Heron Presidential Podcast Ep. 2

We are back with another episode of our Presidential Podcast, where we talk to Dana K. Bezerra about what Heron is doing, thinking, and learning. In this episode, we discuss how Heron is placing community agency and wisdom front and center in the next phase of our work.


Since the last episode of this podcast, we’ve deepened many of our engagements with our community partners and thought partners. To kick us off, what have you been learning from our partners in the field?

Yeah, well just to context-set, I think one of the things that’s becoming increasingly apparent for Heron is that when we accomplished, in late 2016 and 2017, being 100% invested for impact, we always knew that the next frontier for us would be moving the portfolio from invested for impact to invested for mission. And when your mission is helping people and communities to help themselves, it became incredibly apparent and perhaps unsurprising that the only way we could help communities to help themselves was to get back in touch with communities. And to really understand what the communities’ agency was for themselves, what their vision for a prosperous place was. And so, as you rightfully point out, we’ve been rebuilding those muscles and re-engaging in those communities. And I think what we’ve learned is, not necessarily new news, but if you can create the opportunity to hold space for connection with places, they will tell you what their ambition for themselves is. And they’re able to describe what their hope of the future, prosperity of their place would look like.

And our job really is to bear witness to the context of those communities, and to really ask, with the expanded toolbox that Heron has always had the privilege to work with, do we have anything useful in our repertoire that could support them on their journey? So, it’s been a bit of an affirmation of the strategy, but also a reminder of the complexity that it is to work in a place and that we’re called to honor the place and their agency first, and to try and be of service secondarily.

I want to dig deeper into the work we’re trying to do right now. We oftentimes talk about walking in places and fostering community agency. But admittedly those phrases sound pretty broad. In more specific terms, what do we actually mean right now by working with communities in places?

Sure, well, I think in communities, in individual systems, we as a country have a long history of telling people what they need to do to advance, telling places what they should do about major issues (transit, education, etc.). And we’re trying to upend that and return to a place of really listening to wisdom in communities about what they think. And ironically, we and many others have discovered that’s a process.

And given that we are a funder, and that necessarily means we come from a place of privilege, there’s work to be done by us and others to restore power into the hands of the people who live in places. And as a result, it takes time and trusted relationships. And, relationships take time to build. Where, when we say, “what do you need,” the response isn’t “what will you fund?” We would like a richer engagement, where when we talk to communities about what they need and what their ambition is, that it comes from them. That they have ideas about their future. And so, this notion of agency to us is really if all things were equal, what would you do next? And when I say “you” that’s the “royal you”, the collective wisdom in a place, not the single leader or a single enterprise, but ideally a cohesive group best case scenario, appreciating that might be too high of bar. But, multiple voices in a community being able to identify the general direction in which they’d like to move.

What challenges do you see right now in Heron’s work? 

We don’t have long enough in the podcast! The challenges are many and they’re worth taking on. Heron both has an aspiration to show up as a respectable partner to places, again the idea that we go in listening and bearing witness to their context, before starting to work with place to decide what steps should be taken. And that, for Heron, is inextricably tied to being an asset owner and stewarding assets. We have an obligation to develop our communities practice, both with respect to communities as an end, but also as a means to an end for Heron in optimizing our portfolio. And trying to always strike a respectful balance between how we show up in place and how we’re taking what we learn in place and feeding it back into the investment portfolio for optimization.

One of the conversations that has evolved over time at Heron, but is particularly present for us now, is an intention, not yet operationalized, but an intention, and we’re stumbling forward, to work with communities who have a vision for themselves, and in the first instance ideally let the advice of place inform how Heron makes deployment decisions. Over time we would very much like to both not only be informed by place about how to deploy capital, but to literally put, call it an advisory board, of people in that place in charge of those deployment decisions. And I mean “in charge” in terms of like an investment committee, if you will. Heron’s assets but stewarded by the people in a place. And then, over time, as that relationship develops and trust is built and institutional capacity ideally manifests in a place, I think there is an intention on Heron’s part to convey Heron’s assets and/or investments in that place to the place to control as an asset of their own. It’s Heron’s own version of restoring capital that is currently resident inside a philanthropic institution into the hands of the people who live in their places. That will be different from most philanthropic institutions, not all but most, and I think Heron has an intention that if that means over time, fifty years, thirty years, twenty years, Heron invests out all of its money, restoring its control back into the hands of people in communities, I think we’d be okay with that.

