With the new year well and truly underway, we’d like to take this opportunity to reflect on the importance of your organisation’s investment policy and guidelines (IP&G) as one of the central tools for furthering values-aligned, faith-consistent investing (FCI).
As we wrote in our foundational report From Faith Values to Investments a faith organisation’s investment policy and guidelines are the essential governing documents required for the successful integration of faith values with investments.
To review a little further, here are definitions of these two key document types:
Investment policy: A plan document establishing the purpose, objectives, relevant definitions, governance process and responsibilities, reporting expectations, assessment methods, and other key metrics, methods and responsibilities for a specific pool of assets.
Investment guidelines: Asset class or mandate-specific documents that establish the investment performance objective, relevant benchmark, risk and exposure parameters and expectations, time horizons for evaluation, and other important asset class, mandate or portfolio-specific metrics and measures.
But as we’ve written about in the past, additional research we’ve conducted – outlined in our Good Intentions report - has shown that just over half of the more than 100 IP&Gs from faith organisations that we’ve analysed even mentions faith values in their investment policy documents, let alone provide detailed descriptions of how faith values are to be expressed in portfolios.
Why is this?
In our work with many faith-based organisations over the years, we’ve come across several possible explanations, including:
What we call ‘The Great Disconnect’, where religious leaders often see their beliefs & values as separate from their investments.
Complex investment language that can be stifling and impede decision-making.
The misperception that fiduciary duties are incompatible with faith-aligned investing.
And what may be the most typical explanation, described by FaithInvest Executive Chair Dave Zellner in a recent post:
The ‘persistent myth…that faith-consistent investing (FCI) inherently results in suboptimal investment returns’, which we argue is a short-term-focused misconception that can contribute to inertia among faith-based asset owners considering FCI in their investments.
And finally, having limited resources to establish or enhance faith-aligned IP&Gs is certainly a factor for many faith groups.
FaithInvest can help: we will provide a confidential FCI assessment of your organisation's IP&G - at no charge. This free service can provide your faith organization with valuable insights for developing a more values-aligned investment portfolio with a standardized FCI score (based on our proprietary analytical framework). This also benefits the broader community of faith-based investors by contributing to the body of knowledge that supports improved benchmarking through a greater pool of samples. Note that we treat any IP&G that is not publicly available in strict confidence, and any data obtained that may be reflected in broader conclusions is anonymised.
Your IP&G should articulate the beliefs, teachings, and values that your organisation holds dear and which can be expressed through your investments. Developing your IP&G with support from FaithInvest can further your FCI goals while contributing to likeminded efforts by others in the broader faith-based community striving to travel along the continuum to greater faith-consistent investing.
What's your score?
The average FCI score among faith groups we've analysed (those that include any reference of faith in their documents) is 5.6 out of 10 - where does your group score?
Your organisation spends time, treasure and talent in faith-consistent ways, why not its investments? Make getting an FCI analysis of your IP&G your new year’s resolution!
To talk to us about conducting an FCI analysis of your IP&G contact us at info@faithinvest.org.