A Foundation Risks All of Its Endowment on Creating Jobs

The F.B. Heron Foundation puts all of its investments and grants into projects and companies that fight poverty

CHRONICLE OF PHILANTHROPY
By Nicole Wallace
May 23, 2013

DBL port­fo­lio com­pany Eco­logic Brands makes the Chron­i­cle of Phil­an­thropy! Eco­logic is a phe­nom­e­nal exam­ple of impact invest­ing: the com­pany cre­ates bio-​​degradable pack­ag­ing out of recy­cled mate­ri­als in a Cal­i­for­nia town that had a high unem­ploy­ment rate. Through its work (and impact phi­los­o­phy), Eco­logic Brands helps the envi­ron­ment and its com­mu­nity get health­ier. The orig­i­nal arti­cle in the Chron­i­cle of Phil­an­thropy is here (requires subscription).

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The Heron Foun­da­tion was founded in 1992 to help peo­ple move up from poverty and build wealth in poor neigh­bor­hoods. It invests roughly five per­cent of its endow­ment a year into causes that help elim­i­nate poverty. Twenty or so years ago the foundation’s board began look­ing for ways to gen­er­ate bet­ter returns while advanc­ing its mis­sion; the result could be con­sid­ered one of the ear­lier ver­sions of impact invest­ing. Heron was even one of the found­ing enti­ties of a stock index fund com­prised of pub­lic com­pa­nies with sim­i­lar mis­sions: being good employ­ers and giv­ing back to the lower-​​income com­mu­ni­ties in which they operate.

Now the F.B. Heron Foun­da­tion is bet­ting its entire endow­ment on the impact model.

In an efforts to elim­i­nate poverty, the New York-​​based foun­da­tion will fully invest its $274-​​million endow­ment in the next five years.

We want to take a more activist pos­ture,” says Clara Miller, the foundation’s pres­i­dent. “We want to know whether the invest­ments we’re mak­ing are hav­ing a neg­a­tive impact or a pos­i­tive impact on the world.”

The foun­da­tion recently invested $1-​​million in Eco­logic Brands, a com­pany that pro­duces envi­ron­men­tally friendly pack­ag­ing in a Cal­i­for­nia town with unusu­ally high unemployment.

Clara Miller says the F.B. Heron Foun­da­tion plans to be around “as long as poverty is a prob­lem that needs to be solved.”

We’re mak­ing finan­cial invest­ments in orga­ni­za­tions,” says Ms. Miller. “Some of them are non­profit, and some of them are for-​​profit. Our over­rid­ing inter­est is in jobs and sys­temic change in the economy.”

Foun­da­tion inter­est in impact invest­ing is grow­ing, albeit cau­tiously. A third of the 211 foun­da­tions that grant $5 mil­lion or more have reported mak­ing impact invest­ments, and 23 per­cent say they’re con­sid­er­ing doing the same.

Heron’s invest­ment in Eco­logic Brands fol­lows exem­pli­fies its new model. Eco­logic is based in Man­teca, Ca., a small town with higher than aver­age unem­ploy­ment. What attracted Heron to the com­pany was its growth poten­tial and founder’s employee-​​centric approach to jobs–training her work­ers to improve their skills to increase their income. The company’s prod­ucts, envi­ron­men­tally friendly pack­ag­ing inserts for prod­ucts such as laun­dry deter­gent, are find­ing an enthu­si­as­tic audi­ence as more “green” indus­trial efforts are becom­ing mainstream.