As investment professionals, when we think about investments, we think about asset classes: stocks, bonds, hedge funds and the like. As theologians, when we think about investments, we think about “assets” somewhat differently. The challenge is for each to understand the value and insight of the other.
In Jesus’ classic teaching on discipleship, we are given the story in Luke 14:28 about the builder who is advised to consider: “For which one of you, when he wants to build a tower, does not first sit down and calculate the cost to see if he has enough to complete it? “ Jesus was trying to teach us that we are all called to build the “tower” of our own souls where God is destined to dwell. By each of our actions, we are building character which theologians think of as a type of shield to protect our tower.
The costs that are referred to are the conditions of discipleship. These costs include the insistence of having a plan, on maintaining constant diligence, in offering continual effort, in agreeing to self-surrender and sustaining an unwavering concentration. These are the cost of building our souls and our investments: investment professionals and theologians unite.
The Call to Invest and Be Productive.
As individuals and as institutions we are called to fidelity in stewardship. From the very beginning, we are called by God in Genesis 1:28 to be “fruitful, multiply, fill the earth and subdue it.” We have been given the call to be co-creators with God, using all our resources for the good. But what does this mean for the modern world? Many things.
With a little more guidance from Jesus in the Gospel of Matthew 25:14-30, we are given the parable of the talents. In this story, we find a master who entrusts his servants each with a sum according to his ability. To one, the master gave five talents (a talent was approximately 20 years wages for the average worker). This faithful servant invested the five talents and turn it into ten. This same master gave two talents to another servant who also invested and who had the same rate of return. But the third servant, who was given just one talent, out of fear held the sum for safekeeping, and returned it to the master when it was demanded with no return. Needless to say, the master was furious at the mismanagement and lost opportunity, and thereby banished the unfaithful servant.
God has entrusted many things to us—money, talents, relationships, spiritual gifts and the saving truth of the Gospel. He expects much of us. He expects us to take these assets and to grow them.
Religion and Investing in the US.
Research suggests that it was the Quakers and the Methodists immigrants from Europe who were the first religious groups to put their religious values at the center of their investment strategy. This was evidenced when the Quakers over 200 years ago condemned and refused to invest in companies and institutions that promoted and benefited by slavery and war. The Methodists are credited with being the first religious tradition to actively screen its investments from what we would now call “sin stocks,” such as those companies related to gambling, tobacco, alcohol and the like.
For Catholics, we trace our traditions on “socially-responsible” and “morally-responsible” investing back to the themes of Pope Leo XII’s 1891 encyclical Rerum Novarum (On Capital and Labor) setting forth the framework for understanding the notion of social justice.
For the first time in the 400 year history of the formal corporate legal structure, the faith community stood up. In 1971, on behalf of the Episcopal Church, the first “faith-based” shareholder resolution was filed. This resolution called on General Motors to cease operations in apartheid South Africa on moral grounds. This effort gave birth to the Interfaith Center on Corporate Responsibility, the oldest and most numerous, faith-based shareholder activist group. The ICCR is led by current Board Chairman Father Seamus Finn of the Missionary Oblates of Mary Immaculate, and is supported by its over 250 institutional members.
Then in 1986, the US Conference of Catholic Bishops (USCCB) issued guidance to the US faithful in Economic Justice for All: Pastoral Letter on the Catholic Social Teaching and the US Economy. In this document, the US Church set out teach the lessons learned by the Church’s “long tradition of thought and action on the moral dimensions of economic activity.” The bishops have given us six basic moral principles to guide our economic activity:
- The Dignity of the Human Person. “Every economic decision and institution must be judged in light of whether it protects or undermines the dignity of the human person.” Economic activity must serve people.
- Human Dignity Realized and Protected in Community. Catholic social teaching stresses that not only is the human person sacred, he is also inherently social. Therefore, we must understand that we must also have a “broader commitment to the common good.”
- Participation in Economic Life is for Everyone. “Basic justice demand that people be assured a minimum level of participation in the economy.” Participation in economic activity is vital to human development because through our work we “join in carrying forward God’s creative activity.”
- All of Us Have an Obligation to the Poor and Vulnerable. Our faith teaches that the poor “are agents of God’s transforming power.” As such, Christians are called “to respond to the needs of all our brothers and sister, but those with the greatest needs require the greatest response.”
- Human Rights are the Minimum Conditions for Life in Community. Catholic social teaching includes economic rights in its definition of human rights. In 1961, Pope John XXIII in Mater et Magistra (Mother and Teacher) addressed Christianity and social progress and reminded the Church that “all people have a right to life, food, clothing, shelter, rest, medical care, education, and employment.”
- Society’s Public and Private Institutions Have a Moral Responsibility to Enhance Human Dignity and Protect Human Rights. The bishops exhort us that “in a democracy, government is a means by which we can act together to protect what is important to us and promote our common values.”
In the USCCB’s commemoration of the tenth anniversary of the bishops’ pastoral letter, The Challenge of Peace: God’s Promise and Our Response, and the thirtieth anniversary of Pope John XXIII’s encyclical letter, Pacem in Terris (Peace on Earth), the bishops in their statement, The Harvest of Justice Is Sown in Peace, give guidance on advocating for Catholic social issues. This guidance gives rise to the USCCB’s 2003 Socially Responsible Investment Guidelines. These guidelines are those still governing the US Church’s investments today. The major themes relate to (1) the Church as a shareholder and investor, (2) the responsibilities of shareholders, and (3) the Church as an economic actor.
A Catholic Investment Policy.
The investment guidelines of the USCCB are constructed with two primary principles. First, the Conference “should exercise responsible financial stewardship over its economic resources. This means that there is an expectation of a “reasonable” rate of return on its investments. Second, the Conference “should exercise ethical and social stewardship in its investment policy.” Together we understand that we are called to prudent and faithful (just like the master and servants in the parable of the talents).
