What faith groups' move toward value-based investing means for NGOs

Despite more faith groups wanting to take a value-based approach to investing — particularly around achieving environmental and social goals — many are yet to do so. New research by FaithInvest, a membership association that helps faith-based assets owners, or FBAO, invest in line with their values, highlights a gap between aspirations and implementation.

According to the report, 69% of faith-based asset owners studied clearly state the role of faith in the principles and guidelines that govern their financial assets, which can include cash, stocks, bonds, and private equity. A third of the research subjects makes no such indication.

“For the 69% ... our study shows for many of them there’s still a lot more work to do,” said Mathew Jensen, investment solutions officer at FaithInvest and author of the report.

Less than half of the investment policy and guideline statements described faith values as being “integrated” across all assets, while 66% lacked a dedicated subportfolio or fund for investments that action faith values.

“Why should these assets just be invested in traditional financial assets? Why could they not be invested in something that’s doing so much good for our planet and society?” asked Janie Oliver, chief financial officer at Stewardship, an organization that facilitates giving among and between Christians, charities, and churches. “We’re called to be good stewards of God’s creation and you look at a lot of the investments made in fossil fuels and weaponry and you say ‘how is this congruent with our faith?’”

The bureaucracy often presents in faith groups a lack of knowledge around impact investing, and a reticence from financial advisors could be the barrier, said Amanda Joseph, director of faith-based initiatives at global nonprofit investment firm Calvert Impact Capital.

For Michael Lustig, an adjunct professor of finance at the New York University Stern School of Business and an adviser to the Jewish Funders Network, inertia and the “if it ain’t broke, don’t fix it” attitude are also contributing factors.

But given the significant resources faith groups have, if more congregations, institutions, and faith-based consortiums were to invest in tackling issues such as climate change, poverty, and education, it could make a significant difference, experts said.

“The issues are so urgent right now in the world and faiths manage a huge amount of resources. This is another way to start addressing much more quickly these global crises with solutions that include dollars from faith communities,” said Ciara Feehely, head of fundraising and communications at Vita, an Irish development partner focused on supporting rural climate-smart economies in Africa.

Calvert Impact Capital has helped influence $243.75 million from faith institutions over the past two years into areas such as microfinance, community development, renewable energy, and environmental sustainability investments, said Joseph.

In 2020, the Jewish Communal Fund invested $536 million in grants to charities, and the Church Investors Group has combined assets of over £25 billion.

Increasing awareness of the sustainable development goals and impact investing as well as a push from groups like the Interfaith Center on Corporate Responsibility are helping to realign this, Oliver said.

For example, the Jewish Community Foundation of San Diego is already investing in affordable housing and sustainable job creation in the United States and Israel, and the Sisters of Mercy of the Americas — through its Mercy Investment Services — has invested in clean technology, water, green buildings, and sustainable agriculture and forestry. FaithInvest has also supported numerous investments from the Missionary Sisters of the Sacred Heart of Jesus into migration-related projects, and Taoist faith leaders in China investing in the sustainable building of eco-towns.

“It’s about finding what’s important to you as a faith community and the work you may be doing in other parts of your faith communities’ activities in the world and then finding an impact investing opportunity that mirrors that,” Joseph said.

Last year, Pope Francis made a multifaith statement that laid out the need to examine banking, insurance, and investment choices.

This push could present an opportunity for NGOs as oftentimes they “have the resources, access, investments, and reputation that faiths would find attractive,” Jensen said.

But Jensen warned against calling FBAOs “donors” and assuming that it’s all about handouts and grants. “Faiths do have tools for making grants and donations but folks might forget faiths have pools of assets that are there for a reason … Faiths need to make a return on their assets so they can fund the things the faith is doing,” he said.

But many NGOs aren’t set up to receive an investment versus a grant, Feehely explained. “Depending on a grant-based model limits the ability [of an NGO] to scale their work and that’s a shame,” she said, adding that more should shift their model to allow for investment.

A part of that, according to Jensen, is packaging what an NGO is doing in a buyer-friendly way. “Price it and have liquidity provisions on it that are attractive or amenable to FBAOs,” he said, explaining that oftentimes FBAOs need to be able to invest and withdraw at specific times.

At the same time, a lot of institutional FBAOs don’t have the resources to do the detailed due diligence more complex investment strategies might require, Jensen said. If coming from a larger development agency that requires such a process, he advised providing resources to support FBAOs.

In trying to appeal to an FBAO as an investment opportunity, it might be useful, Oliver suggested, for an NGO to share why it does what it does from a faith-based angle. “It’s about explaining the impact you have, this is our theory of change and why we do what we do,” she said, which helps in understanding the business case and rationale.

That’s not to say only faith-based NGOs will be invested in, she added. “Different grant-makers will have different criteria and some will say you have to be of a particular faith but others don’t mind.”

Stewardship, for example, operates on a bull’s-eye model, which sees investments related to faith at the center as an ideal and causes that have impact on the SDGs marking the second ring. “We believe the SDGs are achieving excellent impact and biblical-based outcomes,” Oliver said.  

Many, however, don’t know what they want to do with their assets, Jensen said, which is where organizations such as FaithInvest, ShareAction, the Ecumenical Council for Corporate Responsibility, and Calvert come in. Calvert has published guides on how to impact invest and how to create and measure an impactful portfolio, the United Nations Development Programme has a guide on Islamic finance and impact investing, while Lustig has also developed a guide to Jewish impact investing.

“If a faith group is currently investing generically and decides to invest in an impactful way … that’s more capital that’s being applied toward solving problems,” Lustig said, adding that this will make a real impact to social and environmental issues.

Update, May 17, 2022: This article has been updated to clarify comments made by Janie Oliver.