The following is a conversation between Dana Bezerra, President of the Heron Foundation, and Denver Frederick, the Host of The Business of Giving.
Denver: The Heron Foundation, founded in 1992, is an organization that continuously learns. It acknowledges its missteps and then seeks to change in order to get better so it can best serve people, places, and enterprises. And here to tell us about their work and that learning journey is Dana Bezerra, the president of the Heron Foundation.
Welcome to The Business of Giving, Dana!
Dana: Thank you. Nice to see you and a pleasure to be on with you, Denver.
Denver: Thanks. Share with listeners a little bit more about your mission and the overarching philosophy of the foundation.
Dana: Sure. Well, I think I’m happy to say that since our founding nearly 30 years ago, our mission has always remained the same, which is helping people and communities to help themselves.
And one of the pieces that accompanies that is, almost since our very founding–I think you’ll appreciate this having spoken to others from Heron over time–our board of trustees has been really throwing elbows at the business model of the private foundation and always calling on staff to be more innovative and find additional ways to make sure all of our capitals — and that’s plural by design — are in service of the mission. So, it’s a fun ball to catch, and it’s kept us busy for nearly three decades.
Denver: I hear you. And you are one of those rare foundations, Dana, that does not have an investment side of the house and a programmatic side of the house. Tell us how that came to be and the benefits that result from that kind of organizational design.
Dana: Really, truly, almost since our founding a couple of years in, our board decided that all capital at The Heron Foundation was in play. And so, rather than having an investment side that dealt with what most of the world calls their endowment, and a programmatic side that dealt with the doing good or the grants and PRI side, our board really wanted us to consider all money for mission at all times. And so, as a result, we have one team – its name has changed over the many years, but right now we refer to it as our Integrated Capitals team.
And the way we approach the world is when we’re working out in community, we’re really most interested in sourcing investment of all types, opportunities bottom-up from what communities say that they need or that they want to strengthen in their place. And by not having two sides of the house, it allows our staff to really dig into what the challenge is, and to contemplate what’s needed, and to be able to deliver what’s needed. And one of the last questions that we ask in Heron is: Where is this being recorded, if you will? Is this a market rate transaction? Is this a PRI transaction? Or is it a grant transaction?
And I think, for me, coming to Heron from Merrill Lynch, it’s like the world is your sandbox because very rarely do you run into a need …you may not align on mission; you may not align on community outcomes, but you almost always have a tool for that. And it’s a really liberating way to try and be of service to people and communities.
We wanted to move from unexamined to examined, to understand what impact, insofar as it’s knowable, our portfolio was having, and then to move to a better impact. And then once we arrived at 100% invested for impact…we internally decided that it would be our life’s work to optimize from invested for impact to invested for mission.
Denver: Well, I think it was back in 2016. Heron’s main goal was to pivot your portfolio to be 100% invested for impact, but you now have moved your portfolio, let’s say, to be invested for mission. What would be the difference?
Dana: So, this was one of our learning journeys. I think when Clara first announced to the world that we would go 100% for mission – that was our intention. That’s why we exist on the planet.
I think on that journey – again, with an antipoverty essentially, social justice, and community development mission – one of the things that we learned was it was really hard to find market-rate opportunities, certainly, but opportunities that aligned with our mission. What was more readily available were more mature sectors, I’ll say. Like, the environment, for example. So, in our quest to rotate the endowment for mission, we kept finding mission hard to achieve but positive impact, and at least not negative impact things were available.
So during that journey, we switched our language internally to start saying – You know what? We’re affirmatively invested for impact, but to say that we’re affirmatively invested for impact, insofar as impact is knowable…. And you do enough of these to know that’s hard, too. But insofar as impact is knowable, and that lets you sleep at night, is really pretty far from being able to draw a direct through line to and/or invested in an antipoverty community development mindset.
So we started talking about: OK. Let’s rotate the portfolio. And people ask us about this language all the time. But what we say now is we wanted to move from unexamined– because conventional investment portfolios are simply unexamined for impact. We wanted to move from unexamined to examined, to understand what impact, insofar as it’s knowable, our portfolio was having, and then to move to a better impact.
And then once we arrived at 100% invested for impact, which is what you referred to, where we got to in December 2016, we internally decided that it would be our life’s work to optimize from invested for impact to invested for mission.
