HOMEPAGE for this issue: November 14, 2012 // Download PDF Version // Click to install/update Adobe Reader on your computer

Faithful investing: good for the soul and the bottom line

By Julie Filby

Catholics are called to put their money where their faith is, when it comes to their investment portfolios. According to Blessed John Paul II, the decision to invest is “always a moral and cultural choice” (“Centesimus annus,” 1991).

“Catholics are encouraged to try to live their values in every aspect of their lives, including through investments,” said Daniel Nielsen, director of socially responsible investing for Christian Brothers Investment Services Inc., “to make their best effort to align their actions and activities with core beliefs.”

The firm, a leader in Catholic socially responsible investing (SRI), manages assets for more than 1,000 Catholic institutions including dioceses, health care organizations, universities and religious orders.

“SRI is the broad universe of investing with respect to one’s values,” said Nielsen, “faith-based and non-faith based.”

From 1995 to 2010, SRI grew at a pace faster than the broader universe of conventional investments under management, according to data from The Forum for Sustainable and Responsible Investment.

Specifically, Catholic investing is a category of socially responsible investing.

“You can divide (socially responsible investing) into subsets, such as Catholic investing, because you’re talking about a specific set of values,” he said. “First and foremost what defines Catholic investing are life ethics and incorporating life issues into strategies.”

Socially and morally responsible approaches seek not only to “avoid the bad,” but “do the good.”

Avoid the bad
According to guidelines from the U.S. bishops, this strategy refuses to invest in companies whose products or policies are counter to Catholic moral teaching, such as those involved in abortion, contraception, embryonic stem-cell research, human cloning, racial discrimination, gender discrimination, pornography, or investments that might cause “confusion or scandal” such as heavy investment in conventional military weapons producers or gambling (“Socially Responsible Investment Guidelines,” Nov. 12, 2003).

“A number of funds screen out specific activities of individual companies that violate Catholic values,” explained Nielsen. “They’re looked at on a company-by-company basis.”

He said it’s important to consider options available and understand one’s responsibility in making choices.

“We don’t live in a black and white world,” he said. “We make the best decisions we can ... about certain issues … based on Catholic teaching.”

Do the good
Active ownership by shareholders promotes social stewardship by attempting to positively influence corporate behavior.

Such activities can include dialogue with corporate leadership, supporting shareholder resolutions, and collaborating with groups working for corporate responsibility by advocating steps to support moral activities and policies—and objecting to those that are immoral.

“It entails talking to the companies you invest in about issues of concern and trying to get them to adopt better practices,” Nielsen said, which could include matters such as protecting human rights, advocating for the poor, providing better conditions for workers, caring for the environment, or promoting community development.

“We can use our investments as a tool to do good,” he said. “If you’re investing in a fund with active ownership, there’s active engagement with the companies to try to get them to be better … supporting that work is a way to contribute to the common good.”

Performance
While it may be good for the soul, is Catholic investing good for the bottom line?

“(That’s) the most common concern we hear,” Nielsen said. “How will this strategy impact my returns?”

Based on academic research, investors who screen out certain activities, who have a solid strategy and “a good manager who knows how to reallocate investments,” do not have to give up performance.

“What we’ve observed over the long term is it averages out about the same,” Nielsen said. “The averages match the benchmarks.

“You don’t need to give up performance to invest in line with your values.”

To learn more about Catholic investing read the U.S. Conference of Catholic bishops’ socially responsible investing guidelines, and review strategies from firms that offer Catholic investing such as Christian Brothers Investment Services, Epiphany Funds and Ave Maria Funds.