Faith-Based Investing: How to Get Started

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Can the way one invests really align with one’s commitment to a religious mission?

Over the years, in his writings and sermons, Pope Francis has urged us all to tackle global challenges such as climate change and help those less fortunate.1 The Pope’s words shed light on the broader mission of living a positive life in line with values ​​and mission, and that includes how and where we invest.

By following a holistic, faith-based investment strategy, investors can now be confident that the way they invest their capital fully adheres to the tenets of their faith and teachings.

Although interest in faith-based investing has increased recently, the idea of ​​investing according to one’s values ​​is far from a new concept.

More than 100 years ago, Methodist entities “screened” investments in companies that manufactured alcohol, tobacco or promoted gambling. Around the same time, Quaker values ​​such as peace, simplicity, integrity, and justice helped steer the Friends Fiduciary Corporation toward established guidelines that avoided investing contrary to the values ​​and mission .

In the late 1960s, Roman Catholics, alongside Protestants and other denominations, spoke out publicly against apartheid in South Africa. The religious sisters are credited with taking further action. After pooling their retirement assets, they filed shareholder resolutions to confront companies that had not adopted the Sullivan Principles, which state that all employees should be treated equally, regardless of race. .

Today, we see a growing landscape of interfaith investors who see managing their investments as an extension of their mission and as a powerful catalyst for social and environmental change.

Since faith is so personal, it naturally follows that faith-based investment goals will be highly tailored based on each individual’s unique set of values. Once an individual or institution has decided to incorporate a faith-based approach to investing, a Morgan Stanley financial advisor can guide the process of developing an investment plan that incorporates financial goals and confessionals of the investor.

As part of the definition of investors’ expectations, this investment plan must appropriately incorporate flexibility allowing any investment strategy to evolve over time according to market conditions and opportunities.

Today, faith-based investors have access to a range of increasingly sophisticated approaches that allow clients to align their investment decisions and personal values ​​without necessarily sacrificing financial returns.

The Morgan Stanley Investing with Impact platform offers a “Three Is of Impact” framework that faith-based investors can consider:

  • The intentionality of the investment process. This may involve choosing to avoid certain companies you find objectionable while investing in those that help solve some of the biggest global environmental and social challenges we face today. In the recently updated guidelines,2 for example, the United States Conference of Catholic Bishops (USCCB) encourages Catholic investors to avoid companies that derive income from tobacco, weapons, or other activities that run counter to the mission of protecting the human life. In the same way, it also encourages investors to seek out companies whose business models align with the emissions reduction targets of the Paris Agreement.
  • The radiation shareholders to help change corporate behavior for the better through active engagement. Example: The USCCB guidelines frequently emphasize the influential role that some shareholders can play in pushing companies toward “activities and policies that are socially beneficial and serve the common good.”
  • The role of inclusion in an investment portfolio. Increasingly, faith-based investors can consider inclusion by looking at the diversity of ownership of an asset management firm and/or investment professionals guiding investment processes.

By understanding the variety of investment options, faith-based investors can be confident that the power of their capital can help them achieve their financial and faith-based goals.

A typical misconception about faith-based investing is that aligning investments with one’s values ​​means sacrificing return goals. However, due to the growing interest in faith-based investing, there is now a growing landscape of investment choices.

Today, faith-based investors have opportunities in virtually every asset class in their portfolio, achieving different approaches to alignment – ​​from restriction selection to environmental, social and governance (ESG) integration and more. . Additionally, investors can choose to align their entire portfolio to financial and denominational goals, or just part of it.

Faith-based investing strategies are just one aspect of Morgan Stanley’s Investing with Impact platform. Launched in 2012 as part of the company-wide commitment to sustainable investing, we define impact investing as an investment approach that aims to generate market-rate financial returns while demonstrating a positive environmental and/or social impact. Investing with Impact enables our clients – from individuals to institutions – to align their investments with their values ​​and mission, including faith-based investors.

In Morgan Stanley’s view, there is no single motivation for pursuing impact investing and faith-based investing, and certainly more of an implementation approach. We are proud to partner with our clients in taking action to align investments with personal and institutional values.

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