Denver: Interesting journey. You mentioned about community before. What role does community play in the traditional investment universe?
Dana: So, conventionally, and for most people, and for my time when I was in that world – none. They’re wholesale unrelated, unfortunately. And so, for Heron, when we started incorporating it into the portfolio, you do have some interesting learnings. For example, I would say at this point in time that our fixed income tracks community and ideally what communities say they want for themselves pretty closely. And I’m happy to nerd out about how we implement mission in fixed income.
And more specifically for Heron, what I was saying a moment ago about arriving at 100% invested for impact and really deciding that we needed to get to 100% for mission over time, one of the troubling things we learned was that Heron talks about net contribution, and originally, it’s sprung up as a kind of organically developed way to think about enterprises. What’s the human effect, the natural capital effect, the civic capital effect, and the financial capital effect? And then, we make trade-offs. Every investor does.
And what we try to do is call ourselves to our own attention to say: Are the trade-offs we’re making acceptable and therefore, do we still choose to invest in it? Trouble is, when we got to 100% invested for impact and wanted to get to mission… Well, our mission is helping people in communities to help themselves. We were not, at that point in time, in touch with communities. We had been head-down focused on the endowment.
So, we started rebuilding our community’s practice, which was something from our past that we were pretty good at, I think. And as we started rebuilding it, coming back to this notion of net contribution, we had a really uncomfortable moment inside Heron. We actually internally talk about it as a reckoning where we struggled with the idea that we were back in touch with communities because we believed they knew what we needed to know in order to make better deployment decisions and to move us closer to mission. And that started to feel net extractive.
Denver: You’re extracting from communities.
Dana: Absolutely. And that was a very vivid and alive conversation inside Heron. And when we took it, the conversations, to the board about – “This is difficult. We talk about net extractive and net contribution all the time. And we feel like we’re being extractive.”
That’s when our board took the next step, which said, “Look, if you think communities know what you need to know, then you need to be in the process of transferring power and control over deployment decisions.” That’s the path we’re on now.
We do think about human, natural, civic, and financial return. So, when we’re talking about a transaction, the rate of return as an investor return is the language of the field.
Denver: That’s something. It is interesting, in terms of so many organizations, how we extract from communities because when we seek their input, we have staff people in the room; we have consultants in the room, and they’re both getting paid. But we never pay the community member. We just want to get their information. We don’t give them the dignity, and that, just in and of itself, is a very simple example, but it’s kind of what the culture has been, and we’ve accepted that. And we think we’re giving them a great opportunity to just voice their opinion, but we don’t think enough that they should get paid a few bucks for doing so.
Well, you have started to think about return on investment in a different way, which is not whether your portfolio has gained or lost value. So how do you think about it, Dana?
Dana: Well, it’s an ever-evolving process. And for us right now, as I said, we’re utilizing, if you will, a portfolio theory that begins and ends with what communities tell us they need or want for themselves. And by the way, I should also say, we’ve learned from communities that they don’t always like talking about what they need. Sometimes they just want to talk about what they want.
And so, we’re super mindful to be looking both at not only a deficit narrative – also something philanthropy has trained communities to do. “Tell us what you need. Tell us what void we can fill.” Whereas, often communities say, “We’ve got some things that are working here. We want to build from that.”
So, for us, we often work with communities to try and understand: What is it they want to build from or build upon? What tools are involved? And that’s how we start to construct a portfolio. And to your point on return, we do think about human, natural, civic, and financial return. So when we’re talking about a transaction, the rate of return as an investor return is the language of the field. And we have that conversation.
We also have a conversation with the community around: How will we know if civic engagement increases because this investment gets made? How will we know if natural capital is better stewarded or less encumbered because of the investment? So, we really are looking across these four pillars for return.
And the reality for Heron is if the bulk of the return may be in human capital and less in financial – that’s actually OK with us. And we don’t drive to monetize that either. Because we believe, for example, clean air is inherently valuable, and we need not monetize it to see it as a valid return on investment.
Denver: So, you’re human-focused and not investment-focused when it comes to return.
Dana: We try to be.
We’re always trying to honor, listen quietly for community wisdom…What does the community believe to be true of itself? And what are the levers in changing the potential outcomes for a place?
