Faithful Finance: Strategies for Connecting Values and Capital to Generate Real-World Impact
Faith-based investors have been pioneers in the field of responsible investing for nearly fifty years. In 1971, the Episcopal Church penned the first shareholder resolution addressing a social concern: racial segregation. Empowered by their ownership stake, the church called for General Motors to divest from South Africa until apartheid was ended. Paul Neuhauser, author of the resolution, later reflected on the church’s underlying conviction: “Our view was that, because of the conditions there, they should not operate under such immoral conditions.” That demand ultimately prompted a number of major corporations operating in South Africa to adopt the Sullivan Principles, a set of operating guidelines focused on basic fairness and anti-segregation.
By wielding their power effectively, these early faith-based investors generated change – and sparked a movement. They knew their work was essential fifty years ago, and it is even more important now.
Today, we need an “all hands-on deck” approach as the urgent issues of climate change, racial and social injustice, and inequality reach their tipping points. We also need leadership through varied approaches to solve these crises. Allocating substantial capital to promising solutions is one of the most effective way to address these concerns. Impact investing – that is, investing with the intention to generate positive, measurable social and environmental impact alongside a financial return – offers precisely such an approach.
As the global champion of impact investing, the Global Impact Investing Network (GIIN) has long recognized the important role of faith-based investors and, in 2019, began a project to deepen our engagement with this community. We sought to understand what might prevent faith-based investors from allocating capital to impact investment and to identify ways that more faith-based assets could be invested in alignment with their missions.
Although the field of faith-consistent investing is wonderfully diverse, three key themes emerged from our research as strategies for faith-based investors to more effectively generate the positive change they seek: realize the opportunity, articulate your impact goals, and work in community.
Realize the opportunity: Impact investing is a natural extension of the values of faith-based investors. However, not all have realized this alignment and, thus, may be missing an important opportunity. Many faith-based investors told us that they and their financial consultants may have limited knowledge or experience of impact investments. Without that understanding, these investors may overlook the powerful ways that impact investments can align with both the mission and financial goals of their organization. So, broader awareness of the opportunity presented by impact investing is critical.
Key decision-makers must also recognize that impact investments exist across asset classes and across the risk-return spectrum. This means that there is likely an investment product for any faith-based investor appetite. Even for investors who will consider only low-risk and market rate returns for their investment portfolio, there are still opportunities to find impact products that meet asset owners financial and moral goals.
Faith-based shareholders also have an opportunity to advocate in a more internal setting, encouraging their internal managers and decision-makers to learn about impact investing and insisting that these products be offered to the organization. The investors should always decide what purpose is attached to their capital.
Articulating impact goals: In order for faith-based investors to operate more effectively, they must clearly vocalize the end results they are seeking. This is the second strategy uncovered by our research. In the GIIN’s 2019 Annual Impact Investors Survey, some fund managers indicated that their fund simply did not offer a specific impact theme of interest to faith-based investors; the managers listed this as a top challenge. To meet this need, fund managers and advisors will have to reflect on the mission of the faith-based institution. When the institution has clearly articulated its end goals, it is easier for financial advisors and consultants to seek out the right financial opportunities. While there are many products in the market that may match with faith-aligned values, financial institutions may sometimes need to create a new product to meet a specific need of a faith-based organization. However, for such innovation to occur, the first step is a clearly articulated and measurable impact goal.
Come together: The final strategy for realizing a deeper alignment of impact investing in faith-based portfolios is through partnership. This approach is the most complex – and perhaps the most necessary, as it can amplify the effectiveness of the first two strategies.
As faith communities know from their decades of advocacy, there is deep benefit in coming together to share knowledge and grow commitments aimed at achieving meaningful real-world changes. Those same lessons can be applied to faith-based investing efforts. As investors, faith communities must learn from each other, coordinate across different groups, and make their collective capital count. By partnering, both inside and outside their faith, resources are shared, knowledge is spread, and capital can be placed in ways that directly address the pressing challenges we all face.
As 2020 draws to a close, more and more people are seeing the reality that the Episcopal Church shareholders realized back in 1971: that all investments have an impact and that, with intention and focus, those impacts can be positive. Indeed, for faith-based investors, there has never been more urgency to ensuring that your investment capital is impacting the world “for better” – and in accordance with your values.
That underlying vision of a more aligned world offers a host of powerful benefits. Perhaps its most important benefit is the potential to unify people across faiths, and beyond faith, for the betterment of our world. So, let us take action now – building on the lessons of the past and moving toward a brighter future, together.
Article by Kate Walsh, who serves as the Manager of Faith-Based Investors for the Global Impact Investing Network (GIIN). In this role, Kate networks with faith-based investors to encourage the use of impact investing as a tool to further their missions.
Previously, Kate served as the Associate Director of Investor Advocates for Social Justice (formerly the Tri-State Coalition for Responsible Investment) where she focused on advocacy regarding food sustainability, financial markets reform and forced labor concerns. In addition, she served as a board member for the Interfaith Center on Corporate Responsibility (ICCR). She is also experienced in impact measurement having previously been the Manager of Program Evaluation for the Actors Fund.
Kate holds a Masters of Public Administration from the Robert F. Wagner School at NYU and a BS in Management & Politics from Fairfield University.