D. Wayne Silby, W'70
D. Wayne Silby, W’70, makes you think what a great country this is — and what an amazing school Wharton is, that an 18-year old kid from a small town in the Midwest could seek it out and receive an education and relationships, with which he unexpectedly transformed the world. First, there is Calvert Investments, a $12 billion investment management group he founded in 1976. Then, six years later, with his Calvert Social Investment Fund (CSIF), he helped conceive the impact investing movement, which collectively, today handles $3.4 trillion in assets. In 1987, he co-founded the Social Venture Network, a peer-to-peer network of 600 values-driven business leaders, social entrepreneurs and impact investors, which has incubated even more business alliances. Today, he spreads his message globally. As the recipient of this year’s Joseph Wharton Award for Social Impact, he conducted this interview with a modesty that reflects his roots.
How did Calvert Investments come about?
After graduating from Wharton and the then law school six years later, I didn’t have a job and didn’t completely know what I was doing, but I did have a desire to be financially independent. I founded Calvert, with John Guffy, a fellow from the last row of my Wharton accounting class. I developed the First Variable Rate Fund, which became one of the first variable-rate government money market funds. It was structured in such a way as to combine short-term, fixed-rate securities with long-term, variable-rate securities to provide one of the highest and safest yields. We did not foresee that interest rates would rise from 4% to 14%, but we did ride the boom! We were just in our 20s, but ended up managing over $1 billion by 1982.
What happened in 1982 that prompted you to create Calvert Social Investment Fund?
I went to a retreat — on “right livelihood” — which is a Buddhist principle to lead one’s life consistent with one’s values. It made me think to myself, “My gravestone is going to say that I got 30 basis points higher than the next guy.” But it wasn’t like I was Mother Teresa; I just thought, “Why don’t we put a little money into a fund that would screen investments?” I already had the staff, the lawyers and the phone lines, so why couldn’t we make this kind of filtered fund accessible to our existing audience. We weren’t betting the ranch. Once we set up CSIF, a lot of people showed up who truly were the founders — in a sense, I just financed it and created the impetus.
When you were creating Calvert in 1976 and then the CSIF in 1982, how were your ideas received?
You have to remember that, in 1976, we were just 25, and people advised us to get a job instead of starting an investment company because we had no money. It was probably the cheapest investment startup in history, as I wrote the prospectus myself. Regarding the CSIF — it’s hard to imagine because these social funds are so widespread today, but 31 years ago, it was the first comprehensively screened investment fund. People wanted to know if we were on LSD or something! Even at Calvert, our five key managers voted against it, but fortunately, their votes were advisory. My partner abstained from the decision, and I voted, “Yes.”
What is a recent investment by CSIF that you are proud of?
One Earth Designs. Its mission is to bring innovative and clean energy solutions to people around the world.
Why is Calvert involved in shareholder actions?
We do about 20 shareholder actions each year. Sometimes, the changes the corporations make are confidential, but one
example I like to share was about 10 years ago, we went to Dell to ask its board to do a study on what happens to its computers after being sold, and its lawyers were very against it. Then, Michael Dell heard about it, invited us to his office and supported the idea. Michael Dell was great. Dell began the first computer recycling program, partly because of the resolution we filed. If you are an investor, you have a responsibility to make some suggestions and speak up.
Everyone has the same 24-hour day. How do you get so much done in yours?
I have pretty good people. As Chairman of Calvert, I stick with governance issues. You want to empower management. That’s not to say that I agree with all their decisions, but if you micromanage, there are not enough hours in the day. So that’s how you do it — you have a rule that you try to go along with management, unless you feel that they will do so much damage to the company that you have to say something.
How do you select and grow people to bring your ideas to fruition?
You make a relationship with people who have talent. We try to look internally to promote people. Our people have substantial buy-in, so they want the company to succeed. For example, we just transitioned in a new CEO at the Calvert Foundation — she came from within the company. Also, we haven’t had a lot of changes over the years, because our co-founder CEOs love the company. It’s not like they are climbing a corporate ladder. There is a lot of meaning to their work. We have one company, Impact Assets, a donor-advised fund, which is part of the Calvert constellation, led by a fellow we took out of the foundation. And we started Social Capital Markets (SOCAP), which together have over $100 million under management, and we don’t even have an office. It’s amazing the talent wanting to work in this space.