Denver: And it is strange when you look at investment focus, it really all— I guess maybe it doesn’t stem, but it seems like it comes from GDP. That somewhere down the line, GDP became the end all and be all of the health of a country. And it kind of has just sprung out from that. And now, people are beginning to say, “That’s it? Is it really just GDP?”
Well, you’ve captured a lot of what you’re doing in a really wonderful booklet, I guess. It’s available on your website. It’s called Dare to Change, and you’re really challenging these broken conventions to create an economy that’s going to work for us all. And you’ve got five principles that are guiding your work. So we’ve touched on some of them, but let’s run through them all, starting with honoring community wisdom. Speak about that, Dana, but also how does Heron enter a community?
Dana: So, honoring wisdom in particular— and the five principles, to be true to practice, they’re emerging for us. They are lessons that we’re hearing. They’re not principles we decided and then superimposed on the work. We allow principles to emerge and decided it was time to capture some of these. So, I’m sure they’re all involved in change.
But honoring community wisdom – really the roots of this goes back to Ambassador Joseph when he was on our board and constantly talking to us about: There is knowledge, and we think of knowledge and intellectual property as coming from universities and researchers and Higher Ed… things like that. Very valid part of the field. But there’s also the wisdom, the inherent wisdom of community. Why is a place a place? Why are the dynamics in that place the way they are? What has come before? What are the underlying cultural beliefs of a place …about itself and about the world in general?
And so, for us – with Ambassador Joseph’s encouragement years ago, and it’s something we just now speak more clearly about – we’re always trying to honor, listen quietly for community wisdom. We’re not of a place. What does the community believe to be true of itself? And what are the levers in changing the potential outcomes for a place?
Denver: So, you’re not going in there telling people what to do. You’re really listening to what they want and what needs to happen.
The other thing along those lines is nurturing the ecosystem. And I think sometimes in this area, we get so compelled to focus on the problem and to solve the problem. And we never really think about the container that the problem is embedded in. Talk a little bit about what you do to nurture an ecosystem.
Dana: Well, and again, this comes from the benefit of being around for nearly 30 years. In previous versions of Heron, which hired me… which I respect tremendously, I think like a lot of foundations, we decided top-down sort of what the interventions were that we had faith in for helping to improve the situation for local communities.
And I think of them as the building blocks of community development. Nothing wrong with them. Homeownership, access to capital, small business development, affordable childcare so families can participate in the economy – those were the types of things we were doing. Again, I don’t think there’s anything wrong with those interventions, but we decided, and then we did those things in communities.
And I do think we did them honorably, and we were never asking what it added up to for successful placemaking. We just didn’t, at that time—invoking Maya Angelou here—I think we did then what we knew how to do. And I think we know slightly better now. So even though I don’t think there was any fault in, for example, making more affordable housing available, we never said and never asked communities: What is the effect of this? What else needs to surround it? What else in the system can improve things?
And flipping hats slightly, when you think about this through the lens of us as institutional investor, we spend a lot of time buying taxable municipal debt because we’re tax-advantaged. We don’t need the tax advantage. So, we buy taxable municipal debt.
The challenge is, again, when we’re working in community as philanthropists and learning about community voice and what they want, and then when we compare – and we do ‘cause we’re super nerdy at Heron – when we compare the prior decade of municipal debt issuance, there is often a vast gap between the narrative the community is telling you about what they need and want to see built upon in their community, and what they’re being obligated for as citizens of the place.
And so, part of nurturing an ecosystem on the not-just-philanthropic side is really wearing our institutional investor hat to work with development and finance agencies in the place to try and broker a conversation around: You have bond capacity. You have underutilized bond capacity. The community is asking for these things. How can we reweave communities and capital markets?
Denver: One point that just caught my ear there when you were talking, which I really like, was the fact that you looked at the past decade. And so few organizations in the sector seem to make decisions and then take the time to look back 10 years and then say, “What happened from that decision?” And then say, “What did we miss? Where didn’t it work?” Because again, this probably gets back to you being a learning organization. You do take that time, you nerds, to take a look at all that. You know what I mean?
Dana: We do!
Denver: The third principle is stewarding from strengths. And this is a different perspective because the inclination has always been: Define what is broken and “Hey, I’ll come in, and I’ll fix it.” What are the benefits of this approach in terms of stewarding from strengths?
