In a passionately argued Opening Address at the Faith Pavilion today, on Finance Day at COP28, FaithInvest CEO Dr Lorna Gold challenged faith groups to increase their efforts to finance climate action as a matter of urgency – and moral responsibility.
While welcoming the achievements of this and previous COPs to date, such as the Loss and Damage Fund for the world's poorest countries agreed at this UN climate conference ('after 30 years of trying'), and the increased flows of government and private finance into climate action, she made it clear that these efforts were not nearly enough.
It was clear that 'the whole financial system was not fit for purpose' to tackle the climate crisis. The whole financial system literally underpins the fossil fuel industry. It undergirds the sector in terms of investment, insurance and banking', she said.
'It systematically undervalues climate risk in all its forms – and inflates the value of carbon heavy stocks and products. We are now in a creeping crisis – a rolling crisis where the international financial system is not serving the needs of the majority of people and the planet.'
Faiths as investors
'One area which I’m concerned about, where I feel we haven’t focused enough, is how faiths can leverage their role within the financial markets as investors. – Dr Lorna Gold
When it came to climate action by religious groups and communities, Dr Gold said there was much 'wonderful work', from the grassroots to the senior levels.
However, she added: 'One area which I’m concerned about, where I feel we haven’t focused enough, is how faiths can leverage their role within the financial markets as investors.
'Many will not be aware (because we don’t really like to talk about it) that faiths are significant investors on global markets.
'The Oxford University study a year ago put the figure at US$4 trillion. That is a vast underestimate of faith assets. For a start, Islamic finance alone is estimated at $7 trillion, and it does not count the substantial assets of over 2,000 Catholic religious orders and universities. If you think of the resources of all the Catholic dioceses of the USA alone or the Daoist temples in China… you get the point. We are talking about a massive amount of capital here.'
'These same faiths have stood up at conferences for decades and proclaimed that their theology is aligned to care for the earth and that they will lead by example. So, surely a good place to start is with their own investments? – Dr Lorna Gold
Dr Gold said her contention was very straightforward: 'These same faiths have stood up at conferences for decades – most recently in Abu Dhabi before COP28 – and proclaimed that their theology is aligned to care for the earth. The most recent statements go further and state that they will lead by example – they will embed sustainability within their own institutions and communities.
'So surely a good place to start is with their own investments? After all, these are faith assets owned by faith institutions, as custodians of their wider communities.'
What is happening now?
Dr Gold said FaithInvest's own research of publicly available investment policies and guidelines (a small percentage of the total) for its latest Good Intentions study into faiths and investing had revealed a big gap between intention and implementation.
'We scoured the internet to find faith institution investment policies and guidelines, and also invited groups to send us theirs,' she said. 'In the end, we assessed well over 100 policies this year and devised a scorecard to weight the faith alignment of each. Of the policies we assessed, an astonishing 45% made NO mention of their faith in their investment policy.
What we also showed is that if institutions do not mention faith in their policy (what we call 'the front door language'), they are pretty much precluded from pursuing any strategies to align their investments. For this reason, we named our report ‘good intentions’ – because right now, that is what faith institutions have in relation to their investment policies and strategies.'
What should they do?
So what would an ideal faith-consistent investor be doing with their investments? There is no one-size-fits-all answer, she said, but you would expect a few key features:
A clear statement of the faith values and principles right up front – and how that influences how the institution thinks and acts in relation to money.
A number of clear strategies to ensure alignment of investments to these values. These could include 'exclusions (such as fossil fuels); shareholder engagement (using proxy voting or other collective means to ensure your values are being acted on); choice of ‘best in class’ funds based on robust ESG or other criteria; and a portion of funds used for more ‘prophetic’ investments – perhaps direct investing in impact projects or venture philanthropy,' she added.
A clear governance structure and process for making decisions on this and for ensuring monitoring and evaluation of the investments' impact.
What about profits?
Is it possible for faith groups to reflect their values in their investments and still make the profit needed to fund pensions and activities? Dr Gold said there were, of course, real trade-offs but 'solutions can always be found – particularly with a realistic time horizon and proper signalling to investment managers of the desire to change'.
The market will respond to values-driven demand, she added: 'I always like to tell the story of when we in Ireland helped the Irish Catholic Bishops to divest from fossil fuels after [Pope Francis' 2015 encyclical] Laudato Si' was launched.
'At the time there was no product on the Irish market which was fossil free. Nevertheless, the bishops went ahead.
'Their decision had a snowball effect – leading eventually to the government legislating for divestment from fossil fuels of the sovereign wealth fund. It was huge. Suddenly, the market shifted.'
How can FaithInvest help?
Dr Gold said FaithInvest was set up in 2019 precisely to help religious groups to align their investments with their values: 'We work with individual faith groups to support them to think through their investment policies and strategies and then take action to put their values into practice.'
'We do so through, first, engaging in networks like this and convening spaces where faiths can learn from each other about how to invest in more aligned ways. Our next online forum on faith-consistent investing (FCI) is on December 7. They take place quarterly.
'Second, we provide one-on-one support to individual faith groups – accompaniment along the FCI journey. Finally, we provide training for those organisations who want to learn more and gain confidence in how to invest in a way that's aligned to their faith. Our brand new online training programme is starting in early 2024 and will provide a really engaging way to learn about what this area is all about.
'This kind of engagement is really about systems change. It is about faiths really stepping up as deep, values-based communities – and recognising the moral responsibility to use everything in our power to help address our global crises.
'Just imagine what could happen if faiths started to invest according to their values? What, then, if their congregations do the same? We could see a huge tipping point... to build a better future' – Dr Lorna Gold
'Just imagine what could happen if all faiths – or even a sizeable portion of them – started to invest according to their values? What then if their congregations started to do the same?
'We could see a huge tipping point – where people everywhere started to demand that their own pensions and other investments started to contribute to climate care rather than destruction, to sow peace rather than war, to build a better future.'
Catch up on today's events
The talks and discussions at the Faith Pavilion are being live-streamed and recorded to the Faith Pavilion's dedicated YouTube platform. You can catch up on Lorna's Opening Address, watch the Livestream, or find out more about the programme of talks by clicking the links below.
Dr Lorna Gold is taking part in a panel discussion on 'Climate& Systems change: Towards positive tipping points.
Time: 5th December, 10:15-11:00 Dubai | 6.15 GMT | 7.15 CET
Location: Majlis Room (5th floor), Impact Hub (DP World Pavilion), Green Zone