The values-alignment trend has dramatically reshaped the investment landscape.
We live in an age when values have taken center stage in American discourse. Not only are people keen to scrutinize the values embraced by public figures, but they’re more apt to take notice of how all their institutions behave. In fact, in a recent survey, nearly half (45%) of Americans said that they intentionally choose to do business with companies whose values align with their own.This values-alignment trend is dramatically reshaping the investment landscape. The traditional view that “performance is everything” is being challenged by a “performance plus” view, in which companies must deliver sound returns plus behave in ways consistent with the investors’ values. We talk about this dual expectation variously as viewing investments through an “SRI lens” (for socially responsible investing) or an “ESG lens” (for environmental, social and governance), or an “impact lens.” Regardless of the nomenclature, all of these are important concepts and worthy of investor consideration.
Yet, for many millions of Catholic in the U.S., these various takes on values-based investing can feel incomplete. This is because religious beliefs and morals – or any application of Church teachings – are not included in these models. As such, if you are Catholic and are considering how to align your investment strategy more closely with your beliefs and religious practices, you’ll need to add a “Catholic lens” as you scrutinize your own investing behavior.
Building your Catholic lens
How do you fashion this “Catholic lens”? A great place to begin is by reviewing the Socially Responsible Investment Guidelines created by the U.S. Conference of Catholic Bishops (USCCB). These Guidelines, published in 2003, lay out the strategies used by the Church to invest its assets based on Catholic principles. The Guidelines may not be seen as comprehensive by all but, by any measure, they represent a valiant attempt to reflect the Church’s beliefs in a way that’s easy to grasp.
Certain aspects of the Guidelines relate to avoiding evil, or harmful activities, and should resonate instantly with Catholics. The very first Guideline discusses protecting human life by excluding investment in companies that pursue activities relating to abortion or contraception, embryonic stem cell or fetal tissue research, or human cloning. Other Guidelines exclude investments in purveyors of pornography or manufacturers of military weapons or land mines.
But the vast majority of the Guidelines share common ground with the general principles of sustainable or ESG-based investments, such as pursuing economic justice and human rights, taking on racial and gender discrimination, addressing poverty, and promoting ecological preservation. However, you’ll find no laser-like focus on specific industry sectors (think: fracking or commercial fishing) that are often shunned by ESG adherents. There are two reasons for this. First, the USCCB Guidelines were released in November 2003, when the idea of investing based on personal values was relatively new. Consider that US-SIF Foundation only began measuring the responsible investment marketplace’s sized in 1995, on the heels of the USCCB Guidelines’ release. At that time, the assets invested using ESG-type criteria were just $639 billion – a number that had risen 18-fold – to $12 trillion – by the beginning of 2018.2 Second, the USCCB guidelines were created to provide general guidance related to investing, based on 2,000 years of Catholic theology and moral teachings. So, although the Guidelines may benefit from a tune-up, the underlying moral chassis is timeless.
Focusing your lens
As with other parts of life, aligning your Catholic beliefs with your investment approach demands focus and effort. Here are a few basic steps to get you on your way:
- Read and reflect – The Guidelines are concise – about 12 printed pages – and presented in accessible language. They explain the Church’s investment philosophy in detail and provide references to theological sources along the way. What many Catholic readers notice is that the Guidelines prompt deep personal reflection: How strongly do I feel about this issue? Or Am I giving enough attention to this problem? Or What am I willing to do to impact this situation? In other words, through the process of considering this investment philosophy, Catholics often discover new insights into their beliefs and willingness to act on them.
- Distill and discuss – Once you’re familiar with the Guidelines, identify which of them speak most powerfully to you as a Catholic and an investor. Note that investing through a Catholic lens isn’t about black-and-white decisions, but rather “navigating the gray” to pursue the impacts that matter most. Once you’ve found this focus, it’s time to discuss your ideas with loved ones, such as your spouse or those involved in managing the family foundation. Give them time to review and reflect on the Guidelines, and then reconvene for deeper discussions. You are likely to find that these faith-driven conversations will bring the family closer together, delivering benefits far beyond driving agreement on investment strategies.
- Take meaningful steps – Now that you and your family have identified priorities based on the Guidelines, make these priorities the foundation for refining your overall investment philosophy. With your Catholic faith at the center, you can build outward in any number of directions, taking advantage of the ever-broader universe of ESG-focused investment options in the marketplace. There has never been a better time to create a portfolio that reflects the values dear to you and to your loved ones.
Regardless of what you decide to do, remember that your investment choices are yours alone. Don’t worry if your portfolio isn’t a perfect match with the specifics in the Guidelines. The important thing is to search for a way to create greater harmony between your Catholic values and how you invest your money. That search, in itself, can only strengthen your faith and deepen your understanding of how your investments impact our world.