Dana: So this came directly from our community partners. After working on the ground, there were a series of conversations. So Heron practices reflective practice a lot. How did we show up? How did our partners show up? What container did we create to invite them to show up? And so, as a result, direct feedback is hard in philanthropy because of the power dynamics, but we try to create a container that allows for that.
And one of the things our community partners were saying loud and clear is— we had gotten frustrated by talking to community partners around, “Well, what is there we can do? How can we help?” And they would immediately say often, “What will you fund?” And that was the most frustrating conversation ever.
So, when we would inquire about, “Forget what we’ll fund. Let’s have a conversation about your place,” partners inevitably said, “We’ve been trained by government, by philanthropy, by lots of folks, to always talk about what we need and to present our deficit self so as to appear worthy of whatever support is coming down the pike.”
Denver: The way the game is played!
Dana: Correct! And frankly, we’re tired of that because what we were hearing from partners is when you’re always speaking your deficit narrative, you start to believe it. And it starts to become the story of place. And that has its own issues for the will of a place to do better or to improve itself.
And they really wanted to talk about themselves and their strengths. What is working? What do we have here that we might build from? What do we have here that might actually be instructive for other places? And so, this was really an appeal from our partners to say, “We can talk about–and we’re great at it–what’s wrong in our place. But we also want the capacity to talk about what has us hopeful about our place.”
And in part, it’s about how communities learn and how they come to believe what is “true” about themselves. And if stewarding from strengths gives an opportunity for community to have a vision that is built on strength, then that’s an easy switch for us to make if we can embrace it.
Denver: What’s funny about that, too, is that if you read any of these self-help books like StrengthsFinder, they’ll tell an individual that you should find out what your strengths are and double down on those strengths because that’s what’s going to make you distinctive, and not find what you’re really bad at and work at what you’re really bad at because you’re never really going to be that good at it. So, it kind of is just a very interesting parallel that we never put into practice.
Dana: Right. Totally agree with you.
Denver: You talked about power dynamics, ceding power. This is very hard to do. And often, when an organization or institution thinks they’ve done it, they really haven’t done it because they still maintain the final word and the ultimate decision-making authority. What are some of the lessons you can share here about doing this effectively?
Dana: This is a really complicated area. And at its most basic, it begins with what we spoke about a moment ago, which was feeling extractive, feeling like we needed what communities had in order to make better decisions, and then deciding we had to flip that paradigm.
The irony is we didn’t know at the time that flipping the paradigm was the easy part. Executing on it is really, really difficult. And I’m very grateful for some who are fellow travelers. And in particular, I have to credit Farhad from Forest Foundation with what I’m going to say next. I think when we put this piece out and we talked about ceding power, we absolutely meant it. That’s where we were headed. What we’ve learned is: the process of doing so is hard. And so, Farhad taught us some grace for ourselves, for our partners in the process.
And what we talk about now is that Heron has a history, I think, of stewarding wealth and stewarding power accountably. I think we’ve done a pretty good job of that. What we’re trying to do now is figure out how to share power equitably because the reality is jumping straight to ceding power is not practical. So, we’re trying to figure out how to steward them and share the power equitably so that we can transfer and cede power permanently.
But it is a learning journey. And so, for us, the notion of sharing power is where we are now in the process. We’re sharing power. Both us and our community partners are on training wheels at the moment. What that looks like, for example? They identify in their community the deployment opportunities they think they want. We do the due diligence. We present the recommendation. They decide. We don’t ratify their decision. They decide. And then over time, we will be, we hope, infinitely less relevant in that process. And they’ll be off and running.
So, we’re learning it’s a process. We’re learning to be patient with ourselves and to be patient with our partners. But the ultimate goal is to dilute, not delude–because that’s easy, too–but to dilute ourselves out of relevance over time. That’s really the goal.
Heron’s clarion call is to continue to challenge ourselves to do better, to be bolder, to view risks from non-traditional lenses, and to just keep moving forward.
Denver: And that leads us to the fifth principle, which is staying brave, which is a little bit of the tension that you were just talking about, about some incrementalism, which you have to do some of it, but also really daring to change big, correct?