These principles guide a strategy that avoids the participation in harmful activities and uses ownership status to pursue good social stewardship and the common good. The US bishops have identified six key areas of emphasis in investments—both those investments to avoid and those to encourage.
- Protecting Human Life. This includes economic activity that promotes or supports abortion, contraceptives, and embryonic stem cell and human cloning.
- Promoting Human Dignity. This includes disinvesting in economic activity that does not support human rights or that promotes racial or gender discrimination. This also includes divesting of economic investment that support the denial of access to pharmaceutical to low-income communities and nations. Such activity should also be encouraged through good investments and shareholder advocacy. In addition, the bishops also denounce investments in any type of pornography.
- Reducing Arms Production. The policy guidance is to support shareholder actions to “limit weapons production, to limit foreign sales of weapons and to convert corporate capacity to non-military uses.” This theme also includes the prohibition on the investment in companies “that are directly involved in the manufacture, sale, or use of anti-personnel landmines.”
- Pursuing Economic Justice. The guidelines call for “avoiding the use of sweatshops in the manufacture of goods” and promoting “generous wage and benefit policies and adequate worker safety guidelines.” This policy also includes the promotion of affordable housing and the proactive use of banks whose business activities earn it positive performance under the Community Reinvestment Act.
- Protecting the Environment. The policy guidelines seek investment and/or engagement strategies to “encourage corporation to act to preserve the planet’s ecological heritage, addressing the rampant poverty in the poorest nations, redirecting development in terms of quality rather than quantity in the industrial work and creating environmentally sensitive technologies.” Further guidance on environmental issues can be found in the USCCB’s 1991 environmental policy entitled Renewing the Earth.
- Encouraging Corporate Social Responsibility. The bishops note that “the private sector must be not only an engine of growth and productivity, but also a reflection of our values and priorities, a contributor to the common good.” In this spirit, the guidelines promote holding corporations accountable for doing “right” and using capital in moral ways.
How Should We Invest As Catholics?
Investment professionals are often engaged to help those entrusted with shepherding the Church’s assets, and the USCCB’s guidelines are helpful in constructing investment strategies that are consistent with Catholic Social Teaching and the mandate to make productive, good use of assets. However, for the average investor, this may seem like a daunting task. To assist in the process of screening investments, the market has developed some helpful tools. In the Catholic tradition, there are several mutual funds that offer options in both equities and fixed income.
The first Catholic values mutual funds were the LKCM Aquinas Funds, and they remain the only no-load Catholic Values fund in the market. The Aquinas Funds offer options a Fixed Income Fund, a Value Fund, a Growth Fund, a Small-Cap Fund and a money market fund. All of its funds proactively screen investments for compliance with the USCCB guidelines.
Thomas Monaghan, the founder and former owner of Domino’s Pizza and former owner of the Detroit Tigers, was the leader behind the creation of the Ave Maria Values Fund. This Fund differs from other Catholic funds in that it has the primary emphasis of screening for any abortion-related companies.
Other Catholic investment alternatives are the Carlisle Catholic Index Funds. Carlisle has two index funds based upon the USCCB guidelines, one is the US Market Index Fund, and the other is the Catholic Small Cap Index Fund.
As more and more investment management professional become familiar with the demands of the faith, more creativity has emerged. An example of this is DEVCAP Shared Return Fund which is a partnership between Catholic Relief Services, the global representative of the U.S. Catholic community providing relief and development programs in more than 80 countries, and Seed Capital Development Fund, Ltd, providing technical and financial assistance in developing countries. DEVCAP is unique in that its shareholders’ contributions are used to provide loan capital for micro entrepreneurs in developing countries.
In addition to these uniquely-branded Catholic investment options, there are other fund families in the market that share common values and have also established investment opportunities. Some of the most well-known include: MMMA Praxis Mutual Funds (Mennonite), American Trust Allegiance Fund (Christian Science), the NOAH Fund (non-denominational Christian), Timothy Plan Funds (Judeo-Christian non-denominational), Amana Funds (Islamic), Azzad (Islamic), Guidestone Funds (Southern Baptist), New Covenant Funds (Presbyterian), and Eventide Gilead (Christian).
A New Investment Horizon.
When investment professionals talk about the “investment horizon,” they are talking about duration. This is the length of the investor’s intent to hold an asset. The answer to the question “how long” helps to understand the suitability of an investment. To those with a theological lens, time becomes more nebulous, and the tools become more interesting.
This means that when we are investors with the eyes and minds of faith, new opportunities arise. No longer are we just screening for ESG (environmental, social and governance) issues or exercising our shareholder rights through advocacy in publicly-traded corporations, we are looking for ways to proactively invest in our local communities because those of us of faith understand that we are all one body, one community.
This special understanding about solidarity and moral responsibility can bring untapped vibrancy and opportunity to our investments. DEVCAP is but one example. Other examples include investments in community loan funds. Examples of the good work done in this area include the Jewish Funds for Justice, an interfaith partnership for disaster recovery, and the loan fund Partners for the Common Good, established by Christian Brothers Investment Services, which invests (alongside Catholic orders from Italy and 23 states in the US) in some of the most challenged communities in America.
Our challenge as Catholic investors is to leverage our faith to make smart and lasting investments that yield not only monetary returns but also social and human returns—always keeping our investments in service to the human person. This means that we must have a plan. We must maintain constant diligence that our investments are supporting those initiatives that support our Catholic faith. This requires continual effort to stay informed and stay creative. We may be asked to surrender some of our free time to stay abreast of what is important, but with concentration we can one day say to the master that we were good and faithful servants.