The Evolution of Heron: Enterprise

Enterprise

2011-present

View Timeline (2011)

Heron’s mission is to help people and communities help themselves out of poverty. The foundation works with a diverse set of investment strategies focused on fostering economic innovations and practices that lead to long-term economic opportunity and prosperity for all. 

Heron began as a grantmaker in 1992 and has continued to issue grants since then. If you would like to learn more about the early focus of the foundation, you can find more information here. It didn’t take long to realize that it would take more than our own endowment to address poverty in a meaningful way. That is why we began mission investing over a decade ago, which you can read about here. Below, we discuss the evolution of Heron and how we operate today.

For years, Heron has aligned an increasing portion of its assets with mission. Until relatively recently (2011), we were investing in programs and organizations that were meant to connect people and communities in need with a main stream that, if it could be entered, would flow steadily toward fair opportunity, employment and with them, steady income. We funded home ownership, education, access to credit and similar programs in service to this assumption.

After the economic crash of 2008, and the financial crisis that followed, we reassessed. In 2011, following a strategic review, we came to believe that in the United States, poverty had become structural, and the reliable opportunity that was a cornerstone of our national promise was available to fewer and fewer of us. And while the programs we had funded for years were important and necessary, they were not sufficient. We were winning battles, but not the war. The world had changed.
 

 

The World Changed... So We Did Too

The urgency and size of the job of shifting an economy to greater accessibility and fairness required a full-on approach.

We fundamentally altered our strategy to focus primarily on investing in enterprises that create reliable income streams for people striving to get out of poverty. We also looked to invest in organizations that shifted the metrics of the economy as a whole, by measuring the positive and negative social impacts of enterprises of all sizes and kinds, as well as by providing data standards and comparability for like-minded investors and managers.

With a change of strategy came a change to Heron as an enterprise. We removed the division between the investing and the giving operations (traditional in virtually all private foundations), creating a “team of the whole” to deploy all of Heron’s capital in concert for mission. We now look to find and deploy the best combination of financial, human, knowledge and social capital within and outside our walls on behalf of enterprises allied with us. Staff members combine the skills of financial analysis, investing, research and community-building to this end and undertake initiatives focused on engagement, market segments and reinvention of the foundation's business model.

The Early Years: Traditional Grantmaking »

Our First Foray: Mission Investing »

Heron Today: Foundation as Enterprise »

Heron's Journey

1992

Inside: The Creation of Heron

Heron formed with a belief in self-help, personal independence and empowerment, in the importance of access to the market for community as well as for personal prosperity and, underlining these themes, an impatience with a philanthropic model that seemed at times to be static and ungenerous. These principles inspire how the foundation is structured, how it operates and how it targets the impact it seeks to have in society.

Outside: Diminishing Social Safety Nets

While some of the country manages to recover from the deep recession of the early 1980s, the era is markedly negative for cities, the working poor and access to capital. There are significant cuts in aid to cities, such as the Community Development Block grant program and aid for affordable housing. This era forms the backdrop for the Heron staff’s thinking on how to address poverty.

1994

Inside: The Reinvestment Fund

Heron contributes grant support to The Reinvestment Fund, a national leader in the financing of neighborhood revitalization, to assist with operating costs, loan loss reserves and policy work.

Outside: Creation of CDFIs

The Community Development Financial Institutions Fund becomes part of the Treasury Department, paving the way for Community Development Financial Institutions (CDFIs) to legally step in and give low-income communities access to credit and financial services they had been denied by traditional banks.

1996

Inside: Moving Beyond 5%

Board members suggest that, because of Heron’s mission and tax-exempt status, the foundation should do more than just act as a private investment company that uses its excess cash flow to support charitable causes. Inspired by this concept, the board encourages staff to explore ways in which Heron could engage more of its assets through a combination of grantmaking and “mission-related” investment strategies. 

Outside: 'Welfare Reform'

President Clinton signs the Personal Responsibility and Work Opportunity Act into law, which puts an increased emphasis on moving people who receive benefits into the workforce. The legislation makes major changes to the welfare system in the United States and shifts much of the responsibility for providing benefits to the states.

1998

Inside: Shifting the Investment Strategy

In late 1997, Heron makes its first Program-Related Investment and by 1998 sees an increase in volume of PRIs investment. The foundation also starts a "capital markets access project," identifying potential nonprofit partners and marketing deals to potential investors. The foundation's leadership seeks to simplify investment management and reduce investment expenses by shifting an increased percentage of assets from active managers into index funds.

Outside: Tracking 'Good' Business

Journalists Robert Levering and Milton Moskowitz begin producing the Fortune 100 Best Companies to Work For. This highlights the companies using the best corporate social responsibility practices and how their financial performance fairs because of it.

2000

Inside: Expanding the Mission Portfolio

By 2000, 75 percent of Heron’s grants advanced affordable homeownership, small business development and access to capital. The “Mission-Related Investment” portfolio grows to $15.8 million, almost 6 percent of the foundation’s total portfolio. Urban America becomes Heron's first significant “double bottom line” investment with the goal of acquiring and developing commercial real-estate. 

Outside: Internet and Economic Boom

Though the decade of the 1990s sees one of the most sustained periods of economic growth in U.S. history, it culminates in a dot-com bubble and economic recession by 2001. The Economist calls the 2001-2009 period "the lost decade." Largely due to globalization, the country bled nearly five million manufacturing jobs between 2001 and 2009 according to the Bureau of Labor Statistics.

2004

Inside: Screening Public Companies

Heron supports more R&D and policy work to create a more favorable environment for change to happen and advances its Mission-Related Investing strategy. The U.S. Community Investing Index is set up to encourage investing in public companies that demonstrate successful and proactive engagement with economically underserved populations in rural and urban communities in the United States.

