The Story of Founding TFAC

Terry Mollner

My passion to reduce and end poverty on Earth began when I met Bob Swan. At that time, 1975, he was an elderly white-haired non-violent civil rights activist. He taught me human society is agreements. The most fundamental agreement is to give priority to the common good. It began with the agreements to not kill or steal, but we have added many additional agreements. Our job is to keep the agreements that are in alignment with giving priority to the common good and work to mature those that are not. We were to do this by having the process be the same as the end we are seeking, using love instead of violence.

At that time, he was focused on changing our economic agreements. It was from him that I first heard the words “socially responsible investing.” We both liked each other and shared a similar worldview. I had spent the previous year primarily reading everything that interested me and had concluded, as Bob had, Mahatma Gandhi was one of the most brilliant thinkers of the last hundred years. To further the idea of socially responsible investing, and some of Bob’s other ideas, in 1975 we created the Institute for Community Economics, Inc. (ICE).

Bob and I believed the day would come when all business owners and investors would see the wisdom of giving priority to the common good and second priority to profits or anything else. This belief stemmed from the wisdom we had both learned from Mahatma Gandhi. It is the universe operates as an indivisible whole. Therefore, the highest priority of all people is the common good of us all. About that we do not have choice. That is the result of the universe being an indivisible whole and all the parts cooperating, not competing, with each other for the health and maturation of the indivisible universe. People’s beliefs could be anything, and their secondary intentions and behavior flowed from those beliefs. Gandhi’s brilliant social change strategy was to always primarily relate with other’s primary good intentions. He knew that this is how they see themselves. They then feel seen and respected by us. This builds trust in the relationship. Then, when facts become obvious to both of us, we can easily mutually agree they are facts and forge new, more mature agreements based on them.

We invited about fifteen business, labor, and civic leaders from around the country to meet once a month at our offices in Cambridge, MA. I facilitated the meetings and kept notes of our discussions. I would then mimeograph copies (do some of you remember those days?) of my now organized notes and mail a copy to each participant. The next month we would meet to improve and add to them. We met for over a year and at the end we had a list of what we judged to be one of the first set of “socially responsible guidelines for investing.”

Wayne Silby was one of the people I had invited to be a member of that group. Many things happened but eventually Wayne called me and suggested we use those social screens to begin the first family of socially responsible mutual funds in his company. He and his partner, John Guffey, had over the previous years created the First Variable Rate Government Money Market Fund. It had become very successful. Their company’s name was then changed to be the Calvert Funds to accommodate this new addition.

When Wayne, Robert Zevin, who was going to manage the assets, and I met in 1982 to incorporate the company, I argued for up to fifteen percent (15%) being able to be invested at low interest rates to reduce poverty. Bob Swan and I had started one of the first of what became known as “community development financial institutions (CDFIs).” It is usually a non-profit, charitable organization that can receive both tax-deductible donations and raise capital by borrowing money. It then makes loans (it does not donate the capital) at as low a rate as possible in low-income communities to build low-income housing and to begin small businesses and cooperatives.

ICE was one of the first organizations to do this because we had discovered it could be justified within the definition of “charitable” at the Internal Revenue Service (IRS). The definition is one sentence and one of the phrases is “to reduce neighborhood tensions.” That was what the IRS allowed us to use to justify a loan fund in a tax-exempt charitable organization. People were beginning to learn this model from us and creating CDFIs all around the country. I wanted us to make loans to them.

Of course, such an activity had never been done by a mutual fund and Wayne and Bob were at first against it. To keep the possibility alive, I agreed to put in the legal papers we could only loan up to one percent (1%) of our assets at below market rates to reduce poverty. I also agreed we did not have to do anything with it until socially responsible investing was permanently established as an option in the investment community. They agreed that was a good solution.

We launched the Calvert Social Funds in October of 1982. We thought it would take us five years to get to $30 million to break even. In the Spring of 1983, the students on college campuses had large demonstrations against apartheid in South Africa. We were the only three mutual funds—an equity, balance, and money market fund—that were not investing in businesses doing business in South Africa. We rapidly grew past $30 million in assets under management. Today, in 2021, all nearly fifty mutual funds in Calvert Funds are managed socially responsibly and we have over $21 billion under management.

In 1988, I read in the Business Section of the Sunday New York Times an article about Muhammad Yunus and the bank he had created in Bangladesh, the Grameen Bank. It was making low interest and uncollateralized loans to very poor people in villages throughout Bangladesh and having a nearly 100% repayment rate. The secret to their success was organizing the villagers into solidarity groups who supported each other. I realized he had discovered something new and wonderful to reduce poverty. It was six years later and there were now many socially responsible mutual funds.

