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Faith-based investing

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The ability to invest along religious lines is gaining momentum. Some people of faith are avoiding “sin stocks” in favour of spiritually responsible funds. Such individuals want their investments to grow, but not at the expense of strongly held moral beliefs.

Special funds are available for Catholics, Protestants and Muslims who seek investments in companies that do not violate the tenets of their religion. These funds are a subset of socially responsible funds which consider both financial return and social good i.e., investing with both the head and the heart.

The Ave Maria Funds in the US screen out businesses that promote or support activities contrary to the core moral teachings of the Catholic Church. The funds have a pro-family investment philosophy that shuns companies involved with abortion, contraception or embryonic stem cell research.

Another US fund that invokes biblical values is the Inspire Global Hope ETF. The fund believes that “good returns and good values are not mutually exclusive”. It adopts a conservative evangelical approach to investing and excludes any company associated with gambling, alcohol or pornography.

Muslims who are strictly observant to Shariah Law and want to invest “the Islamic way” may utilise the Amana Mutual Funds Trust. These funds evaluate a company’s business activities to ascertain if what it does is permitted (Halal) or not permitted (Haram) under Islamic Law.

To this end, the Amana Funds do not invest in the money market or most banks because collecting interest is against the religion’s teachings. Other Shariah-compliant restrictions include a ban on investments in “unholy” stocks including alcohol, tobacco, weapons, pork and entertainment.

In Australia, the Catholic Superannuation Fund ranks as the nation’s biggest religious-based financial services group. With more than $7 billion in funds under management and in excess of 70,000 members, Catholic Super is a signatory to the United Nations Principles of Responsible Investment.

Each religious group has a slightly different take on how to incorporate its values into investments. But they are united in their belief that economic success should never come at the expense of human dignity. Non-secular investors take pride from investing with a clear conscience.

Of course, faith-based investing still requires a leap of faith and this, it is claimed, is made easier when you can jump into stocks that reflect your religious creed. In a pragmatic sense, putting your money where your faith is demonstrates your biblical stewardship.

However, investing in sync with religious beliefs does not guarantee divine returns and, indeed, may even yield fewer loaves. For example, the loathsome tobacco industry has produced some of the best investment returns over many decades. Boycotting this sector, therefore, due to your virtues will cost you.

A feature article in the Atlantic magazine titled, The Conscious Investor, opined that in a perfect world, Socially Responsible Investing (SRI) should promote practices that improve life for everyone, not just those whose religious or personal beliefs lead them to value some products and services over others.

The article bemoaned that the main problem with eliminating “objectionable” companies is that “objectionable” is in the eye of the beholder:

After tobacco, the next two industries on the list (of socially unredeemable industries) are alcohol and gambling; more than half of SRI mutual funds eliminate them. Alcohol and gambling certainly cause plenty of problems. Alcohol, especially, kills, maims, screws up families, and turns customers into addicts and occasionally into murderers … On the other hand, would you really want the winery that produces your favorite pinot noir to go bankrupt? The tens of millions of people who jet to Las Vegas each year might tell their pastors that the Luxor is evil, but it’s hard to believe they (or their pastors) never intend to go back.

It’s clear that meeting both monetary and moral objectives can be a challenge for the pious. But God and mammon can go together assuming the devout are prepared to potentially sacrifice investment performance for the intrinsic reward of knowing that their investment choices can help make the world a better place.

 

Regards
Paul J. Thomas, CEO

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CEO Paul Thomas