NEW YORK – This week, nearly 100 financial advisers, fund managers and Catholic Chief Financial Officers gathered at the Second Annual Faith Consistent Investing Forum in Midtown Manhattan.
The two-day forum, hosted by Bank of America Merrill Lynch, included conversations about the health of the economy and forecasting financial markets. It was driven by Pope Benedict XVI’s reflection in Caritas In Veritate that “every economic decision has a moral consequence” and the responsibility of Catholics to invest according to Catholic Social Teaching principles.
James Ryan, managing director at Merrill Lynch and host of the forum, identified two problems that plague many Catholic organizations: Their investment portfolios often do not reflect their financial goals, and their investment choices do not always mirror their religious and philosophical beliefs.
Essentially, many faith-based organizations have “outsourced their conscience” when it comes to investments, Ryan said.
When he first began working with Catholic organizations, Ryan sat down with an abbot of an abbey to help him review their investment portfolio. He found that it was a poorly crafted portfolio that failed to adequately respond to the investment goals of the abbey. Even more concerning, he said, was that some of the underlying investments were in companies that went against the abbey’s Catholic beliefs.
Ryan began helping the abbey build an investment portfolio according to its Catholic beliefs. He consulted “Socially Responsible Investment Guidelines,” a set of principles to aid Catholics on investing, released by the United States Conference of Catholic Bishops (USCCB) in 2003.
In this document, the USCCB identifies six investing priorities: protecting human life, promoting human dignity, reducing arms production, pursuing economic justice, protecting the environment, and encouraging corporate responsibility.
Screening out so-called “sin stocks” – companies that are involved with alcohol, tobacco, arms trading, pornography, etc. – was not the only goal that Ryan set out to accomplish in building a portfolio that reflected the abbey’s Catholic faith. The U.S. bishops also call on Catholics to actively participate in issues of corporate responsibility.
One of the main tools that Catholics have to positively affect corporate responsibility is through Proxy Voting – a vote to elect directors to the board, approve a merger or acquisition, or vote on other governance issues on behalf of a shareholder of a corporation which occurs during a shareholder meeting.
Pamela Macrogliese, partner at Clearly Gottlieb Steen & Hamilton LLP and expert on corporate governance matters, spoke at the forum about the impact that active proxy involvement can have on positively impacting corporate governance on issues important to Catholic organizations.
Some proxy voting issues that were of high importance in 2017 included the reduction in environmental pollutants, transparency on the sale of weapons and arms, reduction of pay gap based on gender, race and religion, the establishment of human rights committees, and transparency on labor practices.
In addition, options now exist for Catholics to participate in “impact investing” funds that aim to fund companies or projects with the intention of a positive social or environmental impact along with a financial return.
In 2014, the Vatican’s Dicastery for the Promotion of Integral Human Development hosted the first Vatican Impact Investing Conference. Participants included financial advisors from around the world.
Pope Francis exhorted those present, “It is important that ethics once again play its due part in the world of finance and that markets serve the interests of peoples and the common good of humanity. It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs, or that the few derive immense wealth from financial speculation while the many are deeply burdened by the consequences.”
Impact investors were called on to specifically put their resources to use for the promotion of the economic and social good, to help “satisfy basic needs associated with agriculture, access to water, adequate housing and reasonable prices, as well as with primary health care and educational services.”
While progress has been made in the financial sector – both in elevating the issue of social responsibility and in educating Catholic organizations on values-based investing – more needs to be done, forum participants said.
“There’s a lot of talk and little action by faith-based organizations on impact investing,” lamented Asad Mahmood, CEO of Impact Investing firm Social Investment Managers and Advisors (SIMA).
And while the Impact Investing Market has grown to $250 billion, according to UBS Asset Management, this still represents a very small portion of the nearly $85 trillion overall investment market.
The Vatican is scheduled again to host the Impact Investing Conference July 8-11 to “evaluate blended finance models and investible vehicles to address systemic challenges of great importance to both the Catholic Church and the global community: Climate Change, Health, Migrants and Refugees, and Youth Unemployment.”