Investing in good conscience

Catholics increasingly are choosing to get their assets in line with their moral values

People invest their assets in order to turn a handsome profit — the greater the gain, the better. Increasingly, however, investors are taking an interest in just how those profits are being earned. They still want to get the highest return on investment, but they don’t want to profit from companies that engage in products or business practices that go against their moral compass.

It goes by many names, but it’s often called “socially responsible investing,” or SRI, a blanket term for practically any form of values-based investment principles, whether rooted in selected social concerns, religious ethics, or personal beliefs.

Many Catholics have gotten on board with the idea. They want competitive earnings, but not at the price of compromising their moral conscience. It’s a matter of putting faith ahead of financial gain.

“Catholics aren’t called to check their ethics at the door of the church when they leave Mass on Sunday. We’re called to be Catholic in all that we do – whether it is in private or in the public square,” said Tony Minopoli, president and chief investment officer for the Knights of Columbus Asset Advisors, and member of Legatus’ Fairfield County Chapter. “As an investor, it would be difficult to reconcile how to maintain your integrity if you are opposed to certain activities — such as abortion, discrimination, or nuclear weapons — but then directly profit from the manufacturing or distribution of products and services involved in those activities.”

Rise of moral investing

“In our view, more Catholics are investing in accordance with their moral beliefs,” said George P. Schwartz, chairman and chief executive officer of Ave Maria Mutual Funds, which in recent years has grown to serve more than 100,000 shareholders with entrusted assets of over $2.7 billion.

The Ann Arbor Legate observed that among investors in general, too, “there has been an explosion of interest in socially responsible investing, or impact investing, which aligns investments with personal beliefs.”

According to a 2019 CNBC report, socially responsible investing (SRI) assets have grown by 40 percent annually since 2016 and now comprise one-fourth of all managed assets in the United States. Another survey shows that millennials — those presently in the range of 24 to 39 years of age — are the adult demographic most committed to SRI, more so than Generation Xers or baby boomers. It seems the younger the generation, the more they embrace it.

Values-based mutual funds are not created equal, however. They go under an array of names and packages, and they vary widely to appeal to particular types of investors. Some portfolios favor “clean technology” or environmentally friendly corporations, for example, while others prioritize companies that stress racial, gender, or LGBT diversity. Other might steer clear of tobacco or alcohol products or particular political agendas.

Some brokers offer portfolios designed to suit Islamic or Jewish investors, and there is a broader SRI subcategory often called “biblically responsible investing” that aims to satisfy scriptural principles.

Then there are asset management firms offering investment opportunities based on Catholic values. Even these differ from portfolio to portfolio. Inevitably, fund managers may emphasize some identified Catholic values ahead of others, and not necessarily in order of moral gravity. One fund might focus entirely on life and bioethical issues, for example, while another might lean more heavily toward social justice concerns.

Why Catholics should care

In 2003, the U.S. Conference of Catholic Bishops approved guidelines on socially responsible stewardship. Although meant to govern the USCCB’s own investments and not binding on any other Catholic institutions or individuals, the document exemplifies the kinds of Catholic moral and social principles that should inform investment decisions.

“Those principles are a good starting point, but we also understand the bishops’ conference will hold themselves to a higher standard,” said Father Jason Tyler, bioethicist for the Diocese of Little Rock. “They want to provide a good example.”

The USCCB guidelines read a bit like a Hippocratic Oath for investors: first, do no harm by refusing to invest in companies whose products or policies run directly counter to Catholic moral teaching; use shareholder influence to improve corporate policy where possible; and support companies that are proactive in moral causes and attentive to the common good.

The bishops’ policy thus forbids the USCCB to invest in companies involved in abortion, contraceptives, or human cloning, and also to examine their commitment to human rights, economic justice, labor standards, arms production, and environmental concerns.

At the same time, the policy admits the possibility of “mixed investments” in companies with some morally or socially problematic practices. In such instances the bishops urge the prudent application of moral and ethical criteria to avoid scandal and determine whether divestment is necessary.

Applying prudence

Ave Maria Mutual Funds and the Knights of Columbus Asset Advisors each use “moral screens” to weed out companies that violate the Catholic principles that define their investment criteria.

Ave Maria uses what they call “morally responsible investing” (MRI) by screening out companies that support abortion, pornography, and embryonic stem cell research. Their Catholic Advisory Board governs the policy and meets regularly to review the funds’ religious standards and criteria.

