Aligning Faith and Finances
With sadness and a heavy heart, I acknowledge the recent death of Rod Oram on 19 March 2024. Rod was a strong supporter of ethical investment and ethical business. He was an inspirational friend and ally.
For example, back in 2000, in his capacity as Business Editor at the NZ Herald he invited me to publish a series of three articles: ‘Ethical business need not dent profitability’, ‘Companies look for payoff from triple bottom line’ and ‘Building bottom lines on ethics’. In loving memory of Rod we have made a donation to his chosen charity Trees That Count and reproduced these three articles as blogs - see these separately on our website after this blog.
Rod’s obituary includes these beautiful words: “Active for justice, lover of kindness, who walked humbly with his God. We won't do enough until we care enough and we won't care enough until we have a spiritual relationship with the planet and its people.”
We dedicate the following blog on faith and finance to Rod.
Applying religious principles as the basis for ethical guidelines in investing is growing in popularity according to a new report ‘Faith-Based Investing: Beyond Profits: A Path to Ethical Wealth.’ from global investment research firm Morningstar.
“Faith-based investing, a distinctive approach that integrates financial goals with religious and ethical principles, has emerged as a noteworthy avenue for investors seeking to align their portfolios with their deeply held convictions,” says the report’s authors Manan Agarwal and Sabeeh Ashhar.
“Faith-based investing is not merely about exclusion but also about active engagement with companies that prioritize sustainability, social responsibility, and ethical practices. It's about using the power of capital to influence positive change and encourage businesses to operate in ways that benefit society. In this rapidly evolving landscape, faith-based investors are finding innovative ways to navigate the complexities of modern markets while staying true to their beliefs.”
Early ethical investors included the Quakers who notably spoke out against profiting from the slave trade, and in 1760, John Wesley, founder of the Methodist movement in the Church of England, said members “ought not to gain money at the expense of life or by losing our souls.” Flash forward to the 20th century: Another milestone came in 1971 when the Episcopal Church filed a shareholder resolution urging General Motors GM to stop manufacturing in apartheid South Africa. Catholics and other churches joined the movement, forming the Interfaith Center for Corporate Responsibility (ICCR).
Tim Smith, senior policy advisor to the ICCR, says that “religious investors played that key catalytic role.” Socially responsible funds prioritise positive social change by considering both financial returns and moral values in investment decision-making. That has evolved into the modern sustainable investing movement, which relies heavily on environmental, social, and governance research. An ESG-based fund uses such data as part of its fiduciary duty to consider the material risks to its investment returns, such as climate risk and diversity risk.
Today, the ICCR includes more than 300 global institutional investors overseeing more than $4 trillion in managed assets. They include the Unitarian Universalist Association, the Presbyterian Church, the Sisters of St. Francis, and the Rabbis and Cantors Retirement Plan, as well as fund providers such as Everence Financial, sponsor of Praxis Mutual Funds, which has $2.5 billion in assets and has its roots in the Mennonite Church, and Wespath Investment Management, which provides funds that are informed by the values of the United Methodist Church.
Largely led by the ICCR, faith-based investors filed or cofiled nearly one third of ESG proposals in the U.S. between 2020 and 2022, according to US SIF, a U.S. trade group for sustainable investing. These institutions represent just 1.1% of the combined $3 trillion in assets controlled by all shareholder proponents, but they got results.
A big win came in the fallout of the opioid crisis, when the ICCR pushed for boards to take responsibility for opioid business risk. After that campaign, 18 companies adopted policies to recover compensation from corporate officials for misconduct.
In a move ESG investors would cheer, Eventide Funds urged solar panel producers to address slave labour in their western Chinese supply chains. Says Robin John, Eventide’s CEO, “We believe companies that serve stakeholders well”—meaning customers, employees, supply chains, host communities, environment, and society— will ultimately do better in the long term. That’s good news for all investors regardless of your background.”
In summary, the authors of the Morningstar report say “faith-based investing represents a powerful fusion of financial stewardship and deeply held spiritual belief”.
I’ll leave the last word to Harvard Professor Rosabeth Moss Kanter from whom the following quote was inspirational in my role as an ethical investment researcher and adviser:
“Money should never be separated from mission. It is an instrument, not an end. Detached from values, it may indeed be the root of all evil. Linked effectively to social purpose, it can be the root of opportunity.” - R. M. Kanter, Harvard Business Review, 1991
