As a life-long student of change, Roger Dickhout’s journey towards impact investing happened naturally. Impact investing refers to the intentional pursuit of social and environmental benefits when investing your money, in addition to financial returns. Like many of us, Dickhout sought to achieve multiple objectives; to have a positive personal impact, do well in business, to invest wisely, and to put his values first.
Formerly a partner at management consulting firm McKinsey & Company and Chief Executive Officer, Director of, and investor in several Canadian companies, Dickhout has spent his career analyzing and leading complex businesses. When he first started looking at impact investment options, he applied three principles that helped guide his actions as a business leader and entrepreneur.
1. Consider all stakeholders
The first principle recognizes that while business is conducted in a very competitive arena, generally you are more successful if you take a view of contributing and helping as you go. Dickhout says, “if you are concerned about how your business impacts your customers, employees, communities and the environment, then generally you’re going to be more successful”. Simple as it sounds, Dickhout believes this principle contributed immensely to the success of the teams that he has led.
2. Fundamentals come first
Impact investing is just investing. The same fundamentals apply. In fact, Roger and his wife Janet invest in a series of impact funds across a range of asset classes including – public equities, real estate, infrastructure, private equity and private debt. These investments are fully integrated with remaining more traditional investments as part of an overall asset allocation strategy.
Dickhout considers impact investments in a disciplined and professional way. Developing an asset allocation strategy, conducting due diligence, pricing risk and generating healthy returns are foundational skills that take focus and dedication. With a career that has included private equity deal-making and a need to steward his family’s personal and philanthropic financial assets, Dickhout had an ideal environment to cultivate these skills. “I believe if you’re going to be a successful impact investor, first you’ve got to learn how to be a successful investor”.
“We like to think that our money is contributing to something worthwhile while earning a return. It’s helpful to know about social and environmental issues and the underlying systems you’re trying to influence with your investments”
3. Know where your money is going
Joel Solomon said it best with a simple question in the book Clean Money Revolution, “Do you know what your money is doing?’ Dickhout adds that “We like to think that our money is contributing to something worthwhile while earning a return. It’s helpful to know about social and environmental issues and the underlying systems that you’re trying to influence with your investments”.
For Roger and Janet, conservation, environmental sustainability and poverty reduction are multi-dimensional themes that resonate with them. It’s also what attracted them to the Ilu Women’s Empowerment Fund, which focuses on financial inclusion and gender equality.
“Lending is about assessing and pricing risk. Deetken Impact seems to follow a very disciplined risk management process. The Ilu Women’s Empowerment Fund invests in private debt which is a good asset class for impact investing. The five-year term to liquidity also appealed to us, coupled with the fact that Deetken is a very experienced lender in Latin America, proven by their 10-year track record of successful returns.”
Dickhout is a strong believer that impact investing will be more successful, attract more capital and therefore ultimately have more impact if it’s done from an investment-first mentality. “Deetken Impact appears to take this approach to making loans and we found the historical rates of return to be commensurate with the risk”.
When considering the social metrics of the Ilu Women’s Empowerment Fund, Dickhout observes that it’s a very attractive concept to help people in difficult situations who are trying to create a better life for themselves, enabled by these small loans. “Women’s empowerment has been proven to have substantial societal benefits well beyond the specific ventures they’re involved in. Women get more educated and become more independent. This tends to have huge impacts on their children, on the economy and society as a whole, and the way that countries are governed.”
Key takeaway for those starting their impact investing journey
Dickhout highlights that a key feature of his learning journey over the last five years has been to actively seek out and attend conferences, particularly those with a good mix of Canadian and international impact investors in attendance. His mission for these events is to learn and expand his network. When he meets potential principals from funds that fit his strategy, he takes the time to get to know them and what they do, conduct due diligence and develop trust before investing.
For Dickhout, impact investing is the most exciting movement in finance today because of its potential to enhance overall well-being. It harnesses the power of finance and business to generate specific social and environmental benefits. According to the 2018 Canadian Impact Investment Trends Report, it is a movement that has also seen 81% growth over a two-year period with impact investors overwhelmingly reporting that performance has met or exceeded their expectations.
Dickhout’s key messages for others looking to start their journey? Get out and meet people, learn the basics, and do your due diligence. Impact investing carries the same requirements as any investment and as Dickhout aptly puts it “if you take an investing first approach, then the impact is free”.