What is faith-based investing?
A Christian call
Being Christian disciples implies that the values of our faith inform all aspects of our lives — including our investment choices. God calls us to live in harmony with creation, to work for justice, to seek benefit for the poor and the oppressed and to be a voice for the voiceless. We should seek to fulfill our stewardship responsibilities by ensuring that the resources we manage reflect our faith and God's desires for our lives and our world. In this pursuit, we have the dual responsibility to seek justice and work for the benefit of the poor and oppressed while we provide for the economic needs of our families, churches, and charitable institutions, so that all can enjoy the benefits of God's gifts.
Money and investments play a powerful role within our society. We've seen how the global economy impacts humankind in both positive and negative ways. Corporations can provide positive work environments, help create sustainable communities, and operate in accord with creation. They can also damage the natural world, employ labor at less than living wages, and produce harmful products. Through our investments, we are connected to corporate activity around the world. As investors with a faith perspective, we have a responsibility to manage all aspects of the resources we have been entrusted in accordance with God's call for faithful stewardship.
The faith community in action
Religious investors have for decades used investment resources to bring justice to many situations.
In 1971, the Presiding Bishop of the Episcopal Church presented the first church-sponsored shareholder proposal on a social issue at the annual meeting of General Motors. Calling for the company to withdraw from South Africa, this proposal began coordinated efforts by religious groups and other socially concerned investors to use their investments to end apartheid and address other social concerns. In 1972, the Committee on Mission Responsibility Through Investment (MRTI) was established by the Presbyterian Church (USA)'s predecessor body, the United Presbyterian Church. MRTI implements church policies on faith-based investing.
Today, institutional religious investors including pension funds, endowments, religious orders and health systems continue to play key roles influencing business to bring equality to the workplace, protect the natural environment and provide resources for community development.
Tools of faith-based investing
Faith-based investing uses the three pillars of socially responsible investing — screening, shareholder advocacy, and community investing — to express faithful stewardship of investment resources. All are employed by the Presbyterian Church (U.S.A.).
Screening means selecting investments that meet criteria based on our faith values. Some churches and individuals employ "positive" screens that may include environmental responsibility, fair hiring practices and efforts to support international human rights standards. Others use "negative" screens that may include alcohol, tobacco, gambling and the production of war materials, among others. Research enables concerned investors to make informed choices to invest in companies that come closest to their values.
Screening in the PC(USA) begins with policies of the General Assembly and the investing agencies of the church to avoid investments in companies involved in tobacco, alcohol, gambling and pornography along with some companies related to weapons production, antipersonnel landmines, handguns and assault weapons. In addition, at times a company involved in serious human rights violations may also be screened.
The investment managers retained by the investing agencies for their expertise in specific areas (for example, companies with large, mid-level or small capitalization, or investment styles such as growth or value investing) then select stocks from the universe of non-screened companies according to their mandated responsibility.
2009 General Assembly divestment list
From whatever portfolio of investments that emerges from this process, the PC(USA) then moved into the next area where the vast bulk of its work is done.
Shareholder advocacy combines our voices as investors to leverage a call for socially responsible corporate policies and practices. Shareholders, as the owners of the corporation, have a variety of options — and the responsibility — to influence the behavior of a company in which they hold stock.
Through dialogue and meetings with company management, some shareholders try to directly encourage more responsible levels of corporate citizenship. Examples include dialogues conducted by MRTI with electric power companies such as Cinergy (now Duke Power), Wisconsin Energy and First Energy that resulted in ground-breaking reports on air emissions with a focus on greenhouse gases.
If initial attempts at dialogue or communication with a company fail, institutions or individuals can file a shareholder proposal, to be voted on at that company's annual shareholder meeting. A shareholder proposal is a recommendation or request that a company and/or its board of directors take a particular action relevant to company policy. Recently, resolutions were co-filed at Wal-Mart asking for a report on sustainability efforts and at Coco-Cola seeking an independent investigation into human rights concerns at bottling facilities in Columbia.
All investors then have the opportunity to speak out on key issues through the votes they cast on shareholder resolutions appearing on their proxy ballots in advance of the company annual meeting. Proxies not voted by shareholders are almost always automatically credited to the company's recommendation, which is usually a vote against the shareholder proposal.
Community investing provides financial capital for economic development in communities that are often overlooked or excluded by traditional financial structures. Community banks, credit unions, and loan funds, along with other community-based businesses, build opportunity by helping to provide market-based jobs, housing and local services. Designating a portion of investment capital for community investing supports the building of sustainable economies in communities where it is needed most.
The PC(USA) General Assembly has designated a percentage of its unrestricted assets to be invested in such ventures. This includes Oikocredit, a church-based organization making loans globally to economic development projects benefiting the poorest people in their societies.
With these tools of faith-based investing, we can give meaning to the affirmation, "The earth is the Lord's and all that is in it, the world, and those who live in it. (Psalm 24:1)."