Clara Miller, who has headed the F.B. Heron Foundation for the past three years, wants to take the ultimate impact investing step: to go "all in". That means moving the foundation's $300 million endowment entirely into impact investments. As of the end of the year, about 60% of Heron's funds were in such vehicles, with the goal of hitting 100% by 2017. (Here's a previous post I wrote about going all in).
I recently talked to her about the foundation's approach.
Anne Field: Why did you decide to go all in?
Clara Miller: When I arrived, we were still in post-2008 cleanup. We had to reevaluate our strategy. Our mission is to help people help themselves out of poverty and we'd traditionally done that by helping people to get access to bank credit or home ownership. But the strategy assumed there would be a reliable environment in which somebody would get a job and that would allow them to get a home and a nice path to the American dream. We concluded that just wasn't true anymore. So we looked at how we could make a difference and decided one thing would be to align all of our capital with our mission.
We'd been deploying our capital largely in areas like home ownership programs and financial literacy. But that wasn't necessarily about jobs. Now, we're looking across asset classes for opportunities where jobs and a way to go up the ladder are built into the fabric of the companies.The actual sectors those companies are in is not as important as their dedication to building human capital or adding jobs. So for example, we invested in a couple of private equity firms that are focused on jobs. We also buy bonds that are financing community development financial institutions (CDFIs). We invested through Program Related Investments (PRIs) or enterprise capital grants in nonprofits and cooperatives that are providing training or advocacy or data infrastructure that will help build the impact investing world. We created screens for public companies on the basis of their employment practices and impact on their community.
Field: Has that changed your structure? .
Miller: We don't have a grant side and an endowment side now. We just have one capital deployment unit. So all our financial assets have to be mission aligned and we can track financial and mission performance across the entire portfolio.
Field: What about the question of measuring impact? And the common complaint that there aren't enough places to invest?
Miller: Measurement is a definite problem. With that in mind, we're investing in a couple of interesting organizations doing related work. For example, the Sustainability Accounting Standards Board has a mission to create the same kind of standards for public companies on environmental, social and governance issues that there are for the financial world.
We haven't found a dearth of places to invest. There are some great examples that have positives in both financial and social performance. And then there are really well-managed local businesses that support the Little League team and have a great product and are a really important part of a community working well. So we're trying to find ways to efficiently invest in local economies. We're a relatively small foundation, so we can't invest in a lot of local businesses. That's the bank's job. We find ways to invest in financial institutions that make those kinds of investments.
Some people think of impact investing as an asset class that is about solving problems. We think that's one part of the impact investing sector. We look at it more broadly.
