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ImpactAlpha, September 18 – Calls from U.N. Secretary-General António Guterres or billionaire media mogul Michael Bloomberg are fine, as far as they go. Catholic investors, at least, are answering to a higher authority.
“We have caused a climate emergency that gravely threatens nature and life itself, including our own,” Pope Francis said in a prayer-day message from the Vatican this month. “Now is the time to abandon our dependence on fossil fuels and move, quickly and decisively, towards forms of clean energy and a sustainable and circular economy.”
Catholic Relief Services is among a growing number of faith-based organizations are designing investment initiatives with an increasing focus on climate action, as part of a broader move to carve out portions of their portfolio for direct, private impact investing strategies. The Global Impact Investing Network is bringing faith-based investors together, including Candice Dial of The Church Pension Fund, John O’Shaughnessy of Franciscan Sisters of Mary and Séamus Finn of the Interfaith Center on Corporate Responsibility, at its annual investor forum in Amsterdam next month.
The billion-dollar Catholic Relief Services has scoured for investment opportunities through field teams that focus on basic needs and livelihoods like agriculture, water access and healthcare in 100 countries. As investment opportunities emerged, the connections between nature and the vulnerable communities at the heart of the relief agency’s mission became clear.
“We work with the most vulnerable people around the world, and a good chunk of our programmatic work ends up being climate-related,” says Beth Collins, who heads impact investing at Catholic Relief Services, told ImpactAlpha.
High-impact, program-aligned investing still makes up only a small part of Catholic Relief’s sustainable investing portfolio. The vast majority is built into its institutional-quality investments and, like other faith-based investors, uses values-aligned environmental, social and governance-based stock screening and shareholder engagement to try to influence corporate behavior.
Collins says that she would like to see more ground-up initiatives grow into larger investment opportunities. For now, there are too few institutional-quality funds that are mission-aligned, she notes. That’s why organizations like Catholic Relief Services are allocating capital to direct investing, blended finance, technical services and capacity building.
“I believe the investment capital is out there, if we have investable deals,” she says. “The funds we have for program-aligned investment are about building the pipeline and bringing others on board.”
Other faith-based investors are wrestling with how to respond to what they see as an accelerating crisis. Wespath Benefits and Investments, the United Methodist Church’s pension agency, has poured $500 million into companies providing low-carbon products and services and has invested $30 million in companies like d.light improving clean off-grid energy access in emerging markets as part of its “low-carbon transition” strategy. Still, the pension fund, with $24 billion in assets, has aligned only 6% of its portfolio with the low-carbon strategies.
“We believe that the companies able to manage the risks and capitalize on the opportunities created by this transition make attractive long-term investments,” Wespath writes in its impact report.
Mercy Investment Services, a Catholic ministry of the Sisters of Mercy of the Americas is also going direct to find climate-related investment opportunities. Mercy launched its Environmental Solutions Fund in 2015 to invest in market-rate clean tech, water, green buildings, and sustainable agriculture and forestry investments, both directly and by investing in other funds. This year, Mercy Investment Services has invested in Scoop Technologies, a San Francisco-based carpooling platform and Berkeley Energy’s Renewable Energy Asia fund, which invests in projects in the Philippines, Indonesia and India.
Bridging the climate investing gap
These initiatives sit between a yawning divide in faith-based climate investing, with highly localized and grassroots efforts on one side and engagement through the public markets on the other. Examples of small-scale climate initiatives proliferate across faith-based communities. A survey of green projects across India’s religious institutions reveals mosques, Hindu and Jain temples converting to solar power; spiritual foundations backing village-wide solar installations and waste-to-fuel systems; and Sikh collaborators expanding green city programs.
On the other side of the spectrum, climate change action is playing out with faith-based investors in the public markets. The Interfaith Center on Corporate Responsibility, which works with Christian, Jewish and Islamic investors and organizations, as well as a growing number of non-faith investors, have been zeroing in on fossil fuels companies, pressuring them through shareholder resolutions for board changes, lobbying transparency, and to line up behind stricter environmental regulations, like methane emissions standards.
Catholic Relief Services launched its first impact investment vehicle last year, a blended finance fund called Azure to address water and sanitation in El Salvador. The organization is also making climate change a central theme of another blended finance vehicle to invest in Latin America’s small and mid-size agribusinesses. “In addition to water-smart agriculture, the kinds of opportunities we’re seeing are around [farming] input companies with climate resilient seeds, tech companies, service providers improving soil management practices.”
Azure was initially capitalized with $10 million from Catholic Relief Services, the Inter-American Development Bank’s Multilateral Investment Fund, and the Overseas Private Investment Corp. It is now closing in on additional capital that will support expansion plans into other countries in Latin America and Africa.
On Azure’s radar are projects dealing with water management and opportunities to build local resource management, distribution and protection capacity. A loan to a rural community water service provider in Jujutla, for example, helped the organization purchase and protect land around its water catchment area. The provider had earlier received technical and administrative assistance from Azure to improve its water system and resilience to climate change.
“With climate change, it becomes more and more critical to manage and protect water,” says Collins. “Because the water is there, but unreliably.”