I called each of my fellow board members on the Calvert Funds and argued now was the time to use that one percent (1%) to begin making loans to the CDFIs around the nation and to groups around the world like the Grameen Bank. At our next board meeting, the board voted to allow me to loan up to $250,000 at a low interest rate and without collateral to CDFIs around the US. I made loans of $25,000 to ten strong CDFIs.

A year later, we had meetings of our shareholders in Washington, DC and San Francisco. When Wayne, the chair of the board, let them know as part of full disclosure we had done this, and Rebecca Adamson on our board gave an emotionally moving speech about it, they all shouted for us to do more of it. I then was made chair of the High Social Impact Committee and the board allowed us to make millions of dollars of loans because the assets were now approaching a billion dollars under management.

In the early 1990s, we created the Calvert Foundation, now renamed Calvert Impact Capital, to allow people to invest directly into our High Social Impact Program instead of only indirectly by having a small portion of their investments in our mutual funds being used for it. Today, Calvert Impact Capital has loaned over $2 billion to reduce poverty around the world. There are also CDFIs everywhere throughout the US, also now supported by grants and loans from the US Treasury established in the 1990s during the Clinton Administration. Calvert Impact Capital is one of the main private sector sources of funds for them as well as microloan programs around the world similar to the Grameen Bank.

In 2020, during the pandemic, we successfully worked with the state of New York to create the New York Forward Loan Fund. The state provides the riskiest capital, foundations led by the Ford Foundation provide the next riskiest capital, and the banks and corporations provide the least-riskiest capital, all as low interest rate loans. The capital is then loaned at low interest rates to major CDFIs throughout the state. They then loan the capital to small businesses run by women, people of color, and low-income people. Well over $100 million was quickly raised and the program has now also been launched in California, Washington, and one for the thirteen southern states from West Virginia to Texas. It will probably be eventually launched in every state. We have succeeded in accomplishing one of our earliest goals: having governments, for-profits, and non-profits cooperate for the common good.

In 2000, I stepped in to help my friend Ben Cohen, the Ben of Ben & Jerry’s, to save his and Jerry’s company from being sold to a multinational that did not have progressive values. This is a long story, but the key parts are I learned of this from him on Monday morning and by their Thursday board meeting our friend Judy Wicks and I had gotten twenty-four of the most prominent people in socially responsible business and investing to sign a power of attorney to authorize me to be their spokesperson and put in an offer to buy Ben & Jerry’s for $265 million. That stopped the planned sale (no one knew I did not have a penny in my pocket to buy it; it was pure hutzpah). Once I had secured financing, the board voted to sell to our group. However, the other company got word of it before we signed the papers and put in a higher price we could not match. Unilever, a progressive multinational, was our minority partner that was going to help us finance the purchase. After three months of negotiations, Dick Goldstein, the CEO of Unilever of the Americas, had fallen in love with socially responsible business and believed, as we did, it was the future of business. As we are witnessing today, this is more and more true each day.

When our Hot Fudge Group, as we called ourselves, could no longer buy it, Dick invited Ben and me into a private meeting in the Unilever board room. He made us an offer to be part of Unilever’s bit to buy Ben & Jerry’s. He would allow it to remain a separate company, the membership of the board could be self-perpetuating, he would keep all the socially responsible policies in relationships with the employees, community, and environment we had agreed upon when Unilever was going to be our minority partner, and we could forever spend the same percentage of the annual budget on social activism as the year it was bought. He also agreed we could take positions on social issues Unilever did not agree on, and he would put all of this into a legal contract. Ben & I immediately said yes without even having to look at each other.

That is how Ben & Jerry’s operates to this day and we are the only socially responsible company bought by a multinational before or since that has acquired such a legal contract.

I recently retired from the board of Ben & Jerry’s, the Calvert Funds, and Calvert Impact Capital to focus on creating Trust Funds for All Children and building the Common Good Capitalism Movement, that I am sure is the next layer of maturity of capitalism (free markets). To learn more about it, go to www.commongoodcapitalism.org.

We do not want to do away with honoring individual freedom and free markets, the priority of capitalism. Capital making more capital for capital is secondary in importance, even though many think it is the priority of capitalism. Therefore, I am confident capitalism will continue; however, I am also confident it will mature into common good capitalism. This is where all in the marketplace give priority to the common good and second priority to profit or anything else.

There are two significant things humanity is now ready and able to do. The first is to mature capitalism into common good capitalism. The second is to end poverty by creating a trust fund for every child at birth to assure at least minimum financial security their entire lives. The purpose of Trust Funds for All Children, Inc. (TFAC) is to do the latter. We think of it as ending poverty from the bottom up. It also puts in motion the consistent building up of capital in the TFAC Global Fund. It is an endowment fund for Earth that will solely be used to eventually, someday, have every child on Earth born with a TFAC Trust Fund supported by common good corporations. We can do this!