As the warning bells rang at the 26th United Nations Climate Change Conference continue to reverberate, experts say faith-based finance has been an overlooked but critical element of climate action.
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This series illuminates the role faith actors and their communities play in strengthening global development outcomes.
“The role of faiths is absolutely critical and it’s one that’s been completely underestimated and undervalued in the climate movement,” said Lorna Gold, director of movement building at FaithInvest, a membership association that helps owners of faith-based assets invest in line with their values.
Many faith groups have long been engaged in tackling climate change. Ahead of the formal acceptance of the Paris Agreement, various declarations were made by faith groups — including those related to Islam, Buddhism, and Hinduism — calling for “meaningful action.” In 2020, the Church of England rescheduled its goal of achieving net-zero greenhouse gas emissions for its operations from 2045 to 2030. And last month, 72 faith institutions from around the world announced plans to divest from fossil fuels.
Despite this, faith in itself has never been regarded as having a particular role in climate action, Gold said. “It’s largely been seen within the frame of the secular climate movement and the frame of development in the secular sense.” But that’s changing, she added, as faith groups increasingly recognize their potential in climate action.
Based on 2019 data, the Organisation for Economic Co-operation and Development puts the funding gap that exists in climate adaptation and mitigation at $20 billion. Now, there’s an increasing realization that the significant resources and assets that faith groups around the world have, could make a significant difference in filling that gap.
“Faith communities hold significant assets,” Rosie Venner, national program manager of the Money Makes Change program at the Ecumenical Council for Corporate Responsibility, told Devex in an email.
For example, the Church Investors Group, which is made up of institutional investors from church denominations and church-related charities in the United Kingdom and Ireland, has combined investment assets of over £25 billion ($33.32 billion).
“With this comes a duty to invest responsibly and consider the impact of those investments on the neighbours we are called to serve, locally and globally, and on future generations,” Venner said.
The multifaith statement made by Pope Francis in October was a “step change in the sense of awakening” in this regard, Gold said. While the pope has previously addressed climate change — in 2015, he called it “a moral issue” that needed to be addressed by all — this latest statement, and the appeal signed by the pope and other religious leaders, was more practical in its messaging.
It committed to transitioning from investments in fossil fuels to those in renewable energy and restorative agriculture, engaging with communities on building resilience, and raising awareness about the need for them to examine banking, insurance, and investment choices.
The shift, Gold said, means faith groups are no longer pointing the finger at governments to take action, but taking action themselves. “That was hugely significant because faiths have very substantial financial resources. … They have assets in terms of land, hospitals, [and] schools,” she said, adding that reducing the footprint within those institutions alone would have an impact.
“I very much believe the money is there and the money is looking for places to land. The bottleneck is in the development sector.”
— Ciara Feehely, head of fundraising and communications, VitaAt an institutional level, Venner said churches could also take steps to ensure their investments and pension funds align with a just transition to net-zero. “Churches can work with asset managers to hold companies to account for their environmental impact and call for more urgent action to meet climate targets,” she said.
The same can be said for Islamic finance, according to Saiful Azhar Rosly, a professor at the International Centre for Education in Islamic Finance. “[Islamic finance] has the capacity to mitigate risks arising from irresponsible policies that excessively exploit nature in return for temporal worldly gains. … Climate harmful activities — which the Shariah is inherently against — can also be controlled by excluding high carbon emission clients,” he said.
FaithInvest works with over 700 faith groups, helping them manage their assets in a way that aligns with their values. That includes encouraging sustainable banking, supporting the development of faith-consistent policies, and asking groups to consider where they could invest in startup development projects.
“In the case of climate action, that might mean paying the loss capital at the start to enable small businesses to get off the ground in Africa in renewable energy,” Gold said. As a relatively new area, FaithInvest said many groups are actively thinking about impact investing but it’s a slow process, given the due diligence needed.
The Missionary Sisters of the Sacred Heart of Jesus have so far made 20 such investments, the majority in migration-related projects, while Taoist faith leaders in China, with the support of FaithInvest, are investing and applying their knowledge of sustainable building in the development of eco-towns.
Impact investing is something churches are starting to think seriously about, Venner said. “[They’re] choosing more sustainable funds that support the U.N. Global Goals or actively investing in companies and projects that have a measurably positive impact on society and the environment. This includes renewable energy generation, sustainable farming, low-carbon transport infrastructure, greener housing etc.”
The Vita Green Impact Fund — launched by Vita in 2016 — is another example of this at play. Impact investors contribute to the fund, which then provides affordable water and energy in Eritrea and Ethiopia. “When you have access to clean water, you don’t need to burn a pot of big, dirty brown water to sanitize it. It saves a lot of fuel and wood,” said Ciara Feehely, head of fundraising and communications at Vita.
“If you combine clean water with clean cooking and you have a conservation and a plantation element … you’re saving an awful lot of carbon emissions,” she said. Emission savings can be turned into carbon offsets and sold on voluntary carbon markets to companies wanting to move toward net-zero. The income from that repays investors who, Feehely said, initially mostly included faith-based organizations such as The Sisters of Mercy Western Province in Ireland.
“Faith money is very brave money. It’s not as risk-averse as traditional investment and it’s more patient. It quantifies social impact as part of the return,” she said, adding that development organizations must engage in such “next-generation solutions” and take steps to connect more with faith-based investors.
“I very much believe the money is there and the money is looking for places to land. The bottleneck is in the development sector,” Feehely said. Impact is what’s most important to faith-based investors, she said, and NGOs must demonstrate that their projects will deliver that.
Next year, FaithInvest hopes to launch a fund alongside Climate Investment Funds to support mega religious investors in making mega investments in infrastructure programs, Martin Palmer, CEO at FaithInvest, told Devex. “We’re looking at effectively creating a religious development fund.”
But the impact of individual action shouldn’t be underestimated, Venner said.
More than 80% of the global population identifies as religious. And, as trusted members of the community, faith leaders often have the potential to mobilize action among communities. They can educate and mobilize their congregations to take action with their personal finances, she said. “For example, switching to greener banking, taking action through their pension provider, or choosing to invest in sustainable funds.”
Palmer urged individuals to think about where they’re putting their money — be it through pension funds, insurance, and investments — and how that might support climate action. “If your faith develops a faith-consistent investing policy, they will share that with you through the parish or diocese,” he said, adding that this can help guide individual action.
For example, the Church of Sweden has put together responsible investment instructions and a financial policy that details how it sees faith-consistent investing.
“Faith-based finance should be about joining the dots between faith values, financial decisions, and the change we want to see in the world,” Venner said.
Devex, with support from our partner GHR Foundation, is exploring the intersection between faith and development. Visit the Focus on: Faith and Development page for more. Disclaimer: The views in this article do not necessarily represent the views of the GHR Foundation.