NYTIMES – The intersection of faith and money can be complicated. But investing by the tenets of your faith has become easier, and in many cases it’s neither less profitable nor more risky than investing without a religious screen.
There are Islamic exchange-traded funds and real estate investment trusts, Jewish venture capital funds and Catholic separately managed accounts.
And these strategies are not just attracting investors of the same faith. In some cases, people are choosing to join in what they see as a solid investing strategy regardless of its religious tenets.
“What we’ve seen is faith-based investing, like sustainable investing overall, is much easier to do now than it has been in the past,” said Ms Jackie VanderBrug, head of sustainable and impact investing in the chief investment office at Bank of America.
As with investing with environmental, social and governance criteria, faith-based investing allows people to adhere to the tenets of their faith while still having a diversified portfolio, albeit with some exceptions. In some ways, investing along faith-based lines isn’t that much different from one religion to another. But some provide more guidance than others.
People who invest in line with their Jewish faith often embrace the principle of tikkun olam, which calls for people to leave the world a better place.
For Catholics, the United States Conference of Catholic Bishops has issued six principles as guidance – including protecting human life, pursuing economic justice and protecting the environment – though interpreting those principles is up to the individual.
Islam has a governing body known as the Accounting and Auditing Organisation for Islamic Financial Institutions that sets guidelines on how to invest in an Islamic-compliant way. For instance, investors are allowed to back a company only if it derives no more than 5 per cent of its revenue from something that is prohibited like the sale of alcohol.
Mr Monem Salam, executive vice-president and portfolio manager at Saturna Capital, which invests along Islamic principles, said he had two main criteria for making investments for Saturna’s four funds. The Islamic faith prohibits earning interest, but the organisation has created a way for companies to borrow money to expand their operations.
He also looked for companies that did not have excessive debt, because debt is acceptable only in cases of necessity. He steers away from companies that are cash-rich, because there is a prohibition on them when more than 45 per cent of their balance sheet is in cash. While a portfolio with Apple holds lots of cash, it is not enough to violate the prohibition, but it is a number the fund monitors.
He also screens companies that have a small portion of their earnings in forbidden revenue, like an airline that sells alcohol. In that case, the fund will look to see if the company gets less than 5 per cent of its revenue from something that is prohibited. “In an ideal world, we’d be buying something that is 100 per cent compliant, but that’s just not possible,” Mr Salam said.
For Catholic investors, the principles laid out by the conference of bishops requires more interpretation. There’s agreement on protecting the environment and promoting corporate responsibility, but there’s less consensus on investing in the so-called sin industries.
“We work with Catholic schools, hospitals and religious orders who are stricter about screening for gambling, tobacco and alcohol, even though the bishops don’t say anything about it,” said Mr Jim Ryan, a financial adviser at Merrill Lynch, where he manages portfolios for Catholic institutions and individuals.
Mr Michael Wagner, a co-founder of Omnia Family Wealth, a wealth management firm, has volunteered with Jewish non-profit organisations in the Miami area, where he lives. That experience, he said, prompted him to seek out investments that adhere to Jewish values of making the world better.
One is a new fund called J-Impact, created by J-Ventures, a technology venture capital fund that labels its approach a “capitalist kibbutz”, for the Hebrew word for a communal settlement.
What’s different, Mr Wagner said, is the communal style of decision-making, which gives limited partners more of a voice in the investment decisions than usual.
“Being involved with the Jewish Federation has brought me great personal joy and satisfaction. I’m bringing that part of my personal life into portfolio management and feeling that we’re doing good in the world. Is it a uniquely Jewish view? I’m not sure it is. It’s a uniquely human thing.”