Dana Pancrazi


Dana Pancrazi is Vice President, Capital Markets at the F. B. Heron Foundation, having joined in 2006 after a career in private banking.

In recent years, the Heron Foundation has altered its strategy to shift focus from access to assets onto jobs and economic opportunity. Heron considers 100% of its endowment capital to be ‘in play for mission’, and deploys all capital from a single office. Ms. Pancrazi’s role involves identifying and developing relationships with other investors while also syndicating capital, via grants, market-rate investments and tailored finance schemes to enterprises that meet the Foundation’s mission criteria. 

Can you tell us about the mission of the Foundation?

Our mission started in 1992, when we were founded with an anonymous donation and the mission to help low and modest income people to help themselves out of poverty. Although we have modified our approach to investment over the years, our mission has remained consistent throughout.

The Foundation considers 100% of its capital to be ‘in play for mission’? What does this mean and why is it so important for the foundation?

We’ve been engaging in PRI [Programme Related Investment] since the ‘90s so the idea that something more than the ‘typical 5% [payout]’ should be in service to mission is not new to us.

At some point in the mid ‘90s, our trustees became frustrated that they spent 3/4 of their time together talking about our investment portfolio and not about the work we were to be doing in the world. They asked what has become the Foundation’s seminal question: ‘shouldn’t we be more than a private investment company that uses excess cash flows for good? Isn’t there a better way?’ That question is really what launched us on the path to exploring first PRI and later market-rate mission investing, and around the notion of - why should 5% of the assets be doing 100% of the work?

About ten years later we went through a presidential transition, which is always a natural moment for institutions to pause, and we were right in the heat of the moment with the great recession. For nearly 20 years we’d been an asset-building funder with primary strategies around home ownership and access to capital and small business. We’d been concerned with connecting low and modest income people to the mainstream economy, which had seemed like a good thing, but when our economy was having such problems, we were thinking ‘should this really be the goal?’ We then asked ourselves, if we have to be different to respond to the changing context, what should different look like?

We remain big fans of assets for people, but lots of things fall apart very quickly when households have no income. So that’s a big reason why we turned our focus to job creation. Many people and organisations take a human services/training approach to this problem, and do it very well. Given our focus on businesses, it was a better fit for us to focus on growing enterprises that are capable of adding good jobs to our economy.

So for us having 100% of capital in play for mission means that everything - all forms of capital (not just money) that we either possess or can access are in play for mission. Social capital, relationship capital, intellectual capital etc., if we have it. Because we’re a very small foundation, we spend a lot of time making connections for people - to money, other people, to investors. 


Why should 5% of the assets be doing 100% of the work?

Can you talk about some of the practical changes you’ve made internally so 100% is in play for mission?

It has been an evolution. One of my colleagues used to joke and say she was brought in as programme officer, and she was good at that – and when Heron adopted the new approach, she had to learn to love and embrace her ‘inner loan officer’. It started with everything from learning and working with staff to ramping up on reading financial statements and thinking about risk in financial terms and in terms of impact.

We haven’t had ‘silos’ at Heron for many years. There is no ‘investment function’ separate from the ‘programme function’. This was true before 2012, but in 2012 we merged this even further - we now have one set of people and that really demands a different outlook on the world. In practical terms it means we go into the marketplace looking for impactful enterprises. We are tax status agnostic - we don’t care if they’re a business or a non-profit - we’re interested in the impact they’re having and how money can help accelerate that impact and/or grow that enterprise.

How do you choose which organisations to invest in?

The foundation’s standpoint since the beginning has kind of been its own version of the Hippocratic Oath - “provide money, do no harm”. We’ve been taught that money is our tool, and we’re really hitching our success to the success of those we support and invest in.

When we ask an organisation ‘what does a slug of capital have to do with improving your revenues?’ - we’re often met with silence. The first thing we often do with an organisation is to offer them technical assistance to help them answer some of the questions we have for them. Many non-profits don’t think about themselves as businesses, they think about themselves as a collection of programmes.

We go through an underwriting process - getting to know an organisation, figuring out where it is financially, then working out what tool we will bring to bear. We have a range of financial tools we can deploy: grants, market-rate investments and or PRIs. For example, a particular grant might give capital upfront but state if this organisation later goes through a for-profit exit, we would become equity holders, and therefore be able to share in the success we hopefully had contributed to.

There are a lot of well-recognised ways of measuring financial return, but how do you measure social impact?

In our field, the focus is still very much on outputs, not outcomes—in other words, metrics tend to be focused around counting things rather than about impact. Things have improved, but we’re not there yet. Our approach to date has been to be led by the enterprises, and due to lack of uniformity and standardisation we try to bring the language closer to something that would be recognised across the sector.

We lean heavily on organisations to understand what they’re tracking and why, because for us the best deals are really when the company’s main activity and the impact they have are part and parcel - so doing more of their work will have more of a good impact. The impact is not incidental but central to what they do and directly related to them doing business.

The impact selection is not perfect and we all wish it were easier, but for the enterprises that we end up working with, it’s all about the management dashboards that they’re typically already using. There’s a whole body of work that Pioneer Employers is doing with support from the Hitachi Foundation. We look at lots of the Pioneer Employers because these are companies that absolutely believe that good behaviour in relation to the front-line workforce has a positive effect on the bottom line - that’s exactly the type of company we’re interested in.

There is an ongoing discussion around what constitutes ‘social alpha’ from an investment perspective. We would like to see more work on this issue and more focus on ‘outcome investing’.

We’ve also invested in the ‘data infrastructure’ of impact investing.  We want to advance and try to standardise this process as we recognise that what we have at present is haphazard at best, and still very much about whether a company is reporting anything on a given measure, rather than whether they actually did a good job on that measure.

Do you believe there is a conflict between financial returns and social impact?