Can you close the circle and tie this version of Heron back to the last two? We spent a long time working to pivot the portfolio, but now we’re saying that we need to return to communities to optimize it. Can you connect those dots for us?

Yeah, and it’s funny because for someone who’s been at Heron a long time, I feel like that’s apparent, and I appreciate it’s really not for most of the world. And, what I can say as a longtime Heronite is I have reverence, deep reverence, for all versions of Heron, and I think in a serendipitous way they have brought us to where we are now. So, to answer your question, I think, the first version of Heron was really led by respect for people in places and the guidance of places around what was important in their communities. And what we heard at the time, for us, was around affordable housing, access to capital, small business development, things like that, so we did those things as a funder, as a program-related investment investor, and ultimately as a mission-related investment investor, really deeply in places. And then over time, we started looking more at the investment portfolio, and our board to their credit, almost from our founding has called the question around all assets needing to be looked at through the lens of mission. And so, Heron, what I refer to as 2.0, really focused on that portfolio part, the idea that we should be viewing our investments through the lens of our mission or at the very least through the lens of impact.

And grateful that Heron is the learning organization that it is, we learned over time that being invested for impact, and for us being invested for mission, are different. And so, our learning journey over the period of time when we were focused on the rotation of the endowment, was that as an asset owner we had an existing portfolio, and as we were all well-reminded, all investing is impact investing, we just didn’t know what the impact was. And honestly, we hadn’t looked. I think most conventional investors don’t. And so, the first step for us was really taking our existing assets and examining them for mission.  

So, moving from an unexamined portfolio to an examined portfolio. And then, once you know what you own, and insofar it’s knowable, what the impact is, then you can move to something that’s more acceptable on the impact spectrum. And that’s the process we were really deeply engaged in the last several years. And I think we learned during that period of time that we could move the portfolio to be invested for impact that we found acceptable insofar as we could know the impacts. But we also came to appreciate that there was a fair distance between (often) being invested for impact and being invested for mission. And so, in this stage, we’re seeking to constantly optimize the portfolio from impactful positions to positions that are impactful specifically through the lens of our mission. And again, that’s a big part of why we need to return to deep communities work, to understand what it is that communities think they need for themselves as the optimization strategy for Heron and our portfolio. So differently from being guided by a pure asset allocation strategy, for example who talks to you about what asset classes you should own, we’re really looking to build a different model of optimization where communities are telling us what we should be owning, irrespective frankly of asset class. So, as we move forward, we absolutely will be optimizing our public equity portfolio, we’re absolutely going to be optimizing our public debt portfolios. We are still an investor, we’re still a fundamentals-based investor, we’re just starting to incorporate very different data into our investment fundamentals, and part of that is going to be what communities tell us they need.

So, for a long time Heron has been talking at length about net contribution. Help me get from net contribution to the community work we’re thinking about now.

Great question. So, you’re absolutely right, and we have podcasted and written and blogged before about how net contribution evolved for us as an investment thesis and specifically a way to think about evaluating the effect of enterprises. So, again that’s looking at the effect of enterprises across human, natural, civic, and financial capital. Definitely more on that on our website. That said, to your point, when we started looking at communities, there are whole bodies of work that certainly predated Heron’s thinking around asset inventories and the assets of places. And surprisingly to us but delightfully, a lot of that work actually talked already about the various forms of capital that can be present in communities. And so, for us, the leap from net contribution as a way to think about the effect of enterprises, to the way to think about the asset inventory in a place, is almost a direct correlation. Now I think in a place, you don’t necessarily want to talk about the net contribution of a place, but you absolutely want to talk about the asset inventory of a place. Which assets are robust in a place? Which assets are less than robust in a place? And in part to think about how you invest, whether it’s financial capital or connection or social capital in a place, I’m not sure we always want to be filling the deficits, sometimes we want to be accelerating the strengths. And, again, we take the lead of communities there, we follow their lead, but I think the correlation for us was surprisingly easy, and thankfully there’d been much written on the subject already.

