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Sustainable & Impact Investing

May 05, 2022

Investment Strategies and Guidelines for Christian, Jewish and Islamic Faiths

Executive summary

  • Faith-based investing focuses on investments whose strategies align with an organization’s values, and every faith has its own perspectives on investing to support certain causes or ideals.
  • Investors from Christian, Jewish and Islamic faiths, among others, have long considered the societal impacts of their financial decisions. Many denominations have adopted formal guidelines prohibiting investments that violate their traditions or beliefs. This can take a variety of shapes, from avoiding industries that conflict with an organization’s beliefs to shifting capital in support of human causes. Faith-based organizations can lead the way in using the power of capital for transformation.
  • Faith-based investing is unique from other areas of mission-aligned investing in that many religious denominations follow predetermined guidelines available for fiduciaries to either use or adapt to their denomination’s specific preferences. Depending on a particular faith or set of values, guidelines may exist as a starting point from that practice’s leadership that enable investors to think about best practices and adapt to their own interests.

Investment strategies and guidelines

Investors — both religious institutions and individuals of faith — can amplify their voices by enacting mission-aligned strategies that couple positive screening with shareholder engagement tactics. For instance, faith-based investors can identify strategies that seek opportunities to vote their shares to advance environmental, social and governance (ESG) issues. Glenmede has worked with investors of various faiths to vote their shares to ask companies to disclose greater data. Examples include asking how companies are seeking to slash carbon emissions or how they are measuring the efficacy of their diversity, equity and inclusion practices.

Faith-based organizations striving to be true to their values have long considered the correlation between their investments and their missions. At the end of the day, mission-aligned investing can fulfill an institution’s financial goals while paving the way for a healthier and more just world. With the path to more good works laid out before them, organizations need only to take the first step.

Below we highlight three faiths and their unique investment strategies and guidelines.1

Christianity and Catholicism

Like most faiths, Christians generally may screen out certain types of stocks, such as alcohol, tobacco, gambling, pornographic-related companies, weapons makers and defense contractors. Christians may also lean on Bible verses that incorporate “values and priorities of Christians,” including charitable giving, into financial plans. Here, we focus on the Catholic faith.

The U.S. Conference of Catholic Bishops (USCCB) Socially Responsible Investment Guidelines serve as a guide for Catholics and can also serve as a baseline for other Christian faiths. The guidelines are intended to provide policies that model the USCCB’s investments and other activities related to corporate responsibility. Further, the guidelines provide an accessible framework for dioceses, colleges and church organizations striving to make investment decisions that align with their faith while meeting financial needs.

The USCCB first issued investing guidelines in 1991 and updated them in 2003. In November 2021, the bishops updated guidelines to include wider limits on where money may be invested and advance a policy of engagement on corporate practices that impact human dignity.2 The policy update adds guidance in areas such as telecommunications, media and social impact investing as well as an emphasis on shareholder engagement and environmental issues. The policy further expands consideration of steps ranging from no investment to engaging corporations on their business practices.

The categories from the 2003 guidelines were revised and streamlined from six to five.  Some of the restrictions have been recategorized and new ones added. The five categories are:

  • Protecting Human Life
  • Promoting Human Dignity
  • Enhancing the Common Good
  • Pursuing Economic Justice
  • Saving our Common Home3

Some organizations may choose to follow the guidelines closely, while others may choose to incorporate certain elements to their own investment policies. Still, the guidelines provide a baseline for Catholic organizations, dioceses and charitable nonprofits to consider their own investment policies and mission-driven guidelines.

Jewish

Central to Jewish tradition are values and principles, sometimes referred to as “Mitzvot,” that govern one’s behavior and decisions. The Torah provides guidance for discussions around values, but how these values are interpreted and put into practice can vary across branches (i.e., Orthodox, Conservative, Reform, Reconstructionist and Renewal).

