Faith-based Investing - Economics for the Greater Good by Duane Roberts Dana Investment Advisors

Faith-based Investing: Economics for the Greater Good

By Duane Roberts, Dana Investment Advisors

Duane Roberts Dana Investment AdvisorsSister Generose Gervais, a Franciscan sister and administrator of Saint Mary’s Hospital (now part of Mayo Clinic), recognizing the need for financial resources to pursue the hospital’s work, once stated: “No money, no mission.” This quote is often used to justify a myopic focus on investment returns. But her complete statement finished thusly: “No mission, no need for money.” She was reminding us that our resources are only meaningful if put in service of a greater good.

Faith-based investing is not a recent trend, for religion has influenced economies and finance throughout recorded history. In ancient Greece, capital accumulated with the temples and sacred administrators acted as bankers, leading historian Gustave Glotz to state “finance was born in the shade of sanctity.” The Talmud gives advice on diversification (one third in land, one third in commerce, and one third at hand). Views on usury go back millennia and span all the Abrahamic religions. Faith-based investors recognize they have an opportunity, indeed an obligation, to exert influence on businesses to maximize the human welfare (beyond simple monetary gain) of shareholders, broader stakeholders, and society at large. Such investors may align investments with their belief system, such as the Quakers eschewing any business dealings with companies involved in the slave trade, or early Methodists avoiding investments in or partnerships with companies profiting from alcohol, tobacco, gambling or weapons.

Faith-based investors have also been at the forefront of shareholder advocacy. In 1971, the Episcopal Church filed the first shareholder proposal to appear on a corporate proxy that went beyond internal governance or financial issues, asking General Motors to withdraw from South Africa for as long as apartheid continued. A Baptist minister, Leon Sullivan, was a General Motors board member at the time and authored the Sullivan Principles, a code of conduct for corporations designed to pressure the South African apartheid system. Religious entities and individuals have collaborated ever since to nudge economic actors toward more just and sustainable businesses.

Dana’s own faith-based investment management is comparatively young, but spans more than two decades. Our experience grew out of a client request in 1999, when a women’s religious order in Chicago asked us to tailor an equity portfolio to their Catholic values. In dialogue with the nuns, we established a group of companies to avoid (exclusions), but also identified characteristics of companies that, all else equal, would be preferred investments (positive screening). We have since worked with religious entities of various faiths to align portfolios with their values and goals. Fortunately, we find that people of good will, whether they identify as religious or not, share many common areas of agreement relating to the use of their capital. At Dana we concentrate our investment activities where there appears to be a broad consensus, while customizing portfolios as appropriate to client-specific values and concerns.

Faith-based investment has been flourishing over the past decade along with the growth of ESG investing. While documents of the Catholic Church have addressed the connection between economies and human welfare for centuries (e.g., Rerum novarum, an encyclical of Pope Leo XIII issued in 1891), several documents in the last 10 years have inspired conversation among Catholics and non-Catholics regarding the purpose and responsibilities of economies and financial systems. Evangelii gaudium (2013) exhorts the faithful to return “economics and finance to an ethical approach which favors human beings.” Oeconomicae et pecuniariae quaestiones (2018) urges “new forms of economy and of finance … directed towards the enlargement of the common good and respect for human dignity.” Fratelli tutti (2020) reminds us that “business abilities, which are a gift from God, should always be clearly directed to the development of others and to eliminating poverty.” In 2021, the U. S. Conference of Catholic Bishops (USCCB) updated its Socially Responsible Investment Guidelines for the first time since the initial guidelines were issued in 2003.

Perhaps the most influential of these recent documents are Laudato si (2015) (“there is urgent need for politics and economics to enter into a frank dialogue in the service of life”) and the follow-on document commemorating the fifth anniversary of the encyclical, Journeying Towards Care for Our Common Home (2020). Laudato si’ generated a global interfaith response, supporting existing activities such as the ecumenical Care for/of Creation movement, while inspiring faith-based and secular institutions and leading to the formation of dozens of organizations to pursue the ideas (e.g., integral ecology, limits to technocratic economics) set out in the document.

Adam Smith was a moral philosopher, best known for his invisible hand argument that individual pursuit of self-interest in a free market would promote the public interest, perhaps unintentionally.

But he presupposes that businesses operate in a well-regulated environment under conditions of justice, and warns of public harm without reasonable regulation. Smith understood that an economy is meant to serve individuals and collective society. The field of economics has become overly focused on optimizing quantitative measures such as income, financial wealth, or GDP, all of which are flawed measures that fail to capture qualitative aspects of individual or social progress and benefit. Several contemporary economists (e.g., Kate Raworth, Tomáš Sedlá?ek) attempt to return to a study of economics in service of a broader concept of human/social welfare. Jon Lukomnik and James Hawley, in their book Moving Beyond Modern Portfolio Theory, suggest that investors will benefit even in financial terms by addressing systemic risks. Pope Francis is trying to steer the conversation in a similar direction. There is substantial common ground between faith-based investors and secular individuals and organizations.

The strategies that Dana manages on behalf of faith-based investors are all implemented consistent with Dana’s fundamental investment philosophy and processes. We do not believe it is necessary to compromise investment discipline to achieve values-aligned portfolios. On the contrary, our history suggests that non-pecuniary considerations may improve our security selection, perhaps by counteracting short-termism that accompanies quarterly financial reporting for U.S. public companies. In addition, we find that ongoing dialogue with our faith-based clients is challenging, stimulating, educational and rewarding. Client conversations are often crucial components to our evaluations of companies, and help to set direction and priorities for Dana’s corporate engagement activities.

Sr. Generose also said: “We must not be content only to see things as they are. We must have the vision, faith and hope to see what things can and must become.” As financial stewards, our investment choices and portfolio-related actions can have effects that extend beyond monetary returns. Faith-based investors have long seen opportunities to promote the greater good through investment activities. Many investors, regardless of religiosity, are recognizing shared desires to use investment capital to achieve a more comprehensive optimization of human welfare. As investors, we can play a small part by thinking holistically and not obsessing on purely financial metrics. At Dana, our faith-based clients awakened us to this possibility over 20 years ago and continue to enhance the perspective we employ as asset managers.


Article by Duane R. Roberts, CFA, is Director of Equities and Portfolio Manager at Dana Investment Advisors, having joined the Wisconsin-based asset management firm in 1999 to launch Dana’s institutional equity strategies. Duane graduated from Rice University with a BS in Electrical Engineering and Mathematics. He earned an MS in Statistics from Stanford University and an MBA from Southern Methodist University. Duane is a CFA® charterholder and a member of the CFA Institute and the CFA Society of Dallas-Fort Worth. He is a partner with Social Venture Partners Dallas and member of the SWAN Impact Network. Duane serves on the investment committees for the Roman Catholic Diocese of Dallas and Cistercian Abbey and Preparatory School.

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