar­chi­cal posi­tion of the person saying it.

Does this influence your work at elea?

PW: There is often this asym­me­try between count­ries with low and high inco­mes: a giver and a recei­ver. At elea, we have fought against this imba­lance from day one. Local compa­nies contri­bute their perspec­ti­ves and we culti­vate a part­ner­ship on an equal footing. This goes both ways: we expect entre­pre­neurs to take a perso­nal risk and parti­ci­pate in their compa­nies as shareholders.

Both of your foun­da­ti­ons rely on part­ner­ships. Do these run more smoothly in phil­an­thropy than in the private sector?

PW: I don’t think so. Most people try their best to do some­thing good, to trust each other and to build some­thing toge­ther. In my expe­ri­ence, that goes for both phil­an­thropy and the private sector.

TS: Peter and I have known each other since 1970. Our paths have crossed time and again. The values and approa­ches of elea were ther­e­fore alre­ady fami­liar to me. This made ente­ring into a part­ner­ship with elea with our Four­fold Foun­da­tion, estab­lished in 2020, a logi­cal step – and the next gene­ra­tion is now putting it into practice.

elea focu­ses on phil­an­thro­pic impact inves­t­ing: is this parti­cu­larly suita­ble for certain areas?

PW: I think impact inves­t­ing is a pionee­ring approach in phil­an­thropy. With elea, we were really able to help pave the way. In prin­ci­ple, entre­pre­neu­rial phil­an­thropy is suited to any area where market solu­ti­ons can have a lasting impact. If there is no market, phil­an­thro­pic impact inves­t­ing is not effective.

What are some examp­les of this?

PW: Culture, science, huma­ni­ta­rian opera­ti­ons and emer­gency relief. But in every area, phil­an­thro­pic impact inves­t­ing is the more effec­tive way to imple­ment inno­va­tive concepts in an econo­mic­ally viable way using market solu­ti­ons and mobi­lise entre­pre­neu­rial energy. And these are the areas we work on.

What are these specifically?

PW: The first area concerns the proto­type of an entre­pre­neur, the farmer. The liveli­hood of up to 70 per cent of the popu­la­tion in low-income count­ries depends on the agri­cul­tu­ral sector. At the same time, most small­hol­ders have very little money. Most goods and services in count­ries of the Global South are sold on the infor­mal market by small trad­ers. Busi­nesses known as micro-retail compa­nies, which supply the last mile, are our second area of acti­vity. The third is educa­tion and trai­ning. We are deal­ing with the ques­tion of how young people can obtain the skills and educa­tion they need to allow them to earn a living. And our fourth area covers climate and natu­ral resour­ces. We invest in impact compa­nies that improve the climate resi­li­ence of the popu­la­tion and miti­gate the conse­quen­ces of climate change. Market approa­ches can make a substan­tial contri­bu­tion to offe­ring a solu­tion in all of these areas.

Were there any speci­fic chal­lenges when you star­ted with impact investing?

PW: The start wasn’t smooth, as the term impact inves­t­ing didn’t even exist back then. When I told people around me about my plans for elea in 2006/7, the next thing they asked was usually: What else do you do?

TS: They didn’t under­stand the raison d’être at the time.

PW: Exactly, the under­stan­ding wasn’t there. In tradi­tio­nal capi­ta­lism, there is often a clear distinc­tion between earning money and phil­an­thro­pic giving. At elea, we do a balan­cing act. We are phil­an­thro­pic impact inves­tors, a non-profit foun­da­tion that invests in for-profit compa­nies. Explai­ning this was not easy – not just to the autho­ri­ties. Of course, we welcome the fact that the canton of Zurich is now moving in this direc­tion and encou­ra­ging phil­an­thro­pic impact inves­t­ing accor­din­gly. For seve­ral years now, howe­ver, we have had a major sense of momen­tum. This is reflec­ted in increased inte­rest in our approach from inves­tors, foun­da­ti­ons and companies.

But there are critics, too. They ask why it is not orga­nised in the private sector when it works like a business.

TS: You always have to sow a seed first. What impres­ses me about elea is the many seeds that are sown in diffe­rent count­ries. These are usually small busi­nesses with 15 to 20 employees. Just giving them money would be wrong from my point of view. Instead, they need an envi­ron­ment for lear­ning and value crea­tion. An entre­pre­neu­rial approach is the best way to truly engage in phil­an­thropy, because the value that is crea­ted locally is the reward that the foun­da­tion does not take back. This impro­ves the lives of fami­lies and the local community.

The value crea­tion bene­fits local people?

TS: That’s right, my most cheris­hed moments are meeting people again whom I’ve previously had the privi­lege of support­ing. In Myan­mar, I had supported a voca­tio­nal school for ten years and trai­ned people for the tourism sector. On a trip to Asia, I arri­ved at a hotel and the concierge who gree­ted me told me ‘I went to your school’ – I was deligh­ted. Is there anything better than that?

