A lively FCI Forum focuses on building a new ecosystem for Catholic investing

We had a fascinating and inspiring FCI Forum on Catholic Investing, which offered a wide-ranging analysis of what is needed to develop a fit-for-purpose Catholic investing ecosystem, as well as very practical details of how two congregations reflect Catholic Social Teaching in their investment policies.

As expected, with three excellent speakers, the Forum was very well attended with over 220 people registering to take part. For this reason, we have published recordings of the event (see the links at the end of this article).

Building a better Catholic investing ecosystem

We began by discussing the current landscape of Catholic investing with Jean-Baptiste de Franssu, President of the Institute for the Works of Religion (known as the Vatican Bank) who has been heavily involved in the two conferences on Mensuram Bonam, the call to action for Catholic investors published by the Pontifical Academy of Social Sciences in 2022.

Pointing out that faith-consistent investment in the Catholic Church has been going on for a long time, De Franssu said what has changed recently was 'the growing interest from the perspective of the Vatican'.

He explained: 'The point of view was that in a world which is fast changing, where the dominance of financial markets keeps increasing, where also ESG is being challenged in many ways, notably in North America in certain quarters, the importance of reaffirming that you can manage your portfolios in an ethical manner, based primarily and principally on your faith, is very important.'

But the messaging coming out of the two Mensuram Bonam conferences, held in 2023 and 2024, was that 'the ecosystem of Catholic finance' is not organised as it should be, he said: 'We need to connect, we need to be better trained and we need to have a better ecosystem.'

Critical to creating a better ecosystem is making it easier for people to find Catholic or Christian funds. De Franssu said Vatican Bank's own experience was that it was difficult to find suitable funds on fund tracking databases such as Morningstar.

Even when you find a fund with a Catholic label, 'when you open the box, you see that it's the fund manager's own interpretation of what the [Catholic] Social Teaching means,' he said. 'So number one is fund classification, two is benchmark – we need to have a benchmark which really stands for what the social teaching is – and three is proxy voting.'

De Franssu said the Vatican was keen to link up with other faith traditions on faith-consistent investing, including on proxy voting: 'We know that other religions are also active in this field of religious finance and we certainly wish to reach out to other denominations and see what we can do together.

'It doesn't cost much to hope that one day, on certain social or ecological issues we share with our Muslim brothers, Jewish brothers and others, that we collectively vote in certain annual general meetings because we've been able to talk together and share experiences.'

He said he hoped to be able to announce developments in some of these areas by the end of this year.

Connecting the dots on CST

From this inspiring and energising start, we moved to hearing how two congregations invest in line with Catholic Social Teaching (CST). John O'Shaughnessy, Treasurer and Chief Investment Officer for the Franciscan Sisters of Mary, described how FSM's investment policy aligns with the focus of its mission: the compassionate care of creation.

'Number one, we want impact investments, where you can measure not just financial return but social and environmental benefits. That's what we really want,' he said.

'Number two, if we can't get that, we're going to do positive screening, like ESG and we do that in ways that also line up with the focus of our mission.

'And third, and an absolute, we're going to screen all our portfolios. We do not want to own certain things and we will not. That's actually 100% across all our portfolios.'

O'Shaughnessy said 33% of FSM's overall portfolio is in 'truly impact investments'. Of this, 13% is in a fixed income public portfolio, 20% is in private equity, with some private credit and real assets – 'and in the themes that fall within care of creation: renewable energy, resource efficiency, conservation forestry, sustainable life, sustainable transportation and so on'.

FSM invests in more than 200 companies and projects and Catholic Social Teaching (CST) is the lens through which it chooses its investments. O'Shaughnessy credits the Francisco Collaborative's Liveable Futures workshop for 'opening his eyes' five years ago on to how to connect Catholic teachings and principles to investment opportunities.

He explained: 'I'm a practitioner, I understand the nitty gritty of investing, but when I get social teaching or other other elements of Catholic faith in Word form, how do you connect the dots over to how I actually can invest and be a good fiduciary? They were able to do that for me. It was an epiphany and once you see it that way, you can't un-see it. We can't look at any investment now except through that lens.'

Quantifying compassion

Petra Vujakovic, Impact Investments Manager for the Missionary Sisters of the Sacred Heart of Jesus, known as the Cabrini Sisters, described how the organisation had chosen to create a bespoke pool of high impact investments where it was willing to forgo returns in order to achieve maximum impact.

'These are purposefully concessionary investments. This is a carved out portion of our portfolio where we are not seeking to get market returns. This portion of the portfolio has a capital preservation mandate,' she said.

'And the reason we split it up is because we, of course, need to get some return on some parts of the portfolio and it seems easier to justify seeking market rate returns when the impact outcomes are environmental, especially in something like renewable energy where there are commercially viable solutions to the problems we are facing.'

The Cabrini Sisters have decided they can allocated 10% of their total investment portfolio to these high impact investments.

'In our bespoke little pool, we really want to be laser focused on our specific charism on Catholic social teachings, but also even more specifically our congregation's charism and that is as a missionary sisters' organisation focusing on vulnerable populations and reflecting a lot of the Catholic social teachings – option for the poor, solidarity,' she said.

On what had been 'a long journey', Vujakovic said they had gone from having 'merely an intuition about what our charism alignment might be – something like, oh, our sisters would love this organisation', but not really being able to pinpoint why, to 'now we are in the process of developing an actual alignment score where we expect that we really can, and I can't believe that we got to this point, quantify something as seemingly unquantifiable as compassion.'

They'd done this by learning, through years of in-depth conversations, 'what are the common traits of the partners that we really feel aligned with, that really understand us and we understand them'. The aim is to produce 'an actual quantifiable measure of this very hard-to-pinpoint alignment', although it won't remove the need to have the conversations and carry out the due diligence needed before deciding to invest, she added.

While this project is not yet complete, Vujakovic said they would be happy to share what they'd done for other organisations to adapt to their own charism.

We need to come together

The theme of partnership and sharing came through strongly in all our speakers' comments. De Franssu said there was a real enthusiasm and a recognition 'that we need to help each other to progress in this area'.

And O'Shaughnessy and Vujakovic both emphasised the vibrant community of practice that's been growing among some Catholic groups, where people are happy to share their experience. 'There's at least a dozen groups that are working together and that's wide open, it's a collaborative group. So we can help there,' said O'Shaughnessy.

Despite this, O'Shaughnessy warned that moving into impact investing was not easy: 'You have to want to do it. You have to be inspired to do it. You cannot do it because you feel like you should. Nothing will get done right that way.'

But you don't have to follow what FSM and the Cabrini Sisters are doing – at least not from the start, he added: 'It took us years to get where we are now. Just make a start with a single investment.'

De Franssu added that for a long time, people had been driven by 'a sort of fiduciary absolutism for ultimate performance' when it came to their investment policies. We need a new system of reporting that illustrates 'how much our faith criteria have been taken into account in our portfolio, and the impact that those decisions have had,' he said.

'The more we can build a reporting system that talks about other things, particularly a faith-based approach and our impact, the more we will be able to talk about something other than the ultimate financial performance. So it's part of the education, the transformation and the renewed ecosystem for Catholic investing.'

Watch the webinar

You can watch this fascinating webinar on FaithInvest's YouTube channel. The top link is to the full webinar, and the second link is to a condensed 34-minute version.

• The full-length, 51-minute version here: https://youtu.be/ykWEgu85m8M

• The condensed 34-minute version here: https://youtu.be/B7JOvX-FB_A