There is often a presumption that there is a trade-off between financial and social impact, but we don’t believe this is necessarily the case.  In fact, when the enterprise is having a positive impact in the course of their business—for example, providing well-paid jobs with benefits and growth opportunities—the opposite is true: more money comes with more impact.


The foundation's standpoint since the beginning has been its own version of the Hippocratic Oath: - 'provide money, do no harm'.

Can you give some examples of some of the types of investments that the foundation has made?

One good example has been the data aggregation company we use - CoopMetrics - to help automate the reporting across the enterprises we work with. When we first became interested in becoming a client of theirs, it was clear that they’d have to expand their systems to work in the non-profit and small business sectors.  So we engaged in discussion with them around providing the capital they’d need to grow their business. Initially we were expecting to provide a grant for this. But as we progressed with the underwriting stage of this process, it became clear that a Programme Related Investment (or PRI) would be more appropriate, as they are a co-operative that can and does distribute profits when it has them. Under the terms of this agreement, we take 5% of their profits in any year that they have them. We don’t intend ever to re-capture the principal, especially as this was initially thought of as a grant, we’re just seeking a share in their profits when they have them. If they don’t make a profit they don’t have to pay us anything, so we ensure we aren’t hurting them in difficult times.

Similarly, we have other traditional non-profits that have developed products that became of interest to the for-profit sector. Knowing that there are potential for-profit suitors, we have written clauses into some of our grants which specify that the finance is intended as a grant, but if there is a for-profit exit at some point, we are interested in recapture of the principal. Lots of opportunities like this emerge, particularly as the different forms that a business can take are increasingly getting muddled.

On the pure ‘market rate’ side of things we recently invested directly in a company called ‘Ecologic’, which is very interesting as they make containers for things like household detergents and food supplements out of recycled and recyclable materials. When they ship, they flat-pack the containers. They have a proprietary technology which fills what is basically a plastic bladder inside these containers, which means they can move much more material than in normal shipping - less of a carbon footprint, less wear and tear, less damage to infrastructure etc. The reasons we invest in them are because the trade line is net positive to the world, but similarly by deploying that trade line, they’re creating human value with their employees, and so whatever their future as a company, the employees have a bit of protection by the nature of the fact that they’re becoming knowledgeable in a proprietary technology. This is an example of how the trade line and the impact - the value creation both for humans and in terms of the financials - comes together quite well.

How do the organisations/companies report back to you?

We try to handle everyone in a similar way, regardless of the financial tool they have received. We don’t want organisations simply filing reports for us to file away in our archives; we want this information to exist outside our walls so that it has utility for other investors and funders, as well as the organisations themselves.

Typically we don’t ask for information that’s special or unique to us. If it’s a listed company we can track their success using publicly-available information, such as the information available through Bloomberg terminals.

When it comes to non-profits or privately held businesses, we partner with CoopMetrics, a data aggregator that pulls relevant data together that we can then see. It’s an automated system, so it shouldn’t be a burden for the reporting enterprise. Once the organisation is mapped, it takes about three minutes every month, or even every quarter, for them to upload the relevant data. They own this data and they simply give us access, and we can interrogate it as we need to without taking up their time.

In a perfect world this should cut down on the time organisations and charities spend collating and reporting such data. As this information is ‘in the cloud’, organisations could potentially grant access to this data to other investors or funders, thus limiting the number of unique reporting instances that the enterprise has.

Do you think that more foundations should take Heron’s approach of mission investing?

It’s not in our culture to tell others what they should be doing. But that said we are very clear that from our point of view all investing is impact investing. Every single dollar that we use as a foundation has an impact on the world. And we think people should know what that impact is, good or bad. Once they know what that impact is, they often choose to try and improve it.

What do you see as the main challenges and opportunities for mission-related investing, especially within the US?

Certainly the issue of uniformity is a challenge - everyone talks a different language about what they think and what they seek.

‘Deal flow’ remains a bit of a challenge as well. I don’t mean to suggest that there are not lots of opportunities out there, but finding opportunities is difficult in a market that is not very well organized. Even our infrastructure traditional broker-dealers, private banks, etc. are making good progress - but are late to the party. For the average investor - particularly those not affiliated with a private office, a private family office or a private foundation - the market is very difficult to access. It would be interesting for our sector to take more of a lead in product development - we’ve seen that with Gates and the Global Health Fund.

As a [foundation] sector, one of the best things we can do is be clearer about what the fiduciary duty of the board is. Most Boards think of duty of care and duty of loyalty. In the tax-exempt environment you also have the challenge of ‘obedience to mission’, and there’s case law on this. How does a board think about its duty? Is the duty to mission just for the programme budget? I think that’s an interesting question.

What are some of the key lessons learned by the foundation and by its leadership over the years? And especially as part of the transition to mission investing?

The biggest lesson we’ve learned is that 100% in play for mission is a journey not a destination. You can’t sit down and map how you get there. Just as investments can fail financially, you will also have investments that fail for you on impact. There’s also an ever-changing informational infrastructure around impact, one which we are doing our part to push onward and upward – so we’ll be forever in the process of continually optimising our portfolio, along both financial and social lines. We’re setting people up for heartache if we talk about 100% as a destination: it is a false summit. That’s been a huge lesson for us.

We also are constantly thinking through tough evaluations about how enterprises perform and their place in the world. For example, what if a company creates great employment opportunities but it’s a polluter?  Perfect companies are as rare as perfect people, so how do we support the good without demanding the impossible, and yet discourage the negative in a way that has teeth?

What do you think needs to be done to grow mission investing in the US?

All marketplaces start with data aggregation. We tend to start with standards bodies, and we actually need to get the data aggregation right first. Once we have that right, then we can see what enterprises are actually doing, and the rest will follow.