PW: One valid critique of the entre­pre­neu­rial approach is that it is extre­mely time-consum­ing. At elea, we look at around 1,000 impact compa­nies every year, and we carry out inten­sive due dili­gence on two dozen. In the end, we make five to ten invest­ments. We are actively invol­ved in our port­fo­lio compa­nies. We are invol­ved with the Board of Direc­tors. We provide support with stra­te­gic issues, orga­ni­sa­tio­nal struc­ture and gover­nance. Our team also helps in crises. On average, for every franc of capi­tal, we invest one franc in value crea­tion. Since we are active in phil­an­thropy, we can accept that this multi-year support effort is not profi­ta­ble. We contri­bute our exten­sive expe­ri­ence and support this complex process of foun­ding a company, which is also asso­cia­ted with high risk.

How important is it that the idea can be multiplied?

PW: We don’t invest in ideas. We invest in func­tio­ning compa­nies with reve­nues from selling products or services, and with exis­ting orga­ni­sa­ti­ons and teams. We help them grow. The ques­tion of scala­bi­lity is important on two levels: firstly, at the level of our own orga­ni­sa­tion, which is further streng­the­ned by the stra­te­gic part­ner­ship with the Four­fold Foun­da­tion. By the end of the year, we will have around 40 employees. This will enable us to reach criti­cal mass as an orga­ni­sa­tion. Secondly, scala­bi­lity at the level of the compa­nies we support is important. We want them to grow and scale their busi­ness models and their impact on redu­cing poverty.

TS: There are undoub­tedly count­less proces­ses that can be multi­plied. But it is much more diffi­cult if you want to do this from the outside. Looking for the right entre­pre­neur in a coun­try is very time-consuming.

PW: I share your concerns. Our elea Entre­pre­neurs Commu­nity is a lever in this regard. Today, it compri­ses 45 impact entre­pre­neurs who meet regu­larly. The commu­ni­ca­tion from venture to venture on things like expe­ri­en­ces, busi­ness ideas and oppor­tu­ni­ties for colla­bo­ra­tion is beco­ming incre­asingly important.

TS: A dialo­gue like this is important because the problems you find in coun­try A proba­bly also exist in coun­try B. But in my expe­ri­ence, finding an entre­pre­neur in coun­try B who will take on a defi­ned approach is often very diffi­cult, if not impossible.

The big chal­lenges, like poverty and climate change, are global: does phil­an­thropy have better solu­ti­ons than the public or private sector?

PW: I don’t think it’s about better or worse. Diffe­rent areas have diffe­rent strengths and charac­te­ristics. We need to find the right part­ner­ships and make use of syner­gies. In India, for instance, one of our port­fo­lio compa­nies is conduc­ting campaigns for hygiene or the use of rene­wa­ble ener­gies, and works with inter­na­tio­nal corpo­ra­ti­ons and deve­lo­p­ment orga­ni­sa­ti­ons to do so. The tradi­tio­nal distinc­tion between for-profit and non-profit is not appro­priate in this context.

Is that your message for future philanthropists?

PW: First of all, I want to say that you need to be passio­nate about it. A guilty consci­ence doesn’t work as moti­va­tion. You also need to be impar­tial, impact-focu­sed and pragmatic…

TS: … and have plenty of time. The time factor should not be unde­re­sti­ma­ted. In large-scale private-sector projects, we are used to imple­men­ting plans with tight dead­lines. Proces­ses for setting up new compa­nies, on the other hand, are not straight­for­ward and depend heavily on the people invol­ved. That’s the beauty of it. But this also makes them time-consum­ing. Though it’s satis­fy­ing when it works.

PW: One of the main lessons I took away with me from UBS was: deve­lop an under­stan­ding of ‘smal­ler’ and ‘slower’.

What legacy would you like to leave behind with your foundation?

TS: As part of my legacy, the foun­da­tion is inten­ded to contri­bute to a better world. I initiate the ‘how’ with my child­ren, but leave the execu­tion to them. One approach is to use elea to expand the field of action in the fight against abso­lute poverty. I was lucky to be able to build some­thing with Holcim and now I can give some­thing back. I have respect for the deve­lo­p­ments in this world. But here I trust my child­ren. They are well-educa­ted and can achieve a great deal with the foundation’s funds. I am sure they will do well.

PW: For me, the foun­da­tion of elea was about tack­ling abso­lute poverty. We wanted to deve­lop a role model and show how poverty can be tack­led differ­ently. My child­ren were not origi­nally invol­ved, but I am plea­sed that my daugh­ter is now on the foun­da­tion board since my wife step­ped down. We chose a libe­ral upbrin­ging for our three child­ren – so phil­an­thropy can be part of their lives, but it doesn’t have to be.

TS: It is important that the child­ren share the values. That’s why we deba­ted them and defi­ned them toge­ther for Four­fold. It is equally important that the part­ner­ship between elea and Four­fold is based on shared values and that these values are put into prac­tice. And that, in turn, is just as deman­ding as for a company.

PW: I am aware that I am privi­le­ged in many ways. But privi­lege also comes with respon­si­bi­lity, and I want to take it on. Through our work at elea, we want to put the spot­light on entre­pre­neu­rial phil­an­thropy and inspire other inves­tors, chari­ta­ble foun­da­ti­ons and high-net-worth indi­vi­du­als to take respon­si­bi­lity and become active in this area themselves.