While there isn’t a standard set of guidelines for Jewish values investors, one example is the Jewish Values Investing Statement of the Rabbinical Pension Board (RPB), which provides employees of Reform Movement congregations and other qualified organizations with retirement plans and programs. The statement defines Jewish values investing as focusing on “the environment, social issues, such as the health and safety of employees, good corporate governance, as well as support of Israel, along with other issue areas as appropriate.”4 Further, environmental, social and governance issues may affect the performance of investment portfolios. RPB may use positive and negative screening in implementing Jewish values investing, as these are common methodologies used by values-oriented investors.

Today’s investors can apply Jewish values to create portfolios that can benefit others and lead to a better future. Three common Jewish values are among those that inform investment decisions:

  • Tikkun olam is the belief that the world is not perfect, but that people have the responsibility to improve it. Actualizing this value depends on tikva, or hope, in the ability of people to make a difference.5 Investors committed to tikkun olam may focus on themes with the goal of repairing the natural world, including conserving natural resources, developing renewable energy or mitigating climate change. A prohibition against destroying natural resources appears in the Torah, and this teaching could be interpreted as a mandate to protect the planet.6
  • Tzedakah is the closest Hebrew word to philanthropy, reflecting the belief that donors benefit from giving as much or more than the recipients. While the word is often used interchangeably for charity, tzedakah is seen as “a form of social justice provided by the donor as well as those who utilize the support to do their work and those who allow the support into their lives.”7 For individuals and families, practicing Tzedakah may mean giving a percent of their earnings to charity. For organizations, it could mean funding job placement programs.
  • G’milut Chasadim mandates caring for people who need help. This value can be applicable to impact investing by, for example, supporting initiatives that promote food security. There is a statement said during the Passover seder that affirms the value of providing food for those in need, which may spur investors to include access to food among their impact priorities.8

Investing with Jewish values as a guide includes an array of investments that can impact Israel, the global Jewish community or nonsectarian causes related to Jewish principles. Investors may choose to make investments that are not necessarily labeled as Jewish but are otherwise aligned with Jewish values.9

Islamic

Islam does not draw a line between the spiritual and the secular, meaning that Islamic values are a factor in all financial and business decisions. A factor shared by both sustainable, responsible and impact investing and Islamic finance is an “ethical underpinning that puts stewardship and societal value creation at the forefront of finance.”10 Just as impact investors might use negative screening to avoid environmental, social or governance risks or investments in specific industries, Islamic-compliant investments generally avoid businesses related to weapons, tobacco, alcohol and gambling and are driven by principles such as fairness and equitable profit sharing — all of which can be seen as impact values. There are common factors between Islamic financing and impact investing. For example, Muslim investors’ commitment not to support businesses that sell haram, or prohibited, products with the goal of avoiding social and environmental harm mirrors impact investors’ use of negative screens.

Much like traditional impact investments, Islamic-compliant investments also strive for a sense of social equity, including directing investors to share gains with charities through the practice of zakat, or charitable giving.11 But Islamic investing is different from other faiths because companies have to meet certain criteria set forth in Islamic finance to qualify for investment. Further, Islamic finance prohibits riba, which is interest or usury, as it aims to use this prohibition to reduce wealth inequities between the rich and the poor. Because of this prohibition, many conventional investment vehicles such as bonds, options and derivatives are prohibited.

Islamic investing follows Sharia law, which is Islamic law as defined by the Quran. The hallmark component of the rules of Shariah investing is the pursuit of justice in all economic endeavors in order to help all members of society achieve equitable growth combined with rigorous moral and social criteria.12

The five principles of Shariah investing are:13

  • Support of activities that promote benefits to society
  • Prohibition of interest-bearing instruments and practices that aim to cultivate unjust gains such as speculation, short selling or excessive risk-taking
  • Sharing of risk and rewards on an equitable basis
  • Transactions comply with rules that ordain among others trust, faithfulness to contracts, transparency and prohibition of interference or manipulation of market forces as well as coalitions
  • Exclusion of prohibited goods or services that are harmful to humans and society as defined by the Shariah (e.g., producing or selling alcohol or investing in gambling)

There are many complexities to Islamic investments. Check the available resources on impact investing and Islamic compliance, such as The Global Islamic Finance and Impact Investing Platform (GIFIIP), which promotes market-based solutions to sustainable development challenges.