You had described an intention earlier around either incorporating others into Heron’s decision-making process or possibly deferring deployment authority. Can you walk us through that?

Absolutely, and again this is part of the messiness admittedly. But there’s a series of ways we’re thinking about this. So, we’ve talked quite a lot on this podcast around following the lead of our partners in places and following the lead of place. I think in the first instance there’s a bit of a getting to know you period where we’re learning about the place, and place by the way I’m using that word in a very simple way but it’s quite complex to understand place. Not all voices are saying the same thing and not all voices will always agree. So, part of the learning about place in the first instance is very much Heron getting involved there, making some deployment decisions, both to learn and to support organizations, in that instance we are guided by what we’re hearing, but Heron is very much making decisions around deployment.

 I think what our intention is, overtime, as we are clearer about the voices in place that are leading initiatives, leading the narrative of the place, instead of asking them and then making deployment decisions, we have an intention to put them literally in a position of control. Heron’s assets, their will. So I think it would look like, potentially, Heron forming advisory groups in a place to advise what the will of place is, what the language of place is, what the investments that are necessary are, and instead of having them just advise Heron’s deployment, they would actually make the deployment decisions on Heron’s assets. So, am I suggesting that for the various places we work, each one would have its own advisor group? Yes, absolutely. And they would be place-based and very much tied to their community. Taking that a step further, out over my skis here, but taking that a step further, I think we would have an intention over time, since they’re already controlling the investment decisions, to downstream the capital that’s been deployed by their decisions and that is on the horizon to be deployed and putting it in their hands. I think the devil’s in the details—what would that look like? What legal structure would be used? I think all that’s going to be determined over time, and be iterative with the various places, but you’re absolutely hearing an intention to move from a model where we, Heron, take in information and then make decisions and push out capital to a place where that, in the first instance, is collaborative and then over time is actually put back in the hands of communities, both the capital and the decisions.

You’re talking about some significant changes in the future. Why are we doing this?

For a variety of reasons. I think the nature of philanthropy has long created a power imbalance between those who have had the privilege to either make wealth or inherit wealth. We have institutions like private foundations who are staffed to deploy that wealth. In some situations, there’s staff to grow that wealth. And I think for us it’s constantly this return to purpose. What is the purpose of the wealth that was created? And if it’s in a private foundation, by the nature of being a private foundation, it was created for a purpose to benefit society. Every foundation has its own mission, they may be into one thing and not another, but it was really designed to benefit society and if we are true, intellectually honest about the desire to follow the agency of place, we believe that means following the agency of place, including putting the deployment decisions back into the hands of people in those places.

So, you just described an intention for us to someday defer deployment decisions to communities. Does that mean we’re spending down?

In the arena that is philanthropy there, for whatever reason, tend to be two schools of thought. And, people speak to each other in this way. You are either presumed to be a foundation in perpetuity, meaning you hope to exist forever. And so, people in that camp talk to each other about “we have an obligation to distribute five percent at its most basic, this is not technically accurate, but at its most basic, we have an obligation to distribute five percent a year of our total assets as charitable distributions.” And so, for those who are in the camp of perpetuity, the conversation, forget missions for a moment, the conversation tends to be something like, “we have to put out five percent, so our endowment must generate five percent plus inflation at a minimum.” So that is a conversation that lives in the land of foundations who want to exist in perpetuity, because if they don’t make five percent plus inflation they will shrink. And over time, if that were a trend that would continue, you would effectively go out of business. Now that may be in 100 years, but you would go out of business. On the other side, you have spend-down foundations, foundations who say “we have an intention” and it usually goes like this, “we have an intention that in x amount of years we will be out of business,” and for those folks their endowment remains invested but they are spending much more than five percent a year because they have a goal to spend themselves out of business in whatever their declaration is: 10 years, 20 years, etc. Those are very different schools of thought. Sometimes there are conversations pegged to those like, “I’m a spend-down foundation because I have a living donor who really wants the money spent during their lifetime.” Different strokes for different folks, but those are two very different philosophical point of views in our space.

