The parable of the talents in Matthew 25 teaches the importance of stewardship in the Christian life, as well as the responsibility to maximize the gifts entrusted to us. Believers are also called to be in this world but not of it (John 17). As a faith-based institutional investor, these two mandates led us to take a closer look at how our investment portfolio aligns with the convictions and values of our faith.
As a result, our organization began to discover how we could make our investments more faith-aligned and engage with the corporations owned in our portfolio. We hope that this guide will help you begin to take a similar journey in the organization you serve.
Negative Screens
For decades, faith-based institutional investors have implemented negative screens in their portfolios. Commonly used negative screens include abortion, alcohol, gambling, pornography/adult entertainment, and tobacco. Based on the convictions of the institution and the abilities of their investment professionals, the allowed percentage of company revenue from the screened activity would range from 0% to no greater than 50%, with the typical amount being around 10-20%. For example, if the institution implements a tobacco screen based on revenues greater than 10%, any company that derives more than 10% of its revenue from a tobacco-related business activity would be screened out of the portfolio.
Positive Screens
In addition to negative screens, institutions may choose to implement positive screens to their portfolio. If a negative screen’s purpose is to remove offensive companies from the portfolio, positive screens seek to direct additional investment to companies that positively align with the mission and values of the institution. Positive screening can include increasing investment in companies conducting a material amount of business activity that promotes clean water, reduces poverty, or enhances educational opportunities, among other organizationally aligned goals.
Impact Focus
An institution should seek to incorporate investment strategies into its portfolio that deliberately focus on advancing the Great Commandment and the Great Commission. Great Commandment strategies typically focus on investing in businesses that actively demonstrate or advance a commitment to human flourishing. Great Commission strategies typically focus on sharing the Gospel. This is found through a combination of Christian business leaders, company values, management principles based on biblical teaching, and intentional missional engagement with its employees or clients. These types of investments can be found among both public and private equity investment strategies but are most common in private equity strategies.
Proxy Voting
One area that many faith-based institutional investors have not considered as they seek to make sure their portfolio is aligned with their faith is proxy voting. As an investor in public equity, the institution gains the opportunity to vote shareholder proxies. Over the years, most institutional investors have allowed their investment managers to vote their proxies. Many of the investment managers have then turned to proxy voting services to take on the responsibility of voting shareholder proxies. In recent years, it has become more apparent that these large proxy voting services do not vote proxies in alignment with our Christian values. Some have even gone so far as to use intentional approaches to vote proxies that are contrary to our Christian positions. In light of this, we decided to partner with a proxy voting service (IWP) to create our own proxy policy that represents our Christian values and can be shared with values-aligned organizations.
Shareholder Engagement
For years, it was understood that the purpose of publicly traded companies was to maximize shareholder wealth. Over the past several years, that motto for many corporations has taken second place to some of the social issues we are facing in our culture. It appears that there has been a direct effort by those who seek to advance a more progressive agenda to use their influence to pressure corporations to advance these issues. As owners of the stocks of these corporations, institutional faith-based investors have the opportunity to counterbalance the pressure these corporations are receiving from those who do not align with our Christian faith. Through shareholder engagement, investors can be a voice of truth and common sense to companies in which we own shares.
Conclusion
Faith-based institutional investors have both the opportunity and responsibility to steward their assets to honor God and advance His kingdom. The opportunities for faith-based investing have increased significantly over the past several years. These five pillars outline the areas and action steps that investors can consider implementing into their portfolios. We hope to encourage you to take the next step in the process.
Dr. Johnathan W. Gray is president and chief executive officer and Nathan Russell is director of business development for Ministry Trust, which provides Christian institutional fund management services through its investment portfolio, The Ministry Fund, www.theministryfund.org. The Ministry Fund is a professionally managed and morally screened investment fund designed specifically for long-term ministry dollars. It is strategically structured to provide reliable income for ministry, grow the investment to offset inflation, and remain true to Christian principles. Ministry Trust works to make complex investment decisions simple and provide ministries the freedom to focus on what matters most.