Conclusion

Faith-based organizations striving to be true to their values have long considered the correlation between their investments and their missions. At the end of the day, mission-aligned investing can fulfill an institution’s financial goals while paving the way for a healthier and more just world. With the path to more good works laid out before them, organizations need only to take the first step to begin expanding their outreach into financial capital.

At Glenmede, we have the deep experience necessary to help organizations take that step, customizing investment solutions that can align with your organization’s mission, vision and values. We can collaborate with your team to implement the best practices and strategies for you, mindful of the guidelines of faith-based investing. Our fiduciary mindset is a core value that drives our singular focus: putting your organization’s interests first. The desire to build strong relationships is ingrained in the Glenmede culture, and it is why you can expect highly personalized, attentive and responsive service.

Please reach out to your Glenmede Relationship Manager or email EFSolutions@Glenmede.com to learn more about how we can customize a portfolio that aligns with your organization’s faith-based values and mission.

 

1This is an overview of general guidelines for organizations and individuals to consider and does not endorse any specific strategy for any particular institution.

2Sadowski, D. “Bishops Approve New Socially Responsible Guidelines.” Catholic News Service, Nov. 17, 2021.

3“Socially Responsible Investment Guidelines for the United States Conference of Catholic Bishops” (Washington, DC: USCCB, 2021). https://www.usccb.org/resources/Socially%20Responsible%20Investment%20Guidelines%202021%20(003).pdf.

4Jewish Values Investing Statement. https://www.rpb.org/uploads/documents/RPB-Jewish-Values-Investing-Policy-Statement.pdf (accessed April 27, 2022).

5Brodsky, S. “3 Jewish Values for Impact Investors.” Impactivate, April 14, 2020. https://www.theimpactivate.com/3-jewish-values-for-impact-investors/.

6Brodsky, S. “Where Are Jewish Investors Seeking Impact?” Impactivate, Feb. 5, 2019. https://www.theimpactivate.com/where-are-jewish-investors-seeking-impact/.

7DeGroot, J. “Jewish Philanthropy: The Concept of Tzedakah.” Learningtogive.org.

8“Where Are Jewish Investors Seeking Impact.”

9DeBeer, B., and A. Deutsch. “So, What Exactly Is Investing with Jewish Values?” eJewish Philanthropy, Dec. 22, 2016.

10“Sustainable, Responsible, and Impact Investing and Islamic Finance: Similarities and Differences.” CFA Institute. https://www.cfainstitute.org/-/media/documents/survey/sri-investing-and-islamic-finance.ashx.

11Meyers, K. “Aligning Muslim Investors with Responsible Investing Could Bring Mutual Benefits.” Impactivate, June 11, 2020. https://www.theimpactivate.com/aligning-muslim-investors-with-responsible-investing-could-bring-mutual-benefits/.

12Lamont, D. “The Alignment of Shariah and Sustainable Investing.” Schroders and the Maybank Islamic Centre of Excellence, Nov. 2019. https://www.schroders.com/en/sysglobalassets/digital/insights/2019/pdfs/sustainability/the-alignment-of-shariah-investing/2019_nov_the-alignment-of-shariah-and-sustainable-investing_full-paper_final.pdf.

13Ibid

 

 

This presentation is intended to provide a review of issues or topics of possible interest to Glenmede Trust Company clients and friends and is not intended as investment, tax or legal advice. It contains Glenmede’s opinions, which may change after the date of publication. Information gathered from third-party sources is assumed reliable but is not guaranteed. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Clients are encouraged to discuss anything they see here of interest with their tax advisor, attorney or Glenmede Relationship Manager.