A Guide To Faith-Based Investing

By Lisa Smith AAA

No, you can't buy stock in a church. Churches are nonprofit organizations and don't issue stock, but that doesn't mean that religion plays no role in investing. In fact, just about every major religious denomination has an opinion about how to deploy cash in support of favored causes and against those that contradict their views and values.

SEE: Ethical Investing: Socially Responsible Investing

While religious-based investment rules have a wide variety of interpretations based on the teaching of specific organizations, the strategies of certain mutual fund managers, mandates from religious leaders, etc., many religious institutions have direct investments in the stock and bond markets, real estate and more. Following these same strategies is certainly a potential avenue for investors, as is investing with professional investment managers that base their investment strategies on certain well-defined, religious-based values.

So … What Do They Buy?
While churches do not issue shares of stock or bonds directly to investors, the investment principles followed by religious groups are often publicly available and easy to find. Investors who wish to put their money where their faith is won't find it hard to do. The investment strategies advocated by some of the major religious groups are provided below in alphabetical order to provide a logical system of organization. If you are seeking to follow the strictest interpretation of your particular affiliation's mandates, do a bit of research and you will likely find exactly what you are seeking.

Keep in mind that, for the purposes of this introduction to the topic, these are general guidelines and are in no way meant to represent the exact strategies and obligations of any particular institution or congregation. Also, a few notable religions are highlighted but the list is by no means comprehensive. If your chosen religion is not mentioned, have no fear. Only a small amount of effort it likely to be required before you are able to find investment guidelines based on your religious values.

SEE: Change The World One Investment At A Time

Catholic
Investors wishing to put their money to work in a manner consistent with Catholic values often seek to avoid investing in firms that pay domestic partner benefits to unmarried or same-sex couples, support abortion, contraceptives, embryonic stem cell research and weapons of mass destruction. They often favor firms that support human rights, environmental responsibility and fair employment practices via the support of labor union organizations.

Multiple entities provide guidance on investing in a manner that supports Catholic values and there are mutual fund firms that follow those guidelines for investors who prefer not to take the "do it yourself." approach. The LKCM Aquinas Funds, for example, follows the Socially Responsible Investment Guidelines set by the Unites States Conference of Catholic Bishops. Another mutual fund family, Ava Maria Mutual Funds, practices "morally responsible investing" guided by the "Catholic Advisory Board, which is loyal to the Magisterium of the Roman Catholic Church."

Islamic
Investors seeking to follow Islamic religious principles generally avoid sin stocks, such as those issued by firms that profit from alcohol, pornography or gambling. They are also prohibited from owning investments that pay interest of firms that earn a substantial part of their revenue from interest. An investment in Lehman Brothers, for example, would have been forbidden. Some Islamic investors also seek to avoid companies that carry heavy debt loans (and therefore pay interest). Investments in pork-related businesses are also not permitted.

A variety of mutual fund firms offer strategies based on Islamic values. Amana Mutual Funds invest in a manner consistent with Islamic teaching. "Generally, these principles require that investors avoid interest (riba) and investments in businesses such as liquor, pornography, gambling and banks. The Funds avoid bonds and other interest-bearing securities while seeking protection against inflation by making long-term equity investments." The Aman Fund, offered by Allied Asset Advisors is another mutual fund with a strategy based on "investments that meet Islamic principles."

SEE: Working With Islamic Finance

Jewish
Investors seeking to follow Jewish practices with their investment portfolios generally begin with the concept of diversification, dictated in the Talmud. Throughout Jewish religious teachings, there are multiple references to the importance of diversification and those references have become a cornerstone guiding tenets of investment practices. While less formal than some of the other religions, socially responsible investing is often closely associated with Jewish oriented investment strategies. Some interpretations of Jewish investing encourage avoidance of investing in countries that sponsor terror.

Mutual funds that follow Jewish investment strategies provide multiple interpretations of Jewish investing. Through The Calvert Foundation, an organization closely affiliated with the socially responsible Calvert Funds, The Jewish Funds for Justice Community Investment Initiative seeks to provide compassionate use of money to foster community development in areas such as "…affordable housing, small businesses and community facilities that are in need of affordable capital." This mandate is based on the Jewish belief in helping the poor. Another mutual fund investment opportunity is available through the AMIDEX35™ Israel Mutual Fund, which "is the only Israel index mutual fund investing exclusively in Israeli companies traded on Tel Aviv and U.S. markets." While not strictly religious based in the traditional sense, this fund is more nationalistic.

SEE: Socially Responsible Mutual Funds

Protestant
Hard work and thriftiness tend to go hand in hand with the Protestant work ethic, so working and saving are often closely associated activities. Protestant denominations include a range of beliefs from liberal to conservative, and tend to encourage individuals to make investments based on broad Christian values such as social consciousness. In some instances, such as with the Church of England, investment policies are detailed and easy to find. For example, the Church of England has an Ethical Investment Advisory Group that "supports the Church of England's national investing bodies on ethical investment." They actively engage corporations on a variety of issues and discourage investments in "sin stocks," such as those affiliated with "tobacco, gambling, alcoholic drinks, high interest lending or human embryonic cloning." They also seek to avoid firms that cause environmental damage from greenhouse gasses and businesses that do not engage in fair trade. Local support of British farmers is included in their mandates.

A number of mutual funds follow Protestant principles. For example, Guidestone Funds provide "Christian-based, socially screened" investments, and New Covenant Funds makes "investment decisions consistent with the social-witness principles adopted by the General Assembly of the Presbyterian Church." New Covenant Funds "may also limit investments in companies involved in gambling, alcohol and firearm related issues."

SEE: The Evolution Of Sinful Investing

Does It Work?
Even with divine intentions, faith-based investments face the same challenges that other investments face. In 2009, this reality came to light when The Church of England made news due to an underfunded pension plan. Just as it is difficult to make a blanket statement about religious-based investment strategies as a whole, it is equally difficult to categorically rate the concept of religious-based investing as either a raging success or a terrible failure. There are numbers of investment managers and mutual fund companies that build successful businesses in the faith-based arena. There are also other ways to gauge success other than strictly in terms of performance against a benchmark.

The Bottom Line
While you can't buy investments from a church, you can certainly donate investments to a church, if you prefer to give than receive. An appropriate gift to your favorite religious institution can not only help to support an institution that embodies principles that you believe in, but it may also provide a tax deduction in return for your good deed. Estate planning is another way for investors to transfer wealth in a manner that supports personal religious beliefs when they pass away. There are options available in the market if you choose to let your religion help provide guidance in your financial growth.

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