Archbishop's web site Denver Catholic Register Parishes Catholic Pastoral Center
October 16, 2002
Competing principles at play in stock investments
Number of investment companies catering to morally conscious Catholic investors
By Julie Carroll
MINNEAPOLIS (CNS) —For years, Catholics who avoided investing in the tobacco, alcohol and gaming industries — so called "sin stocks" — could rest assured they were not contributing to the demoralization of society, or so they thought. However, in today's business environment, socially conscious investors have a harder time getting a good night's sleep.
In the past, socially minded Catholics were left to their own devices to find companies that both earned a profit and fell in line with their Catholic beliefs. But a number of investment companies now offer mutual funds catering specifically to Catholics.
One of these, Ave Maria Catholic Values Fund, managed by Schwartz Investment Counsel in the Detroit suburb of Bloomfield Hills, Mich., screens companies that violate Catholic principles, as defined by an advisory board of six Catholic lay people, including former baseball commissioner Bowie Kuhn and Domino's Pizza founder Thomas Monaghan.
Ave Maria screens out all players in the abortion industry, from drug manufacturers to pharmacies to hospitals to insurance companies. Pornography distributors, including cable firms that carry the Playboy Channel, have been excluded. Companies that contribute to Planned Parenthood also didn't make the cut.
Ave Maria also eliminates from its portfolio companies that offer nonmarital partner benefits.
"Our Catholic advisory board believes it's a denigration of marriage to put a nonmarital union on a par with marriage, which is a sacrament," explained George Schwartz, president and manager of the fund.
Ave Maria has crossed off 250 companies — 7 percent of the fund's 3,000 prospects. Ave Maria's goal is "to change corporate behavior by avoiding these stocks much the way the (South African) apartheid protest worked 10 years ago," Schwartz said. An international divestment campaign during the 1980s played a strategic role in weakening the economic viability of the South African regime.
Some investors may question whether reducing the number of stocks from which managers choose hurts the fund's performance. Schwartz insists that's not the case.
"It leaves us plenty of good companies to invest in," he said, adding the fund's performance has been "extraordinarily good." As of Sept. 18, the fund was down 3 percent from its inception 16 months ago, whereas the Standard & Poor's 500 was down 26 percent during the same period.
Aquinas Investment Advisors in Dallas, managers of the Aquinas Funds, screens companies for policies related to abortion, contraceptives, weapons of mass destruction, gender and race discrimination, human rights, economic priorities, environmental responsibility, fair employment practices and tobacco. But rather than simply avoiding all companies whose practices violate Catholic values, the funds' managers sometimes invest in those companies and use their shareholder power to change them.
"We did a lot of research and we couldn't find a single company in the United States that changed" because of people trying to blacklist it, said Frank Rauscher, president of Aquinas Funds. "We could find lots of examples of companies that had changed because they were owned by social activists and the activists put pressure on them."
Aquinas claims a high success rate in changing corporate behavior over the past eight years.
"Our philosophy is 95 percent of companies are changeable," Rauscher said.
Among Aquinas' claims of success: Tenet Healthcare Corp. no longer performs abortions; six major drug companies in their portfolio pledged they would not be involved in the production or distribution of the RU-486 abortion pill; Whirlpool Corp., Target Corp. and Harley-Davidson have discontinued funding Planned Parenthood; The Walt Disney Co. appointed a priest to its board of directors and hired an external person to monitor labor practices; and PNC Bank and General Electric now recruits women to management positions, after Aquinas put pressure on them for gender discrimination.
Rauscher said the way to effect change in a company is to show it how objectionable policies could affect its bottom line. "None of them are going to get out of it because it's the morally right thing to do. They're going to get out of it because it's the economically right thing to do," he said. "You get their attention real fast if it's an issue that's going to affect their pocketbook."
If Aquinas is unable to engage a company in dialogue over objectionable behavior, or is unable to make "reasonable progress" toward changing that behavior, managers will remove the company from its portfolio. To date, Aquinas has eliminated fewer than a dozen companies.
"The reason is we've been very successful," Rauscher explained.
Faith-based investing is not a new concept. Thousands of years ago, Jewish laws gave detailed directives for ethical investing. In the 1500s, Quakers refused to invest in weapons and slavery. Concerns about war, the environment, civil rights and women's rights in the 1960s, as well as apartheid in South Africa in the 1970s and '80s, gave rise to modern social investing.
Today, faith-based investing has enjoyed a renewed surge of popularity in the wake of corporate scandals. In 2001, there were 75 religious mutual funds, a handful of them Catholic, investing $4.42 billion.
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