What are the practical steps involved in rooting your investment guidelines with your faith values and beliefs? What are the challenges you might encounter in the process and is it really possible to make sustainable returns and have impact?
These were the questions at the heart of FaithInvest's lively webinar, 'Rooting Investment Guidelines in Faith Principles', which explored how to create and audit policies and guidelines, why they can be foundational for investment programmes – from index strategies to impact – and how they can be applied.
Read on for our webinar report, and If you weren't able to attend at the time, you can catch up on the webinar recording below.
Nana Francois, FaithInvest’s Director of Membership, began by outlining how faith consistent policies and guidelines should set a strong foundation for faith-based organisations to internally and externally communicate their values.
The theme was then explored further by Mathew Jensen, FaithInvest’s Member Engagement lead, who said: 'The business of religions involves managing assets – that’s what we’re focussing on today. Most religions have a document that shows what they value, and their values are typically well-documented over 100s of years.
'Faiths have pools of assets that are there for a purpose – supporting operational expenses, support giving and grants etc. Our focus through this effort is about making sure there’s a strong bridge between the values of the faiths and how the assets of the faiths are managed.
'Aligning investments with values will lead to positive change in the real economy' – Dave Zellner
FaithInvest’s Chairman Dave Zellner discussed the approach taken by his organisation, Wespath, in managing its assets. Wespath has been serving the United Methodist Church for over 100 years and is the largest reporting faith-based pension fund in the USA.
Zellner, Wespath's Chief Investment Officer, said: 'Our agency must manage assets prudently in the sole interest of our stakeholders. We’re not obligated to invest in line with our faith values, but we must make a conscious effort to do so.'
He described how 10 investment beliefs were formalised by the United Methodist Church’s board, including the concept of sustainability: 'Our approach to sustainable investing honours the value, mission and tradition of United Methodist Church. We recognise the urgency of achieving positive social outcomes. We must act pragmatically and this means that we cannot invest completely in SDGs and fulfil fiduciary expectations.
'We must inform and monitor external asset managers and encourage companies to adopt policies that align with the sustainable economy vision. Aligning investments with values will lead to positive change in the real economy.'
'The challenge for faiths is integrating the values of the faith into the investments they are making' – Matthew Jensen
Westpath was a great example of the systemic and pragmatic integration of faith values, said Jensen. This was, however, a journey that required time and resource commitments.
'Everyone should have an investment policy that set out the goals and measures of success for investment plans, and investment guidelines sit within the policy. These are conjoined documents and one supports the other,' he said.
'The challenge for faiths is integrating the values of the faith into the investments they are making. By aligning the assets of the faith intentionally with what the faith wants to achieve, integration can root all investment decisions.
'Faiths have done a wonderful job at integrating what they value, but if they aren’t integrated with the investment guidelines, you end up with a collection of different things in the portfolio. Turning values into investment language means you end up with a portfolio that’s fully aligned.'
Jensen discussed the importance of the ‘nesting’ process, showing how most faiths have these documents in existence. However, FaithInvest is encouraging them to revisit those documents and look at their faith values in order to translate them into policy that can inform investment.
According to Jensen: 'Alignment supports improved results and research shows that ESGs have a positive impact on financial performance.
'Screening is a common approach as part of investment guidelines. It’s increasingly common to say "what should we own" and "what should we emphasise". In terms of engagement, the faith’s proxy voting policy should be value-aligned and represent the values of the faith. The active side of engagement includes getting proxies for companies as part of proxy voting.
'ICCR is very good at encouraging faiths and leading them through the process of getting a proxy onto a company’s proxy voting ballot. When it comes to impact, along with a financial or risk objective, we also have a purposeful and direct environmental or social outcome that we want to see alongside financial returns. This means actively pursuing a values-based outcome.
'It’s more complex to be proactive around faith values – but hopefully as we go through this process, you can define a context for this.'
Jensen went on to describe how negative screening involves excluding industries and companies involved in activities that go against faith values. This a common and easy to monitor approach. An example of positive screening is to engage with companies that contribute to solving the climate crisis in a productive way.
Jensen said: 'With impact activities, it’s important to as what type of values are we going to pursue? How much of the portfolio are we going to commit to impact?
'You need to be practical and pragmatic, and we hear from many faith investors that finding ESG investment managers is very difficult. It’s important to regularly revisit the availability of ESG strategies in emerging markets and promote the fact that this is something you’re interested in. You should be able to draw a line from values to policy statement to investment guidelines.'
'Make a statement, make a commitment' – Nana Francois
Nana Francois closed the webinar by saying: 'We really see this work as foundational. We encourage you to look forward to the next steps in terms of investment strategy and the next steps in advocacy strategy. Look at your faith values and ask ‘what is your position’?
'Make a statement, make a commitment. Audit by looking over what you have today and how you invest. Review what portion of your assets are truly faith consistently invested. This is a journey and it’s important to be aspirational. Identify what the challenges are and where you would really benefit from support.'
On the advocacy side, she urged faith-based organisations to publish their plans and policies and communicate with the people who look to how they invest, and to the investors helping them on this journey.
She said: 'Once we’ve set our north star, we can choose an investment manager that really understands this. It’s important to link to other organisations, to share knowledge and realise that we’re not walking individually but alongside others.'
FaithInvest can support faith-based organisations in this work, and will soon be launching a Members Platform to allow members to build relationships and learn from each other. The first members’ event will be in June.
'The whole message of today has been to invest with your values, and it is possible to do so.' she said. 'It is possible to set up a plan and strategies that goes all the way from values to investment to outcomes. Through the work of policy and guidelines, and our work in increasing visibility for this support – we hope we can help you in the journey of faith-based investing.'