How to Practice Faith-Based Investing

For What It's Worth -

If your interest in values-aligned investing is tied to your religious faith, you’re not alone. In one form or another, faith-based investing has been around for centuries and has traditionally involved excluding assets linked to forbidden or disapproved of practices.

Today’s faith-based investors also seek impact, use their shareholder status to advocate for change, can choose from a variety of investment products designed for them, and often find that their goals overlap with those of socially responsible investors. In fact, churches, synagogues, and even Buddhist monks are increasingly turning to ethical and sustainable investments that integrate environmental, social and governance (ESG) issues.

Below are a few starting points and resources for many of the most popular religions in the US:

1. Define it for yourself: Although religious organizations have doctrines and some institutions have investing principles, interpretations vary and your faith is personal. Just like with any socially conscious investing, identifying what matters to you — both financially and spiritually — is the most important part of your faith-based investing journey.

2. Divest or invest by screening assets. As you shape your portfolio to reflect your religious beliefs, you can choose to avoid or include certain companies, sectors or industries. Promising to make the process easier are screening tools, like software provider Zoya Finance’s app or Inspire Insight’s screening website that allows you to enter a company ticker and check its positives, negatives and “biblical values alignment” according to the firm.

Many governing bodies publish guidelines for their own investments or the financial industry that followers can adopt. For example, the US Conference of Catholic Bishops (USCCB) has principles for socially responsible investment, and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), a Bahrain-based non-profit, outlines Islamic-compliant investing.

3. Invest in faith-based funds. You can also invest in a faith-based mutual fund or ETF. As of January 2022, there were 18 religiously responsible ETFs in the US, according to Bloomberg. There are also mutual funds and indexes tied to different religions; most of them screen out companies that are in conflict with religious teachings — adult entertainment, alcohol, tobacco and weapons are commonly excluded businesses. Keep in mind that diversification is sometimes harder with certain industries excluded, and such funds often come with a higher fee. Performance data can show whether they line up with your investment goals and risk tolerance.

4. Seek expert help From Saturna Capital (Islam) to Thrivent (Lutheran), many registered investment advisors (RIAs) specialize in faith-based investing. This is an option worth exploring if you’ve got a lot of assets, especially more complicated ones. Always make sure any prospective adviser whose religious beliefs match yours is also a good fit overall, competent and trustworthy.

5. Make your proxy vote count. Religious groups that are also investors with large endowments often demand businesses adopt sustainable practices via shareholder proposals. You can support them by voting “Yes” during company annual meetings. Every year the Interfaith Center on Corporate Responsibility publishes a Proxy Resolutions and Voting Guide listing the hundreds of proposals filed by its members on issues like climate change, diversity and racial justice, corporate governance, human/worker rights, health, etc. The proxy advisory firm ISS also publishes Catholic Faith-based Proxy voting guidelines every year.

6. Connect with your community. As faith-based investments continue to grow, so do opportunities to learn from other investors. Networks can offer resources and guidance on screening current portfolios and identifying new opportunities.

Some Faith-based Investing Resources:

Christianity

Islam

Judaism

Buddhism and Hinduism

  • Popular screens: weapons, animal products, climate change
  • Advisories and Guidelines: ZUG Guidelines
    We will continue to update and expand these resources. If there is one you like and think we should consider adding, please let us know.