Audio recording of ImpactAlpha Call No. 11: Faith and investing:
ImpactAlpha, Nov. 6 – On ImpactAlpha’s Call No. 11, Agents of Impact aligned with Catholic, Jewish and Muslim institutions found common ground in using capital to usher in a fairer economy and nurture a healthier natural environment.
Catholics institutions are charting the course after Pope Francis himself called for a shift of capital into impact investing. The pope has followed his 2015 encyclical on climate change, Laudato si’, with calls to action to use Catholic assets to fight climate change and lift people out of poverty. Cardinal Peter Turkson of Ghana has become the Vatican’s point person on impact investing, from the unlikely perch of the Vatican’s Dicastery for Promoting Integral Human Development, which he heads.
Last month, the Catholic Impact Investing Collaborative announced a half-dozen institutions with $40 billion in assets have signed a “Catholic impact Investing pledge.” The number of institutions pledging to move more assets into impact investing is expected to double by early next year, ahead of a Catholic impact investing summit at Loyola University in Chicago in September.
“Now there are tools through impact investing to do that and still be a good fiduciary,” said John O’Shaughnessy of the Franciscan Sisters of Mary in St. Louis, who spearheaded the pledge. “We’re seeing that more institutions, and even investment professionals, are looking at how impact investing might actually do something, not only to address the moral obligations that the Pope is outlining in the document Laudato si’, but also to really advance their missions.”
Faith and investing
The Call rolled up “Faith and Investing,” ImpactAlpha’s series in partnership with the Global Impact investing Network, and traced common principles across denominations. Headlines included:
- On guns, faith-based investors provide an object lesson in shareholder engagement
- Faith-based investors are building a direct-investment pipeline to finance climate action
- Faith-based institutions fit local investments into global portfolios
“The thing that I walked away from with this was actually the role of faith-based organizations in shareholder engagement and putting pressure in the boardroom and on corporate management to affect positive change on everything from climate change to guns,” said ImpactAlpha’s Jessica Pothering, who spearheaded the coverage.
The Interfaith Center on Corporate Responsibility, a coalition of more than 350 investors and organizations managing more than $500 billion in assets, is initiating internal conversations with corporate management, filing resolutions, and banding together to drive discussions on guns, private prisons, climate change and other social and environmental issues.
Locally, the faith-based turn toward place-based impact investing is an extension of the kinds of congregation-based activities churches, synagogues and mosques have been engaged in for centuries.
Basketball Hall-of-Famer turned impact investor David Robinson, who joined The Call, said his Christian faith is core to his investing. “It drives it.”
Principles of faith-based investing cross denominations. Jewish and Islamic principles, for example, both discourage profit without risk in investing. Such non-extractive finance is gaining steam in impact investing circles (see, “Candide Group raises $40 million fund for community lenders advancing racial justice”).
“In order to be ethically entitled to a profit, the investor has to have market or asset risk,” said Umar Moghul of law firm Roberts Moghul & Partners, who works with Muslim groups to design responsible capital structures (last month, Indonesia’s BMT Bina issued a sharia-compliant bond on blockchain).
In Judaism, profit without risk is similarly viewed as less moral, said Rabbi Jacob Siegel of JLens Network, which works with Jewish institutions to bring their faith values into their investment decisions.
Shared values point to the potential for attracting more faith-based capital to impact investing, but also highlight the limited scope of impact investing activity at faith-based institutions to date.
Even with long histories of negative screening, ESG investing, and other types of thematic, responsible investing strategies, “What we are seeing is that activity and uptake in impact investing approaches remains limited,” says Giselle Leung of the Global Impact Investing Network, which surveyed more than 30 faith-based institutions.
Separately, in this year’s GIIN investor survey, 35 fund managers (of 169 surveyed) said they specifically target faith-based investors as part of their fundraising strategies.
The Catholic impact pledgers, which include Ascension Health, the second-largest nonprofit health provider in the U.S., Mercy Investment Services, the investment arm of the Sisters of Mercy and Mercy ministries, and O’Shaughnessy’s Franciscan Sisters, are among a number of Catholic institutions carving out portions of their portfolio for direct, private impact investing strategies.
Billion-dollar Catholic Relief Services allocates capital to direct investing, blended finance, technical services and capacity building. The goal is to “think through how we can move institutional capital towards impact and, specifically, given the work that we do at the CRS, towards the more poor and vulnerable,” Beth Collins of Catholic Relief Services said on The Call.
Other faith institutions are seeing impact investing as a way to complement their philanthropy, said Robert Kim of Caprock, which advises a number of faith-based investors. A faith-based organization that supports a nonprofit that helps poor farmers in India, for example, can complement that work by also investing in a business that buys from those farmers.
At the Global Impact Investment Network investor forum Amsterdam last month, faith-based investors, including OIP Investment Trust ($550 million), the Church Pension Fund ($14 billion) and Skopos Impact Fund ($200 million) pushed back on the notion that they are always willing to take concessionary returns for their values-aligned investments. The best deals, said Skopos’ Luka Skorochod, “are when operational metrics align with impact.
Morgan Stanley’s Jamie Martin acknowledges the significant amount of money in motion when it comes to faith-based investors. “There is an evolution from what was a much more restriction-screening-driven conversation to really leaning in and taking a much more proactive approach to allocating towards sustainable and impact investments across asset classes.”
“This is an investor segment that has a long history in responsible investing, having played an active role in the apartheid move with the divestment movement and now climate change,” said the GIIN’s Leung. “Faith-based investors have tremendous opportunity to do even more with their assets and investments.”
Faith-based investing resources
- ImpactAlpha’s faith-based coverage: Impactalpha.com > Themes > Smarter Money > Faith and Investing.
- More on Cardinal Peter Turkson’s ethical investment guidelines.
- Aligning Jewish Values with Philanthropy and Investing (Morgan Stanley).
- Building Value from Values (Morgan Stanley).
- Investment Insights for the Jewish Community to Further the UN Sustainable Development Goals (JLens).
- Video recordings from JLens’ 2017 Jewish Impact Investing Summit (JLens), including Rabbinic Insights on Investing as a Force for Good (JLens).
- JLens’ Jewish Advocacy Strategy Fact Sheet has a write-up of JLens’ process of investing through Jewish values. (JLens).
- The Fundamentals, a podcast featuring David Robinson Sr. and Jr., includes an episode on faith.
“Faith and Investing,” ImpactAlpha’s series on faith-based investing, is sponsored by the Global Impact Investing Network.