As you may know, Heron Foundation has always refused to entertain that discussion. Heron’s board has always taken the point of view that there is no form that we need to fill out where we check out a box to say we are spend-down or perpetuity. That it’s just the conversation not worth having. That their guidance to staff always was, “We need to be led by the opportunities that we find, investment and/or philanthropic,” and that we need to be deploying money as effectively as we can in service to our mission. So, our board has literally refused to entertain the discussion. Which has always made some people crazy-they really want to know. Are you spending down or are you going to live in perpetuity? And it’s just not really in our consciousness at Heron.

So, in the conversation we were just having about the intention to really put decisions back in the hands of communities, I don’t know what that means for our existence. I think the work is complex , relationships take a lot of time to develop, trust is built on relationships over time, and so, I suspect our ability to build that kind of trust in communities will accelerate in some communities more quickly than in others, just by the nature of the work. However, if that means that we’re able to build trusted relationships where there’s institutional capacity to deploy money, I think you would see us deploy whole chunks of ourselves. Now some people are going to want to say “Oh, you’re spending down.” I don’t think we would identify with that; I think we would say “We are investing out in partners to which we have confidence that they are stewarding their place well.” And so again, we’re not really entertaining the spend-down versus perpetuity discussion, we are just saying if there are people in communities who are working together and are capable of making better deployment decisions than we are, we want to empower them to do that. Both with authority to make those decisions and frankly with the capital.

A lot of the conversations we’ve been having around working in and with communities, and following community agency, sound like community development. Is this different? If so, how?

Yeah, it’s a great question. And one that comes up fairly frequently. I think this is a natural progression of community development. I think it’s a slightly expanded definition of community, at least for the way our sector has gone about doing its business. I think what is fundamentally different and maybe not, but what is different to me, what feels different, is that this community development is guided by place. I feel like a lot of, and for reasons that are not malicious but were efficient, a lot of community development over time became funder-centric and funder-driven. Which was necessarily, but not maliciously, driven by program strategies. And so, as money through funders, through capital markets, through whatever function, as money entered communities, often we got the order wrong. We started doing what the money wanted first and figuring out how that served communities second. Even though I think the intention originally when these systems came into being was “what are the community needs and what can money do for it?” I think we lost that somewhere and I don’t think it was due to bad actors, I think it was just the way the space evolved over time. And so, what feels different to me about Heron’s strategy is intentionally trying to press the reset button. To go back to the wisdom in communities and to follow that, and insofar as we can weave our experience with intention, by the way, weave our experience as investor back into feeding that, it’s what we’re called to do.

So much of what we’ve talked about on this podcast is fluid. And it’s fluid in service to the communities we work with. Which on the one hand is great, and on the other hand is really tough to manage. And, at the end of the day we’re using resources that are earmarked for the public good. Can you talk about accountability, whether it be to yourself, to your team, to the organization? How do you know if resources are being used appropriately?  