We do have a back office in Bethesda, Maryland, but we don’t have a front office, because usually, they are networking with high-net-worth individuals, who are donating millions of dollars into investment opportunities. Most donor-advised funds just use an “off-the-shelf” system, whereas we help donors craft their investments, whether they want to support charter schools, or help an ecological venture. That’s a blessing of working within this impact arena, because a lot of top talent shows up. When J.P. Morgan announced its social finance fund, it attracted 1,100 resumes, from inside J.P. Morgan. In fact, I’ll be at Goldman Sachs this week, to help its social impact fund people — it’s a way for the company to attract talent. A lot of the younger generation, including the younger generation of wealth — where money is being transferred, want to know how their money is making a difference in this world, which makes sense to me.
How does Impact Assets work with donors?
We help donors look at investments as another means of manifesting their values in the world. Say, a high-net-worth individual has a liquidity event; he sells his company for $5 million, which is going to result in long-term capital gains taxes. He decides to donate $1 million in stock during this event to Impact Assets’ donor-advised fund, for which he receives a $1 million tax deduction. With the assistance of the investment team, the donor can advise that his assets are reinvested toward the installation of solar panels in schools, for which he can also earn a return that
inures to the benefit of his donor-advised account.
Early on, how important was language in helping investors and partners understand what you were doing?
Language is very important! You can have people come into a room under two scenarios. If they anticipate a competitive deal, they’ll act one way, but if they expect they will be collaborating on a social venture, the conversation creates a kind of openness — yet they are the same people. Those kinds of words — “collaboration,” “network,” “social venture” and “patient capital” — these are all parts of our lexicon that help inform and further these enterprises. Take “patient capital” — we think those deals should be on the table as well. Our company Seventh Generation was formed 13 years ago. If an investor had invested $100k at the time we invested, it would be worth $1 million today.
Is America unique in charitable giving, compared with Europe?
Absolutely. This is an American experience.
Can the general public participate in the work of the Calvert Foundation?
It’s interesting. This week, I’m going to New York to seek more net capital for Calvert Foundation; it’s a victim of its own success, in that the public has lent Calvert hundreds of millions of dollars. It’s one of the few ways that the public can participate in impact investing and express their values — because normally, it’s for high-net-worth people. Through the public’s lending, we support microfinance around the world. Calvert is bringing the democratization of impact investing to the fore, which is essential. But we do need more net capital to meet reserve requirements.
Have graduate schools gained a better understanding of how to teach about impact investing?
In 1993, at one of our Social Venture Network conferences, we asked some Stanford Business School graduate students to help out. At that conference they got this idea that became Net Impact, which today has hundreds of thousands of members. At Wharton, the Social Impact Initiative www.socialimpact.wharton.upenn.edu/ is hard to join. Wharton has a special understanding of finance, so it’s great the school is putting some thought in that direction. At Harvard, the social enterprise club is the most popular club. My executive assistant Jenna Nicholas will teach a course on impact investing to graduate students at Tsinghua University in Beijing next month. It’s unbelievable how this has grabbed young people’s minds.
What did you learn at Wharton that contributed to your success?
I loved Wharton, because it had very high standards! It was the late ‘60s, a radical time, but I loved finance. Actually, my first year in college was at a Big Ten school, where at 18, I invested all of my college tuition into cocoa futures. Probably not the wisest idea, but it worked out, and I transferred to Wharton in my second year, where it was normal for everyone to carry around The Wall Street Journal. Wharton had a certain standard among our classmates that encouraged you to think creatively. I was very charged — I think they mistakenly put me in the economics honors course — I joined clubs, and I was the first student to be on the Wharton curriculum committee and suggested that we should have the arts. I’m very thankful for my Wharton experience.
What are you doing now?
I’m speaking to large financial institutions, and national sovereign wealth funds around the world. We are building toward an argument that, if all major asset fiduciaries set aside 2% of their investment portfolios, at below-market rates, to bring more ecological balance and social justice into the world, then this would create more investable, sustainable opportunities for the other 98% of the portfolio. The result of these high-social-impact investments would be to reduce overall portfolio volatility, so the risk-adjusted returns of the portfolio will be better. If we can actually prove this, then it may suggest a moral imperative for allocating that 2%.