Features | October 7, 2019

Catholic institutions pledge to increase impact investments in climate action and social equity

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Oct. 7 – Catholic congregations long known for providing healthcare and services for the poor are expanding their ministries to drive positive impact through their pension and investment portfolios.

Six U.S.-based Catholic institutions with a combined $40 billion in assets issued a “Catholic impact investing pledge,” committing more of their capital toward the twin crises of climate change and social inequity. 

Members of the Catholic Impact Investing Collaborative are issuing a global call to action to other Catholic institutions to boost allocations from pension and other investment funds to create “measurable, positive, social and environmental outcomes in service of people and planet.” 

That proactive approach goes beyond merely screening out “sin” stocks, as many Catholic institutions have done for years. The new pledge calls for “meaningful allocation targets” for impact investments, as well as measurement and disclosure of investments’ impact. The pledge does not include specific new commitments of capital. 

Pope’s Call for Impact Investment Resonates with the Faithful

“Putting the pledge out there is intended to inspire,” says John O’Shaughnessy, CEO of the Franciscan Sisters of Mary in St. Louis, who helped organize the collaborative. “It’s truly time to get off the sidelines.”

O’Shaughnessy will launch the pledge today in a keynote address in London. Later this week, the collaborative will focus on climate change at an event in the House of Lords, its first gathering outside the U.S. Lord Deben, who heads the UK’s independent committee on climate change, will host the event, which also will feature Mark Campanale, founder of Climate Tracker.

Common home

Pope Francis himself has accelerated the Catholic shift toward impact investing. In encyclicals, speeches and meetings with heads of state, he has urged financial leaders, including Catholic institutions, “to take account of ethics and solidarity.” 

“It is important that ethics once again play its due part in the world of finance and that markets serve the interests of peoples and the common good of humanity,” the Pope said in 2014. “It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs.” The next year, he issued his encyclical letter on climate change, Laudato si’.

The Catholic Impact Investing Collaborative will roll up the pledges and commitments at a Catholic impact investing summit at Loyola University in Chicago next September, marking the five-year anniversary of Pope Francis’ encyclical “on care for our common home.”

Faith-based investors are building a direct-investment pipeline to finance climate action

The signers of the new pledge include Ascension Health, the second-largest nonprofit health provider in the U.S., and Mercy Investment Services, the investment arm of the Sisters of Mercy and Mercy ministries. Four Catholic women’s religious groups, including the Franciscan Sisters of Mary, Catherine Donnelly Foundation, Daughters of Charity and Missionary Sisters of the Sacred Heart of Jesus, are also on board. 

All six pledge signatories have already broadened their strategies to include private market impact strategies. 

Faith ministries

Catholic congregations have long practiced faith-aligned investing through low-interest loans, public market screens and shareholder advocacy. 

What’s changed is the growing recognition that mission-aligned strategies exist now across asset classes and that impact investments can deliver the returns necessary to support operations and pension obligations.

The shift could unlock more capital for solutions to global health, small business lending, sustainable land management and other sectors that impact climate change and economic inclusion in emerging as well as developed markets.

At the Global Impact Investing Network investor forum in Amsterdam last week, a group of panelists including representatives from OIP Trust and Skopos Impact Fund, two Catholic impact investors, agreed they wouldn’t consider an investment in a company that produced or sold abortion drugs.

Faith-based institutions fit local investments into global portfolios

At Franciscan Sisters of Mary, O’Shaughnessy has carved out 15% of total assets for private impact investments, like Lyme Timber’s sustainable timber fund. Another 63% of the portfolio is directed toward so-called ESG, or environmental, social and governance, strategies in public equities. The Sisters recently put another 5% of its assets in Morgan Stanley’s Climate Solutions Fund. The U.S. Dominican Sisters Congregations is an advisor to the public markets fund. (Franciscan Sisters of Mary does not disclose its total assets, O’Shaughnessy said.) 

Impact investors in the U.S. Catholic investing community and impact advisors and consultants have been meeting for several years. Among the original participants were Goldman Sachs’ John Goldstein (then with Imprint Capital, which was acquired by Goldman), Kathleen Haggard of Merrill Lynch and Ryan Strode of Arabella Advisors, who has since joined Franciscan Sisters.

The idea for the pledge was hatched at the group’s meeting last November in St. Louis, “a watershed moment for Catholic Impact Investing Collaborative,” says O’Shaughnessy. The group formalized the collaborative and agreed to hire staff.

“What we discovered is the idea that there could be business enterprises that, one, could generate market-rate returns, and two, can scale up solutions in ways that loan funds are not going to do,” says O’Shaughnessy. 

Catholic institutions commit to move $40 billion towards impact

Shared learning

One of the largest Catholic impact investors, Mercy Investment Services, the investment management program of the Sisters of Mercy of the Americas and its ministries, has committed its full portfolio to pursue its mission of nonviolence, anti-racism, immigration, care for the Earth and fullness of life for women.

As part of the pledge to “share progress,” Mercy is sharing publicly for the first time details on dozens of private equity impact investments.

Mercy has burnished its rep in shareholder advocacy. The investment manager co-founded Investors for Opioid Accountability, which has filed 50 resolutions on board oversight of opioid risks at pharmaceutical companies. The firm annually engages about 150 companies covering 200 engagements.

“Whether your impact is accomplished by engaging companies, voting proxies, making impact investments, or some combination of these approaches, we challenge everyone to take action,” Mercy writes

The Mercy Partnership Fund has made 60 below-market rate investments benefiting the economically poor, especially women and children. The fund’s early investments include El Salvador-focused Azure Source Capital; Shared Interest, a Southern Africa-focused capital provider to small businesses; and First Nations Oweesta Corporation, which finances Native community development financial institutions.

Its Environmental Solutions Fund, which has helped create 5.1 gigawatts of clean energy capacity since 2015, has backed Berkeley Energy, a renewable energy developer in the Philippines, Indonesia and India; U.S.-based vertical farm startups AeroFarms and Living Green Farms; and electric vehicle charging network Volta.