As faithful Catholics, the application of our Christian beliefs does not begin and end on Sunday. We are called to live and experience our faith in all that we do, including our economic and financial choices. The Pontifical Council for Justice and Peace, in the Compendium of the Social Doctrine of the Church says that “economic activity is to be considered and undertaken as a grateful response to the vocation which God holds out for each person.” Yet, making investment decisions that are consistent with Catholic moral teaching is not always as easy as it may seem. This article will explore how to align a portfolio of investments with Catholic teaching and discuss if we must necessarily sacrifice healthy returns for our values.
Catholic Values Investing is the method by which we use Church Tradition and the Gospels as our guide to develop a strategy of investing in companies whose business is consistent with the social and moral lessons of our Faith.
According to Daniel Cardinal DiNardo, “Wealth is a gift from God and is to be used well. Catholic Values Investing (CVI) challenges us to align our investing with our faith lest we create a false dichotomy between our attitude to wealth and our Christian identity and calling.”
The U.S. Conference of Catholic Bishops defines six principles in their 2003 document “Socially Responsible Investing Guidelines” which can be used as a model for shaping some selection criteria for eligible investments in a Catholic values based portfolio.
- Protect human life
- Promote human dignity
- Reduce arms production
- Pursue economic justice
- Protect the environment
- Encourage corporate responsibility
Within the framework created by these guidelines, some investment decisions are easily identified, such as excluding drug companies which produce abortifacients as an act of protecting human life. Some investment decisions, however, raise questions that demonstrate how complicated the process can be and how the application of the guidelines can be difficult and imprecise. For example, what does the Church tell us about investing in a defense contractor that produces weapons of death, yet are also responsible for defending our liberty and security? Or, the energy company who may be responsible for harming the environment but is also one of the largest contributors to conservation and restoration of our natural resources? In the sophisticated market that defines our economy, there is no shortage of competing considerations and decisions to be made. Still there are decisions that can become even more complex and require prayerful reflection. In these cases, the USCCB instructs us to faithfully and “prudently” apply Catholic moral teaching to these complex decisions. A well-formed individual conscience shaped by prayer will guide us to reduce the number of poor choices we might otherwise make.
“As prudent stewards of the gifts we have received from God, we must endeavor to do our due diligence before making investments. More than the desire to make profitable gains, we should also be concerned about forming our consciences in light of the Church’s teaching so as to ensure that our investments are in furtherance of economic justice and all that pertains to upholding human dignity in every sphere,” says Cardinal DiNardo
There is a popular consensus among investors that investing according to these teachings must occur at the cost of sacrificing returns. However, according to S&P Global SPIVA Scorecard 2015, 82-88% of all funds have underperformed their benchmarks in the last ten years. So perhaps the Catholic values are not the problem, instead it may be the manager’s strategy. In fact, the USCCB has stated that since implementing the guidelines into their investment strategy, they have not seen a negative impact on their financial returns. Our experience is likewise such that we believe Catholic Values Screening can be part of a disciplined fundamental strategy using proven return-predictive factors that has historically achieved favorable investment returns while adhering to the guidelines of the Church. In summary, a Catholic Values Portfolio need not be a financial sacrifice to a Catholic investor.
As Roman Catholics, we must recognize the role our investments play in furthering the works of the Church. We urge you to prayerfully consider a Catholic Values Investing portfolio with investments aligned with the teachings of the Gospels and the Church. Reflect on your existing holdings in light of the six guidelines as laid out by the USCCB and carefully research and consider the more complex issues inherent in many large companies. Take this time to study the teachings of the Church that inform our faith. And finally, ensure that your financial advisor shares your faith and your values so he or she can best assist you with difficult moral investment decisions. If we are successful in this endeavor, as Catholics, we can transform the economy into an instrument of God.
Louis Pelz and John Barry are Senior Partners at Core Capital Management & Research, an SEC Registered Investment Adviser located in Houston, TX. They are both installed acolytes and serve on the Pastoral Council of St. Michael Catholic Church and currently serve on boards and investment committees for Catholic organizations and Catholic Schools.