Can the way you invest really align with your commitment to a religious mission?
In his first public speech since his election to the papacy, Pope Leo XIV promised to continue the commitment his predecessor, Pope Francis, made to social issues, including protecting the environment and reducing poverty.1 In recent years, this dedication from the highest levels of the Catholic Church has thrust into the spotlight the larger mission of living a positive life consistent with values and mission—and that includes how and where we invest.
By following a holistic faith-based investment strategy, investors can now be sure that the ways in which they commit capital embrace the full tenets of their faith and teachings.
Faith-based investing throughout history
Though interest in faith-based investing has surged recently, the idea of intentional investing according to one’s values is far from a new concept.
More than 100 years ago, Methodist entities “screened” out investments in companies that manufactured alcohol and tobacco or promoted gambling. Around the same time, Quaker values such as peace, simplicity, integrity and justice, helped prompt the Friends Fiduciary Corporation to establish guidelines that avoided investing contrary to values and mission.
In the late 1960s, several Christian communities began to speak out publicly against apartheid in South Africa. In 1971, the Episcopal Church filed a shareholder resolution calling for General Motors to stop doing business in South Africa. Several other church groups took similar steps with a range of companies doing business there, and the pressure eventually prompted many companies to change their policies.
Over the next several decades, faith-based institutional investors took on other issues, from labor rights to climate change.2
Today, we see a growing landscape of interdenominational investors who view the management of their investments as an extension of their mission and as a powerful catalyst for social and environmental impact.
Creating a faith-based investment strategy
Since faith is so personal, it naturally follows that faith-based investment goals will be highly tailored based on every individual’s unique set of values. Once an individual or institution has decided to integrate a faith-based approach to investing, a Morgan Stanley Financial Advisor can guide the process of building an investment plan that integrates the investor’s financial and faith-based goals.
As part of setting investor expectations, this investment plan should appropriately build in flexibility to allow any investment strategy to evolve over time based on market conditions and opportunities.
Faith-based investment approaches
Today, faith-based investors have access to an increasingly sophisticated range of approaches that allow clients to align investment decisions and personal values without necessarily sacrificing financial returns.
The Morgan Stanley Investing with Impact Platform offers a “three I’s of Impact” framework for faith-based investors to consider:
- The intentionality of the investment process. This can involve choosing to avoid certain businesses you find objectionable while investing in those that help solve some of the biggest global environmental and social challenges we face today. In recently updated Guidelines,3 for instance, the U.S. Conference of Catholic Bishops (USCCB) encourages Catholic investors to avoid companies that derive revenue from tobacco, weapons or other activities that run counter to the mission of protecting human life. By the same token, it also encourages investors to seek out companies whose business models align with the Paris Agreement's emission reduction goals.
- The influence of shareholders in helping change company behavior for the better through active engagement. Example: The USCCB Guidelines frequently point to the influential role that certain shareholders can play in pushing companies toward “activities and policies which are socially beneficial and serve the common good.”
- The role of inclusion in an investment portfolio. Increasingly, faith-based investors may consider inclusion by examining the diversity of an asset management firm’s ownership and/or the investment professionals guiding the investment processes.
By understanding the variety of investment options, faith-based investors can take heart that the power of their capital can help them achieve both their financial and faith-based goals.
Exposure to a variety of investments
A typical misconception about faith-based investing is that aligning investments with one’s values means sacrificing return objectives. However, because of the increasing interest in faith-based investing, there is a now growing landscape of investment choices.
Today, faith-based investors have opportunities across virtually every asset class in their portfolio, achieving different approaches to alignment – from restriction screening to Environmental, Social and Governance (ESG) Integration and more. In addition, investors can choose to align their entire portfolio based on financial and faith-based objectives, or just a portion.
Part of the Investing with Impact platform
Faith-based investing strategies are just one aspect of Morgan Stanley’s Investing with Impact Platform. Launched in 2012 as part of the firm-wide commitment to sustainable investing, we define Investing with Impact as an investment approach that aims to generate market-rate financial returns while demonstrating positive environmental and/or social impact. Investing with Impact empowers our clients—from individuals to institutions—to align their investments with their values and mission, including faith-based investors.
In Morgan Stanley’s view, there is no single motivation to pursuing Investing with Impact and faith-based investing, and certainly more than one approach to implementing. We are proud to partner with our clients to take action towards aligning investments with personal and institutional values.
