First in-depth, multi-faith analysis of the extent to which faith groups align their values with their invesetment portfolios
There's been a huge rise in interest in values-driven investing in recent years, including among faith groups who are increasingly aware of the importance of investing in line with their faith values – particularly when it comes to achieving their environmental and social goals.
However, there is still a big gap between their aspirations to align their investments with their faith values and actual implementation, according to a new study by FaithInvest.
Good Intentions
The world's faiths have billions of dollars invested in global markets. Good Intentions: What faiths say about how they invest and how they can do more is the first multifaith, in-depth assessment of faith groups' publicly available statements about their investment policies.
FaithInvest, a UK-based international non-profit founded to empower the faiths to invest in line with their beliefs and values, developed an analytical framework to assess the extent to which faiths are integrating values into their investments.
It found that while many faith groups profess a faith component in their investments, this practice is by no means universal, and of those that do, the extent of the alignment varies widely.
'Turns out, faith-aligned IPG statements are more a rarity among faith-based asset owners than one might expect' – Mathew Jensen
The FaithInvest study looked at the investment policies and guidelines of organisations that are formally a part of, or affiliated with, a faith practice. The extensive survey was multi-faith and global in scope, and in addition to faith organisations it also included faith-oriented financial institutions, professional networks, non-profits, schools, and other faith-based institutions.
Essential guiding principles
"Investment policy and guidelines (IPG) statements are the essential guiding principles and prescriptions for how faith-based investment portfolios are managed," says Mathew Jensen, author of the study and a member of FaithInvest's Investment Solutions team (pictured right). "Turns out, faith-aligned IPG statements are more a rarity among faith-based asset owners than one might expect."
With 84% of people globally belonging to a religion, according to the Pew Research Center, and thousands of religious organisations worldwide, Jensen says: “We were surprised to find only 164 publicly available statements about faith investment policies."
Of these, only 42 provided enough information in their investment policy statements to make a credible analysis, and just 69% of these indicated that faith values have a role in the principles and guidelines that govern their financial assets.
Even among this group, the extent to which faith values were integrated into portfolios varied widely. In fact, only two of the 42 investment policy and guidelines statements studied indicated extensive integration of faith values in their investments.
'We found that many faith organisations make at least some mention of pursuing faith-consistency in their investments ... but many others have a long way to go' – Mathew Jensen
"We found that many faith organisations make at least some mention of pursuing faith-consistency in their investments, and some have done much to move toward full alignment, but many others have a long way to go." explains Jensen.
Billions of dollars
Why is this important? Although a full picture of global faith investments is hard to come by, faith groups manage billions of dollars of funds. Examples of faith holdings include:
Church of England’s Church Commissioners: £9.2billion and Church Pension > £3bn;
United Methodist Church in the US: $28bn fund managed by Wespath;
Vatican Bank: $5.6bn managed assets at the end of 2018;
According to the Zug Guidelines to Faith Consistent Investing, a landmark 2017 publication that outlined the investment priorities of dozens of faith traditions from eight of the world's major faiths – including Buddhism, Christianity, Daoism, Hinduism, Islam, Judaism, Sikhism and Shintoism – faith organisations likely own 10% of world’s entire financial investment.
“With extensive resources and deeply held values, the faiths are vital to planning environmental and sustainable development around the world, and mapping faith values with investments is central to that end,” says Nana Francois, Director of Investment Solutions, pictured above.
'With extensive resources and deeply held values, the faiths are vital to planning environmental and sustainable development around the world' – Nana Francois
Analytical framework
To conduct the study, FaithInvest developed an analytical framework to assess the extent to which faiths are integrating values into their investments. "This is the first in-depth assessment of the publicly available investment policy and guidelines statements of faith groups, and we wanted a robust tool to conduct the analysis," Jensen said.
The analytical framework consists of a series of questions that the researchers posed to reveal the presence or absence of 'indicators' of faith-based alignment. For example, the first and arguably the most important question, 'Does faith have a role in the organisation's investment policy and guidelines?'
This 'front door' query is followed by a battery of questions that probe several aspects of policy, including declarations of the use of strategies such as screening, engagement, and impact investing, and the presence of guidelines (specific portfolio management directives), such as explicit exclusions or reporting requirements.
Work to be done
While it's clear that a lot of work has been done by some faith-based asset owners to integrate faith values with their investable assets – i.e., faith-consistent investing – this study shows there is much more work to be done: from a greater number of faith organisations declaring a faith role in their investment policies, all the way to more detailed guidelines and robust reporting to ensure effective integration of faith-based guidelines.
“It's likely that fiduciary concerns are holding back some faith-based asset owners from taking a more faith-aligned approach, but with faith-conscious investments becoming more widely available, often providing market-like returns, this may not be a valid rationale for long,” explains Jensen.
Assess your progress
The methodology used for this study can be applied to any faith organisation’s investment policy and guidelines statement to help them assess their own progress against their intentions. FaithInvest's Investment Solutions team is available to assist any faith-based asset owner with an examination of its IPG statement in pursuit of more fully faith-aligned investments.
The findings in more detail
164 publicly available statements were found and considered
Of these, only a quarter (42) contained sufficient detail for an assessment to be undertaken.
69% indicated that faith values have a clearly stated role in the principles and guidelines that govern their financial assets (labeled the 'Yes' group)
31% made no mention of their faith (the 'No' group).
The 'Yes' group
Only two organisations had clearly documented that they had extensively integrated faith values throughout the entirety of their investments.
On average this group’s score was just 5.4 on our 10-point scale, indicating that better alignment is achievable for many.
Nearly 70% of the Yes group use negative screening and/or divestment practices
Just over 50% use positive screening
Nearly two thirds outlined engagement and advocacy activities
Two thirds document a specific reason or goal for incorporating faith values
Just over 40% document documented proxy voting policies
45% stipulated that faith values are integrated (ie, applied across all assets)
34% designated a separate sub-portfolio
Read the report in full
Download the Good Intentions study
Notes for editor
For more information about the study or to interview study author Mathew jensen or Director of Investment Solutions Nana Francois, contact:
Susie Weldon (UK-based) Steven Owen (US-based)
Director of Communications Senior Communications Officer
susie.weldon@faithinvest.org steven.owen@faithinvest.org
+44 (0)797 0466 830 +1 781 910 9260
+44 (0)1749 870057