So, speaking sort of in-house and out-of-house. In-house, the fluidity absolutely contributes to operational complexity. We as a staff have to be generalists, almost necessarily. In fact, straight-up necessarily, because we’re responding to the needs of places, to the needs of our investment or community-based partners, which requires us to have a breadth of range and ability to respond to appreciating that we also have, back to accountability, an obligation, an institutional obligation, to seek the expertise that’s needed in the moment that it’s needed. Which also means, back to operational complexity, making sure we’re always nurturing these pools of deep expertise. So, definitely creates operational complexity and if I’m honest, creates, when we talk about the only constant at Heron is change, part of the complexity is the demands on staff are high. And periodically, as our emphasis either in the first instance in communities, in the second instance in the investment portfolio, in the third instance in both, can sometimes be more than any given staff member wants to take on. Or in a different direction than any staff member sees their career trajectory. And so, Heron absolutely wades into the complexity that the chosen strategy creates for us operationally, that’s true.

In terms of external accountability, it’s hard, back to the nature of privilege. By design private foundations are asset owners, by design the world has been set up that we are responding always to people who want what we steward. The question of “are we stewarding it well” is something we wrestle with always. We’re always looking for external indicators that we are or are not doing our job well. So, we use proxies, and are always open to new ways. So would always invite conversation on this, but we use Grant Advisor to allow grantees to talk anonymously about their experience with Heron. On the investment front, we solicit feedback about our responsiveness. Historically we have had customer service metrics and we continue to discuss this, where we have an obligation at a minimum to be respectful and responsive to people’s requests. So, we try very much to receive external feedback about our responsiveness. It’s hard, and we’re always looking for better ways. And I think the nature of, we talk a lot about what we will do in our desire to be responsive to communities, but there are also people we say “no” to. And that’s real as well. And so, figuring out how to do that in a way that is respectful and nonjudgmental about the value of the organization in the world, but respective to the ability of Heron and the organization to move forward together and keep those separate, is always a challenge. And honestly its part of the culture we try to create with the staff to make sure that every interaction is respectful and responsive.

This is a space that talks a lot about innovation and risk taking. But, do you think as a space we live up to that name? And if not, why not?

So, complicated answer. I think if you look at the most granular, if you look at any given deployment decision, if you look at any given program-related investment, I think the institutions making those decisions could tell a plausible story around the risk they’re taking. And that risk is usually through the lens of mission. It’s a model that hasn’t been tried before. It’s a vehicle that hasn’t existed in that space before. So, at its most granular, I think, and again being both generous and curious about the way other people do business, I think yes, people would tell you they are taking risks. I think the higher the altitude you get to, at the program strategy level, certainly at the institutional level, which encompasses both the program and the investment work, I do not think most organizations are taking enough risk relative to their purpose as defined by the need to service society. That said, and somewhat perversely perhaps, I think if you asked a traditional investment staff if they are taking risk, I think they will tell you that they are relative to the purpose they’ve been asked to serve, which is risk-adjusted financial returns in either existing financial instruments or new financial instruments. I think we keep coming back to this challenge in our space around which purpose you’ve been asked to serve, and why it’s allowed to exist in our space that one institution is not aligned on what its fundamental purpose is.

 We always that Heron is constantly evolving. And therefore, I’d be remiss not to ask you what’s coming next. What do you predict the next 6 months will look like?  

Spaghetti! I think the next six months we will be in high learning. I feel like our strategy has gelled, I think we’re going to have the sloppy work, I’m not sure the external world is interested in, around making sure that the staff is clear on what the strategy is, and frankly that roles and responsibilities are clear so that when we’re in the field we are all presenting with the same intention to communities and to people in places. And, that as we work together, we’re all able to move in the same direction while individually being accountable for whatever our work function is. It’s a very sort of, on the one hand, internally focused capacity building, but also Heron’s always had an ethos of not slowing down the work in communities because it’s what we’re here to do. And so, we’ll be firing on both cylinders a lot over the next six months and I think once we rebuild the muscles of operating this way, we’ll be able to accelerate, hopefully, our work in the field even more.

Thanks Dana! To learn more about what we’re up to here at Heron, you can go to www.heron.org or follow us on Twitter @heronfdn. Thanks for listening!  


Leave a Reply

Your email address will not be published. Required fields are marked *