Are Impact Investing and Women's Leadership Connected? We Ask Clara Miller

As a follower of philanthropy, I am intrigued by leaders who seem to have a fundamentally different vision. I am also intrigued by the idea that women bring a perspective to leadership that could prove pivotal in tackling big problems in new ways. 

Which is why I must confess to a fascination with Clara Miller, who has radically restructured the Heron Foundation to put it on the vanguard of impact investing. 

I wondered if Clara Miller might be doing something particular that reflects how women’s leadership tends to be different from men's leadership.

So I was excited to have the opportunity to hear Clara Miller speak at this year’s Yale Philanthropy Conference, Fostering Ecosystems of Change. She could not have been a more fitting speaker on the subject.

As Clara Miller and Heron see it, events leading up to and following the Great Recession revealed long-time trends that have changed the nature of U.S. poverty. In her recent essay, Building a Foundation for the 21st Century, Miller wrote, "Not only was the country light years away from achieving the gains [Heron] sought, but in many cases things had become worse for Americans in poverty... After a sobering strategic review, we concluded that the world had changed, and that we must change as well."

Access to assets—the main strategy the foundation had been using to help people out of poverty—no longer seemed to be an adequate antidote. “Acquiring a home, getting access to credit, and investing in education were helpful anti-poverty approaches only insofar as people could get jobs that produced reliable and adequate income,” Miller wrote. 

But structural changes in the U.S. economy make it harder for a growing number of workers to earn the money they need to build wealth. Those changes include the spread of low-wage and contingent employment models, high rates of unemployment and underemployment, and such macro trends as globalization and technological advances that favor capital over labor. Miller sees a market economy that, at a basic level, is failing "to deliver on its promises to a growing percentage of Americans." The kind of traditional fixes favored by philanthropy, which are designed to address limited or temporary markets failures, aren't going to cut it.

When Miller took the helm at Heron in 2010—with the economy still reeling from the financial meltdown of 2008 and "the greatest stripping of assets of the poor in American history"—she wanted to make the foundation more responsive to today's new economic realities. 

As we’ve written before, the Heron model of philanthropy is about deploying all the foundation's assets to advance its mission. That sounds like common sense, but contrasts sharply with how most foundations operate—which is to tap only the tiniest fraction of assets to advance their mission, paying out grants based on income from endowments that are typically invested in ways that have nothing to with a foundation's goals (and, in some cases, may work at odds with those goals.) 

Before coming to Heron, Miller was CEO of the Nonprofit Finance Fund, which she founded in 1984. NFF is a community development financial institution that now has over $300 million in assets under management and says it has "provided $575 million in financing and access to additional capital in support of over $1.5 billion in projects for thousands of organizations nationwide."

Miller knows just how badly many nonprofits and social enterprises need more capital—and the ways they can have greater impact when they connect with such capital. Under her leadership, Heron is helping meet that need. It has set the goal of deploying 100 percent of its assets to advance its mission, using a multi-pronged strategy to reduce poverty in America.

This approach has entailed breaking down some of the traditional walls that exist within foundations and, in effect, reinventing how such places operate to meld together the investment and grantmaking sides of Heron.

“Essentially, the endowment side doesn’t really interact with the giving side," Miller said, describing typical foundations. "They exist in separate universes."

To Miller, this is one of the fundamental flaws of foundations, and part of the reason systemic change is so difficult. “The conventional model of a foundation has been described as essentially a hedge fund with a relatively small giving program attached to it. Grants are seen as the best, if not the only, way to work on mission.”

Lately, of course, there's been an explosion of interest in impact investing, with the traditional foundation model coming under growing challenge. 

But Heron is far ahead of nearly any other foundation in embracing a new approach. It has now shifted the majority of its assets into mission-related investments as it drives toward its goal of 100 percent reallocation within the next few years. Among other things, Miller sees this shift as bringing Heron more into the economic mainstream and escaping the marginalization that is common for foundations. “We wanted to position ourselves as influential in the economy, not as a special place with a special language in a special little terrarium where we were not part of the economy.”

Today, as a result of its investing changes, Heron has the capital to have a far bigger impact on America's economic life to advance its mission than it previously did. Internally, the foundation has broken down the traditional divisions between program officers and investment officers to create more “collaborative outward-looking teams, encompassing hybrid skill sets,” said Miller.

Whereas many foundations that do impact investing have a separate staff to handle such investments, and report them separately from their grants, Heron has sought to create an operation that fully integrates its approach. If you look over its "investments," you'll find just one list of investments made in nonprofit and for-profit entities. 

So how is this all connected to women’s leadership? Are there ways in which Clara Miller is taking a more responsive and community-oriented approach to the problems of the world? Is much of the impact investing model really about being more holistic in approaching problems? And are these ideas that are more readily fostered in women-led organizations?

Well, in fact, there is a growing body of research suggesting that women are more interested in investing that is aligned with their values. Some leaders in corporate social responsibility, such as Lynne Ford, Executive Vice President of Calvert Investments, argue that women and Millennials will converge to foster more socially responsible investing in the coming decades. 

Miller was in agreement that many women-led funds and foundations appear to be interested in engaging with a more holistic approach. She pointed to the McKnight Foundation, led by Kate Wolford, as an example. That foundation is also emerging as a leader in impact investing. “Wolford has this radical Mid-Western common sense, and she is just forging ahead with their restructuring, carving it out piece by piece.”

Miller also sees women as a powerful force on the impact investing scene in general. “Many of the people who are actually getting it done—are we surprised?—are women. Nancy Pfund at DBL Investors is one example, and then there’s Deborah Winshel at BlackRock.”

But the larger trend Miller sees is that many foundations have begun to embrace a less traditional approach. Miller is serving on an internal committee at Ford that is working on re-allocating their investment portfolio, and she has heard from others, such as Stephen Heintz, President of the Rockefeller Brothers Fund, that they have also restructured their business model to be more holistic and interconnected, realizing the contradictions inherent in separating money from mission—and also how important it is to use philanthropic capital to tackle systemic problems in today's market economy. 

“All the grants in the world will not make up for a private sector that believes it can do predatory lending or pollute the atmosphere in any way it wants," Miller said. "We can’t do that any more. Let’s not pretend we can."