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Impact Investing due Diligence


Due diligence is the first and only opportunity a fund has to gather the information it needs about potential investees to make an informed decision before investing. Performing due diligence on potential investee companies is a crucial component of successful fund management, and funds should have a pre-determined process for this, a strategy they can begin to formulate alongside the development of their investment strategy.

Due diligence has four core functions: (1) as a risk management tool, (2) as an opportunity to identify ways to add value to and improve the impact of an investee, (3) as a way to identify the social or environmental impact, or both, of the business, and (4) as a means to respond to LP expectations. We follow the GIIN standards for due diligence. Important elements are mentioned in the graph on the left. The due diligence process is not linear. A fund may carry out components of due diligence assessment in whatever order it chooses or perform them simultaneously. The fund should, however, remain consistent in its due diligence approach for all portfolio companies in order to respond effectively to LP feedback in a consistent and organized manner.


Due Diligence: Managing Risk

During due diligence, a fund can ask key questions of a potential portfolio company and surface potential risks. A fund must assess multiple aspects of risk for a pipeline company.

LPs invest through funds primarily to manage their risk and to add value to their underlying investments in portfolio companies. The fund’s role is to identify as many risks upfront as possible and then to mitigate these risks through the structure of the investment. Funds can design a standard due diligence questionnaire that tackles the various forms of risk.

Due Diligence: Adding Value

Adding value to a portfolio company begins during due diligence, as the process for identifying risks can also reveal potential opportunities for improved IRR. Similarly, during the risk management process, the fund manager can develop a strong relationship with the entrepreneur and begin its role as a trusted advisor and consultant to the firm. The fund manager may also identify potentially beneficial roles for an expert consultant. Risk management strategies can also add value by enhancing the company’s reputation, transparency, or both.​​

Source: GIIN

Due Diligence: Screening for Impact

Screening investee companies for impact helps fund managers to determine where to allocate their time building relationships with prospective investees. Some funds will create an ‘impact committee’ from their internal fund management team and LP network to screen potential investments. Once a fund identifies a promising investee, it presents its business model and theory of change to the impact committee to demonstrate how the business aligns with the fund’s social impact goals. The committee then reviews scenarios of business growth, risks, projected impact, and potential challenges. The impact committee and fund manager discuss the prospective investment to address uncertainties around impact assumptions. If the investment has sufficient potential for impact, it then proceeds to financial due diligence.

Due Diligence: Investor Expectations

A fund’s approach to due diligence is an important test for LPs that signals the professional quality of the fund’s practice. Investors particularly look for funds with coherent policies and procedures for due diligence that are used consistently throughout the deal sourcing process. Such an approach demonstrates that a fund understands the unique industry, market, and operations in which the fund is trying to invest and that it can adequately manage, identify, and mitigate potential risks, including any governance, reputational, or environmental issues.

Working with our clients and partners we have developed detailed metrics to provide an impeccable impact assessment reporting

    • Set goals and expectations: We have coordinated with a variety of stakeholders to identify shared fundamentals for understanding impact and more clearly articulating goals and expectations.

    • Define impact strategies and search for evidence: Our framework provides a simple means to align impact goals and expectations to credible, evidence-backed investment strategies – such as those targeting hospitals, healthcare centers, public health and innovation-led healthcare companies – and use metrics that indicate performance toward their goals.

    • Select metrics and set targets: We use the generally accepted metrics that the majority of leading impact investors use to measure and manage social, environmental, and financial performance and evaluate deals. 



StoryTelling- Digital Marketing Strategy

Where do you start if you want to develop a digital marketing strategy? It's still a common challenge since many businesses know how vital digital and mobile channels are today for acquiring and retaining customers. Yet they don't have an integrated plan to grow and engage their audiences effectively.

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Design Thinking

One of the most promising approaches for understanding patients’ experiences has been designing thinking, a creative, human-centered problem-solving approach that leverages empathy, collective idea generation, rapid prototyping, and continuous testing to tackle complex challenges. Unlike traditional approaches to problem-solving, design thinkers take great efforts to understand patients and their experiences before coming up with solutions. This thorough understanding of patients (for example, those who regularly miss appointments) is what guides the rest of the process. And because design thinking involves continuously testing and refining ideas, feedback is sought early and often, especially from patients.

Design thinking has already taken hold in health care, leading to the development of new products and the improved design of spaces. Yet it remains underused in addressing other important challenges, such as patient transportation, communication issues between clinicians and patients, and differential treatment of patients due to implicit bias, to name just a few. If more leaders embrace design thinking, they can leverage a deeper understanding of patients to solve such problems, achieving better clinical outcomes, improved patient experience, and lower costs along the way.

It’s every health care leader’s mission to improve patient experiences. Design thinking is a useful process for doing so, as it requires decision-makers to empathize with patients, think creatively, prototype, and continually test solutions to these problems. Learn more about other design thinking case studies. Contact Us.

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