Dana: Absolutely. Staying brave is a call to ourselves and to our staff. It’s easy and frankly, quite satisfying to help in incremental ways or to be able to fill a need or to build on a strength. There’s a lot in that that’s just fine. And Heron’s clarion call is to continue to challenge ourselves to do better, to be bolder, to view risks from non-traditional lenses, and to just keep moving forward.
Even when we stumble, we talk a lot about stumbling forward – also a mantra inside our shop. And we talk about really not wanting to operate from the cutting edge of the obvious, but to push the boundaries and ask: What else is possible?
So, staying brave is more of a call to action inside Heron, and we try to figure out what that means every day. And I should say, staying brave in the face of supporting our partners. It’s hard to make decisions on the ground. It will never be unanimous. And to hold them and to provide supports as they move through that as well.
We talk about our archetype as being servant leader. And everybody talks about that. But what does it mean inside Heron? It means you have to have done enough interpersonal work to really understand where your ego comes from and to be monitoring that every minute of every day.
Denver: Well, talk about that and change. Change is so hard, and that’s really what we’re talking about. Because we’re all pretty comfortable in what we’ve been doing. And I look at, let’s say, the foundation world – decision-makers actually have to become facilitators in some ways. It’s like a different skill set, and it’s really hard, and we are more comfortable with what we do than what the world will become.
What have you learned about how individuals and organizations can change as part of this learning journey?
Dana: You’re exactly right to put your finger on that. I will say, just inside Heron, we talk about— for example, we talk a lot about: We don’t believe you can do this work well if you’re not doing your interpersonal work.
So, we talk about our archetype as being servant leader. And everybody talks about that. But what does it mean inside Heron? It means you have to have done enough interpersonal work to really understand where your ego comes from and to be monitoring that every minute of every day. Because the power dynamics of philanthropy will teach you that the moment you show up as a funder, you are de facto the most beautiful, the most brilliant, the most enlightened person on the planet. And you have to have the personal fortitude and will to always redirect and ask how you can support the will of the partners.
And so, we spend a lot of time doing interpersonal work. We literally refer to it as our conscious relationship lab. We spend hours on it every week where we are working as a staff to make sure our egos, our institutional access to wealth and therefore power, frankly, is always in check. And it is a moment-by-moment, day-by-day process. And we invite our partners into that work as well. So, for example, we can hold the container for direct and timely feedback even when it’s uncomfortable. And if you’re not prepared to have that turned back at you, you’re not prepared to work at Heron.
And the last piece on that around change is we’ve spent a lot of time with our staff talking about the notion that we are pivoting the organization to exactly be a service organization. So our job – we invited ourselves to have a whole plethora of other bosses. Perhaps not the smartest thing in the world, but it’s the pivot we’ve made. So, always learning that when our community partners have an idea, whether it’s a capital deployment idea or a learning agenda, we catch that. We figure it out. We implement it, and we provide it back. It’s done in a co-creation fashion. But that’s a little bit different than grant requests received, questions asked, funding decisions rendered. It’s a much more complex relationship.
For us, it really is, and back to this deep interpersonal work, we’re constantly talking about not centering ourselves as a foundation. Our growth, our existence in perpetuity – none of that from our perspective is relevant to the mission we’re trying to serve.
Denver: I’m tempted to say, Dana, what you just said is absolutely brilliant, but I shouldn’t be saying that.
Heron is different in so many different ways, and one of those would be people always ask foundations, “Hey, are you a perpetuity foundation or you a spend-down foundation? And you smile and say, “Neither.” Explain it.
Dana: Correct, our board is very smart, and I’m thrilled to say. is usually leading, and staff is always trying to catch up. And so, at Heron, our board made the decision that it’s not relevant to our work, that there’s not a form that we have to check somewhere that declares. And so, it’s not a conversation they choose to entertain.
Our guidance has always been: Work with community partners; try to respond to the questions that they’re asking you; deploy capital as appropriate in service to that. And if we shrink, then we shrink. And if we continue to grow because markets are doing what they’re doing, then that’s OK, too. It’s not great, but that’s OK, too.
And so for us, it really is, and back to this deep interpersonal work, we’re constantly talking about not centering ourselves as a foundation. Our growth, our existence in perpetuity – none of that from our perspective is relevant to the mission we’re trying to serve.
