The following excerpts an article by Buzz Schmidt and Clara Miller on the fundamental shift that comes from asking the right guiding questions:
[W]e resolved to define our financial assets as ‘enterprise capital’, to be deployed fully in furtherance of our mission. Every Heron dollar is a mission dollar and there is no ‘mission’ investing complement because there is only mission investing!
Is this more risky financially? Our experience suggests not. It is certainly less risky from a fundamental mission point of view and carries with it far more accountability than standard practice. That’s the way it should be. Presumably, if we do a good job, we will attract new capital to our investment philosophy, to our mission and strategy, and thrive from both a mission and a financial perspective. If we do a poor job, results will go the other way. In either case, we are making ourselves vulnerable and accountable for our results. We believe it is our responsibility to avoid becoming too comfortable, intellectually limited or plain fearful in investment policies and feel that this self-imposed standard is fundamental to our integrity and effectiveness.
To be sure, Heron must still work to overcome some of its own reticence. We still struggle to shed the ubiquitous ‘best practice’ comfort that is afforded by modern portfolio theory (the entire set of risk-adjusted return/ asset allocation principles that guide the portfolio construction of virtually every private foundation) and reinforced regularly by its army of proponents. We are developing alternative approaches that connect the expected impact of our capital deployment to annual reporting and account for the cumulative impact of this deployment over time. Only then will we move to a fully value-maximizing investment approach.
We will know this transition is happening when the question we are asked most often shifts from the negative to the positive: ‘How and in what ways have your investments, all of your investments, helped you achieve your mission?’ Whether or not others make that shift, the F. B. Heron Foundation, for its own internal accountability as well as its legitimacy in any role it might play broadly in the philanthropic sector, embraces this as the guiding question as it builds its portfolio.
Read more reflections from Heronites on aspects of our work and many the reasons we do it.