“Abortion is the big one – no abortifacient drug makers, no hospital companies that perform abortions, and no insurance companies that pay for abortions,” Schwartz said. “Also, any company that contributes to Planned Parenthood is out…. We have zero tolerance with respect to companies that are offenders of our criteria.”

Knights of Columbus Asset Advisors handle their managed investments as well as the fraternal order’s own assets using moral screens in accordance with the USCCB’s policies, according to their website.

Consequently, their mutual funds demonstrate zero tolerance on key moral concerns such as abortion and the production of anti-personnel mines, and tolerate limited mixed investments in certain other areas.

“Our job as investment professionals is to translate the common-sense standard into actionable guidelines,” Minopoli said.

Yes, but does morality make money?

When values-based investing became a thing a couple decades ago, often there were worries that investing morally would limit profit margins significantly. Not any more, however.

“While it used to be assumed that excluding investments in any group of securities would harm an investor’s ability to perform, there is now a growing sense that avoiding bad corporate actors has the ability to reduce risk because you avoid the volatility,” Minopoli explained. “It may even be helpful to the overall returns of a diversified portfolio as ethical companies may be more likely to make sound decisions and focus on long-term growth.”

Schwartz of Ave Maria agreed that values and solid returns are not incompatible.

“Our goal is to provide good returns without compromising moral values,” he said. “We place emphasis on producing good investment performance in a morally responsible way. Investors should not have to sacrifice financial performance potential because of their prolife and pro-family beliefs.”

Don’t go it alone

Although some Catholics might prefer to plan their own investment strategies and cobble together an eclectic portfolio, it’s a daunting task perhaps best left to the professionals, the experts said.

“While it is admirable that an individual would attempt to invest in a morally responsible way on their own, research resources and time commitment makes it difficult,” said Schwartz.

Minopoli concurred with that judgment. “It can be both time-consuming to read through all the available financial statements and disclosures, and challenging to receive honest and transparent information from corporate investor relations professionals,” he advised. And then there’s the matter of monitoring the new products and services companies introduced and studying the effects of corporate mergers and acquisitions.

“So if an investor’s portfolio is larger than a few well-known names, we recommend that Catholic investors outsource this task to finance professionals who are informed by moral theologians,” he said.

The trend toward morally responsible investing is filled with positives, as Catholic investors become more aware of a critical way in which they can live out their faith and asset managers develop and sustain mutual funds specifically curated to meet those needs — a win-win situation for all.

“These are exciting times in the investment business,” Minopoli said. “We’re optimistic that moral investing offers Catholics the opportunity to pursue profits without sacrificing our integrity.”

NOTE: Legatus was excited to announce the Legatus Donor Advised Fund (DAF) at January’s Summit East. The Legatus DAF is powered by the Knights of Columbus Charitable Fund and offers investment opportunities with Knights of Columbus funds or Ave Maria Mutual Funds. Visit Legatus.org/DAF for more information. 

GERALD KORSON is a Legatus magazine editorial consultant.

Investing for health of soul

“An appropriate starting point for developing an authentically Catholic investment ethic may be to focus on how to avoid evil when making investment choices,” according to Samuel Gregg, research director for the Acton Institute.

Most corporations, he noted, are likely to be associated in some way—however remote—with activities or policies that conflict with right reason. The best analysis, he suggests, regards not which company does the least harm, but whether the investment would amount to a formal or material cooperation in evil.

Formal cooperation in the evil act of another entity is always immoral. “This occurs when the person cooperating intends to help the other do what is wrong,” Gregg said. “Anyone who directs, encourages, approves, commands, or actively defends another’s immoral act formally cooperates in that immoral act.”

Material cooperation involves facilitating an evil act by another entity without intending the evil ourselves. We might foresee the connection between the investment and the objectionable act and therefore bear some responsibility, but we must weigh whether the good we accomplish justifies the evil effect, he explained. The material cooperation might be tolerable if it is very limited and remote — for example, if an otherwise morally solid mutual fund makes a small investment in a corporation that has a subsidiary that engages in some objectionable practice or product.

Additional moral considerations include the possibility of giving scandal to others, or whether even remote material cooperation might become a kind of slippery slope leading in time to rationalizing a closer or even formal cooperation with evil. All things considered, it’s best to do all one can to avoid morally problematic investment links entirely while still supporting morally good options.

“Though this formal/material distinction may sound complicated, it does help us to assess the correct moral choice when faced with different investments,” Gregg said.

When it comes to investments, “Catholics should remember that the maxim ‘Let the buyer beware’ involves more than just protecting ourselves against fraud,” he concluded. “It also concerns the moral health of our souls.”