Denver: And I think that a lot of it is the conditioning of our society because we’re always being asked to make binary choices, either this or that. And every once in a while, you have to do what you do, and say, “No. No one can make me answer A or B because it’s limited.” And it doesn’t have the nuances. It doesn’t embrace the gray in terms of what could happen. And that’s where the goal really is.
Let me ask you about leadership in a crisis, Dana. What have you found to be the keys? And from this experience, are there any takeaways that are going to inform your leadership going forward?
Dana: Heron, like everybody, has had some bumps during the pandemic. We were not a place that had a culture of remote work, for example. And we find ourselves a year and a half on working remotely. And during that time, we’ve hired folks. Folks have departed. So you have team change in an environment where we spend a ridiculous amount of time together but none of it in person. We haven’t even met some of our colleagues, for example, face to face.
I think we’re learning a lot. I’m actually grateful for the timing of the way things happened. The interpersonal work and the focus on that for the staff, just by a hair, preceded the pandemic. And so, carrying into the pandemic, for example, we often start meetings with declarings. So, for example, I had shoulder surgery in September. It didn’t go great, and it often hurt a lot. So I would begin a meeting by saying like, “Just so you know, my shoulder’s really killing me. My trigger is a little short. I need some grace and patience.” Some of our staff who are parents would like, “I’ve had all I could take. I’ve got two toddlers at home,” or whatever the situation is.
So, allowing space for whole personhood as we launched into the work for the day really allowed us a space to have a different conversation and to really see each other, and to kind of bear witness to the context we were operating in. So that we had a space to be able to own those things or to express what we’re capable of in this moment. So that when we turn to face and support our partners, we knew what we were capable of. And we also knew our limitations.
So, I would say certainly doing the work within a team so that you can support each other, and sometimes you have to step forward and sometimes step back, has been a very lucky coincidence that we started the work in advance of the pandemic.
And I would say, we try to carry those discussions into our partner work as well. Like “What’s it like for you?” And they want to tell you about their returns or their performance of the portfolio. It’s like, “Great. I want to know all of that. And like, where are you as a human? How are you doing?” Those conversations have been particularly instructive.
Denver: I love it when you start meetings with a page from your user manual, that is always very good.
Finally, Dana, this has been such an incredible year with COVID and racial equity and racial justice issues; the January 6 attack on the Capitol. How do you believe this confluence of events is going to shape philanthropy over the next decade?
Dana: Philanthropy’s a funny animal as you know. But I think what I’m grateful for— and I don’t know, maybe every generation says this, but it feels different this time. There feels like there is a renewed call to action, that we’ve reinvigorated our look and our willingness to look at equity and where it comes from, and what is built in in terms of systemic racism.
And I do think we’re looking more deeply this time. And instead of always servicing the symptom, I do think some folks are starting to look at servicing the cause. And that’s hard, and that’s going to be a journey, but there seems to be the will, both philanthropically and in our country, perhaps on the planet at this point, to do some of that excavation. I think that’s a very scary and a very interesting and ripe territory for a better outcome.
Denver: I think you’re right. And again, we’re going in with the expectation that this is going to be messy, and that’s good. So, we won’t be surprised when it is.
Tell our listeners about The Heron website and some of the information they can find on it.
Dana: So, if anything, again, being nerds and kind of a funny shop, we’re very quick to write about our failures. And so, if you want to know about a bond we invested in that was impacted when we bought it and then didn’t go so well, there’s a bunch of that up on our website. If you want to talk about what we thought was portfolio optimization and ended up with private prisons, that’s up on our website.
So heron.org is the website. You can click through to see the Dare to Change material that we’re talking about. And we practice what we call radical transparency. We believe we steward money in the public trust, and we have an obligation to be as transparent as we can be about what our actions are and why we’re taking them.
So you’ll find blogs. You’ll find spaces to interact with us. You’ll find our holdings across our portfolio. And we love to engage in conversation about what’s working and what’s not, more often than not. But very, very open and welcoming of any conversation.
Denver: And you normalize failure, which is great. And we need more of it.
Dana: We do.
Denver: So, thanks, Dana, for being here today. It was such a pleasure to have you on the show.
Dana: Thank you. I appreciate it.
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