Faith values run deep, does ESG?
Despite overall religiosity decreasing in the UK (according to Census data), there is an emergence of new faith-based investments and approaches to achieve faith-consistent goals. A good example of this is the Edinburgh finance declaration, released back in 2018 by the Global Ethical Finance Initiative (GEFI), an interfaith shared-values framework on ethical finance, between the Church of Scotland and the Islamic Finance Council UK. While intricacies and nuances abound between faith-consistent investing and ESG, it is useful to highlight some of the key differences and similarities.
We do observe some overlap between ESG frameworks and faith-based investing, but the underlying beliefs, teachings and values of faith traditions create an arguably stronger guiding foundation – when compared with the mainstream secular ESG marketplace. Another major contrast is that the managers and investors of faith organisations consider themselves as custodians of the assets invested, demanding a higher level of responsibility.
Recently, Epworth’s head of ethics Reverend Andrew Harper said, not mincing words, that ‘the difference between faith-led investment and values-led investment is the motivation: we are commanded by God. This creates a sense of urgency’. The principles that faith-traditions hold are often reflected in the extensive exclusions that we find in highly FCI scoring faith Investment Policies. A good example of this is the Church of England’s 2021 stewardship report, which has a total of 467 organisations that are screened out for reasons such as alcohol production or predatory lending – directly anchored into the specific long-term values of the faith, rather than ephemeral implied values defined by an index provider or investor consortium.
It is important to note that this benefits the overall investment universe, as investors do not have to be religious to be attracted to the ethical ideas underlying FCI policies.