March 18, 2006
Thirty Years and Counting: Cofounder Wayne Silby Recounts the Birth of Calvert
by Bill Baue
To celebrate the thirtieth anniversary of Calvert, SocialFunds.com speaks with co-founder Wayne
Silby about its genesis, development, and future.
Thirty years ago, Wayne Silby could scarcely have envisioned that he was starting what would become
one of the leading names in socially responsible investing (SRI). Actually, the name Calvert did not exist for the first few years of
the company's incarnation. Moreover, SRI as a concept had yet to become fully developed--indeed,
the maturation of Calvert helped spur the maturation of SRI.
What Mr. Silby founded
in 1976 with his old Wharton classmate
John Guffey was not a SRI fund at all. Rather, they launched the First Variable Rate Fund as one of the first money
market funds by creating a synergy between short-term fixed rate Treasury Bills and long-term
variable rate securities that produced an "eye-popping yield," according to Mr. Silby.
my last year in law school at Georgetown,
one of my professors was from the Small Business
Administration, and he mentioned how the guaranteed portions of SBA loans were actually
government securities that could be severed by a loan from a bank," Mr. Silby told SocialFunds.com.
"I talked with some banks and they loved the idea of selling off their guaranteed portions as loan
participation and getting good servicing fees--even after those good servicing fees, these loan
guaranteed participations were actually the highest yielding government securities you could buy."
"Then a bank asked me about some variable rate loans they were making to small businesses,
so I thought, how about bundling them in one of these new-fangled money funds, because the benefit
of a variable rate loan is that the value stays constant while the interest rate varies," explained
Mr. Silby. "We started First Variable Rate Fund, and when the interest rates started to rise,
people began to understand that six percent was better than three percent."
achieved the highest yield of all money market funds for a number of years. This success, instead
fulfilling Mr. Silby in and of itself, sparked a realization of greater fulfillment.
attended a conference in Vermont on right livelihood, which asks, 'how do you live your life in a
way that is consistent with your values on a day-to-day basis?" said Mr. Silby, referring to the
fifth path of the Noble Eightfold Path in Buddhism. "The idea came up, 'why don't we have a fund
that would buy companies that reflect our 1960s values across the board and stay away from the
bottom-fishers, like those that are polluting?'"
In collaboration with SRI pioneer Bob
Zevin of the US Trust Company
in Boston, they created the Calvert Social Investment Fund in 1982, named after Calvert Street in
Washington, DC, where their offices were housed.
"When we told people we were starting a
social investment fund, they thought we were nuts, having acid flashbacks to the '60s," recalled
Mr. Silby with a chuckle.
However, '60s values of environmentalism, racial and gender
equality, and respect for human and labor rights resonated with some investors. When formulating
its screens (which have all remained in effect since, with the later addition of an indigenous
peoples' rights screen), Calvert decided to take a stand against companies doing business in
apartheid South Africa. This decision catapulted Calvert into forefront of a movement that
ultimately resulted in the abolition of apartheid in 1994.
"Our advisory council's
decision on South Africa was not based on marketing studies," said Mr. Silby. "Our guiding
principle in devising the screens was, 'when in doubt, do the right thing.'"
rationale underpinned Calvert's decision to commit one percent of fund assets to community
"Calvert board members Terry Mollner and Rebecca Adamson were responsible for
saying, 'we have all these high-minded ideals and we're executing them, but where is our
intervention at the grassroots, people level?'" Mr. Silby recounted. "As a model investor, let's
set aside some amount of money that we'll invest at a below-market rate of return to further issues
of social justice."
"When we brought it to our shareholders for approval, there were
motions from the floor that one percent was not enough--'let's commit three percent!' they said,
and I said, 'let's try one percent first and then we can see," Mr. Silby said. "We've been able to
leverage this one percent, which amounts to about $25 million, to attract another $100 million
through the Calvert Foundation, and
recently we're getting substantially more interest in everything from microfinance to coffee
cooperatives in Brazil."
Fast-forwarding to the present, Calvert is expanding its values
base to encompass even more generous sharing, through its Calvert Digest, which discloses information on
companies that Calvert's social research team has amassed.
"They do too much good work to
not be sharing it with the world, so the Calvert Digest was created to start disclosing more of our
methodology and ratings on these
companies," said Mr. Silby. "The idea is to help people understand where the companies they invest
in stand as corporate citizens in the world."
"If people don't have the information, they
can't make the changes," Mr. Silby concluded.