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.


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