Faith-Based Investing: How to Get Started

Can the way someone invests really match their commitment to a religious mission?

Over the years, Pope Francis, in his writings and sermons, has called on all of us to address global challenges like climate change and help those less fortunate.1 The Pope’s words have put the spotlight on the larger mission of living positive lives in alignment with values ​​and mission — and that includes how and where we invest.

By adopting a holistic, faith-based investment strategy, investors can now be assured that the way they invest capital embraces the full tenets of their faith and teachings.

Although interest in faith-based investing has surged recently, the idea of ​​investing according to your values ​​is far from a new concept.

More than 100 years ago, Methodist institutions “screened” investments in companies that manufactured alcohol, tobacco, or promoted gambling. Around the same time, Quaker values ​​such as peace, simplicity, integrity, and justice helped steer Friends Fiduciary Corporation into established policies that avoided investments that violate values ​​and mission.

In the late 1960s, Catholics, along with Protestants and other denominations, publicly spoke out against apartheid in South Africa. Further measures are attributed to the nuns. After pooling their retirement assets, they filed shareholder resolutions to challenge companies that had not adopted the Sullivan Principles, which detail that all employees should be treated equally regardless of race.

Today we see a growing number of interfaith investors who see the management of their investments as an extension of their mission and a powerful catalyst for social and environmental change.

Because belief is so personal, it naturally follows that belief-based investment objectives are highly tailored based on each individual’s unique values. Once an individual or institution has decided to incorporate a belief-based investment approach, a Morgan Stanley financial advisor can guide the process of creating an investment plan that integrates the investor’s financial and belief-based goals.

As part of setting investor expectations, this investment plan should build in appropriate flexibility to allow each investment strategy to evolve over time based on market conditions and opportunities.

Today, faith-based investors have access to an increasingly sophisticated range of approaches that allow clients to balance investment decisions and personal values ​​without necessarily sacrificing financial returns.

The Morgan Stanley Investing with Impact Platform provides a “Three I’s of Impact” framework for faith-based investors to consider:

  • That intentionality of the investment process. This may mean choosing to avoid certain companies that you find offensive, while investing in those that are helping to solve some of the biggest global environmental and social challenges we face today. In the recently updated guidelines2 For example, the United States Conference of Catholic Bishops (USCCB) encourages Catholic investors to avoid companies that generate revenue from tobacco, guns, or other activities that conflict with the mission of protecting human life. For the same reason, it also encourages investors to look for companies whose business models are in line with the emission reduction targets of the Paris Agreement.
  • That influence of the shareholders to contribute to changing the behavior of the company for the better through active engagement. Example: The USCCB guidelines often refer to the influential role that certain shareholders can play in influencing companies to engage in “activities and policies that are socially beneficial and serve the common good.”
  • The role of recording in an investment portfolio. Religious investors are increasingly considering inclusion by examining the diversity of ownership of an asset management company and/or the investment professionals who guide the investment processes.

By understanding the diversity of investment opportunities, faith-based investors can have confidence that the power of their capital can help them achieve both their financial and faith-based goals.

A common misconception about belief-based investing is that aligning investing with one’s values ​​means sacrificing return goals. However, due to the increased interest in faith-based investing, there is now a growing landscape of investment opportunities.

Today, faith-based investors have opportunities in virtually every asset class in their portfolio and achieve different alignment approaches – from constraint testing to environmental, social and governance (ESG) integration and more. In addition, investors can choose to align their entire portfolio or just a portion of it with financial and belief-based goals.

Faith-based investing strategies are just one aspect of Morgan Stanley’s Investing with Impact platform. Introduced in 2012 as part of a firm-wide commitment to sustainable investing, we define investing with impact as an investment approach that aims to achieve market-level financial returns while demonstrating a positive environmental and/or social impact. Investing with Impact empowers our clients – from individuals to institutions – to align their investments with their values ​​and mission, including faith-based investors.

In Morgan Stanley’s view, there is no single motivation for impact investing and faith-based investing, and certainly more than one approach to implementation. We pride ourselves on working with our clients to take action to align investments with personal and institutional values.

About Paige McCarthy

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