Outside: The Housing Bubble Peaks

The Bush administration places great significance on an “ownership society” initiative—focused on rapidly increasing homeownership—and Congress passes the American Dream Down Payment Assistance Act, which provided $200 million in subsidies for first time homebuyers. Housing rates in the U.S. hit an all time high of 69.2 percent. Meanwhile, the Securities and Exchange Commission repeals the net capital rule for several major broker-dealers, allowing them to take on heavily leveraged debt. 

2005

Inside: Narrowing our Focus

Heron seeks to target its support to have greater impact by focusing its wealth creation strategies in specific geographies, at one point aiming at New York City, Chicago, Michigan, Texas, the Mid-South Delta and Appalachia. Heron also responds to the natural disasters along the Gulf Coast durring hurricanes Katrina and Rita, offering support to the Disaster Recovery Task Force.

Outside: Hurricane Katrina

The 2005 Atlantic Hurricane Season tears through the country, becoming the most active and destructive season recorded. This includes hurricanes Wilma, Katrina, and Rita: three of the top six most intense Atlantic hurricanes ever. The areas below sea level that suffer the most destruction are also some of the poorest. Many of these residents do not have insurance and face a difficult and lengthy recovery. 

2007

Inside: Expanding Our Scope

As the housing market crashes, Heron-supported housing developers and CDFIs report that their families and mortgages are holding their own despite immense stress. Heron investees and grantees provide early warning signs of the housing crash and direct more resources to confronting the financial sector's irresponsible practices. The foundation also builds on core competencies and its track record in mission-related investing. By 2009, 58 percent of Heron’s fixed-income investments are mission-related.

Outside: Financial Crisis

Toward the end of 2007 into 2008, the financial crisis begins to spiral out of control and spread throughout the global market. The U.S. financial sector nearly collapses under stress from the abuse in the derivatives market, low liquidity and collapsing real estate prices. The subprime mortgage crisis leads to record foreclosures, and some families, who otherwise would have been financially sound, are left with mortgages much greater than their home’s value. The economic downturn, which lasts well beyond 2009, becomes known as the Great Recession.

2011

Inside: 100% for Mission

Heron shifts its strategy to invest, directly from its own assets and with others, across a range of industries, legal forms of operation and enterprise size. As part of the strategy, Heron will provide financing in the form of equity and debt and draw on social and knowledge capital. It also begins working on deploying not only its grant dollars, but all of its resources, towards mission. In addition, it hopes to recruit and follow co-investors and influence investment practices, both in philanthropy and private industry, to align with its goals.

Outside: Occupy Wall Street

Occupy Wall Street protests take New York’s financial district, sparking a national conversation on social and economic inequality. Protestors adopt the slogan “We are the 99%,” referencing the gap between the wealthiest 1% of Americans and the rest of the country, in order to highlight Wall Street greed and corruption. The movement calls for reduced influence of money in politics, more equal distribution of income, job creation, bank reform and student loan forgiveness. 

 

2012

Inside: The World Has Changed

Heron begins assembling a new staff including the Capital Deployment team, breaking the traditional barriers between investment and grantmaking departments. The World has Changed document is created, outlining a change in direction for the foundation under three pillars:

1. Primacy of Jobs and Livelihood: investing in the best deals producing reliable, decent employment…expecting meaningful results that enable people to be self-sufficient, act independently, and make choices.

2. Lift All Boats: bringing every enterprise up the social/financial performance curve with a greater percent of people sharing in the economy…seeking to have the market system operate more equitably.

3. Full Accountability: deploying 100 percent for mission…putting all Heron’s resources at work for the benefit of society.

Outside: Presidential Election

The 2012 presidential election ushers in a new discussion on society's "makers and takers." Candidates take different perspectives on America's poor and whether or not they take away from society. The election also sparks a debate on raising the minimum wage. Advocates state that a higher minimum wage would help Americans out of poverty and improve the quality of life for people across the country, while critics say higher wages cripple businesses and catalyze layoffs. 

2013

Inside: Adjusting Our Model

Heron begins making the major adjustments to our business model to better meet the goals outlined in The World has Changed document. This included the design and early execution of our first “pipelined” tracking system for deals, across asset class and across enterprise types with both social and financial performance. The early design of our first omnibus reporting system, to report results of all assets (debt, equity and funds) on a financial and social basis, and our first market analysis by industry, across legal forms of organization.

Outside: Thomas Piketty and the New Pope

French economist Thomas Piketty’s Capital in the Twenty-First Century becomes a world-wide bestseller. The 700-page work argues that inequality is an inherent feature of capitalism, since inherited wealth grows drastically faster than income, and that consequentially the American dream cannot deliver on its promises.  Over at the Vatican, Argentina’s Cardinal Jorge Mario Bergoglio takes the name Francis and becomes the 266th pope. The new pope lashes out against trickle-down economics and the “idolatry of money”, deeming income inequality the root of societal ills and urging for heightened poverty-alleviation measures.

2014

Inside: Moving Closer Towards Our Goals

Heron moves closer toward its goals, with 60 percent of the endowment screened for mission by the end of the year, up from 40 percent the previous year. The Board also approves a new investment policy statement with precepts driving toward measuring endowment performance for both social and financial. 

Outside: White House Roundtable

The White House hosts a roundtable on impact investing to galvanize and expand the global impact economy. Over 20 investors and foundations announce more than $1.5 billion in new impact investments, while the administration pledges to remove regulatory barriers keeping capital sidelined, support private sector investments in high-impact industries and make innovative enterprises investment-ready.