The Church has principled and practical advice on how to make morally responsible investments
Money matters. That goes without saying in the worlds of investment and finance, but it is equally true from the perspective of faith.
The Bible says a lot about money — its right use as a gift of creation versus the danger of it becoming an idol that diverts us from God, our true end and happiness. Some might be shocked to learn there has been more official Church teaching on issues of social, economic and environmental justice over the past 150 years than on marriage, sex, the family and life issues.
The Church has offered teaching both in the form of moral principles and more specific guidance to help investors implement strategies for “faith-consistent investing.” These include statements by national conferences of bishops and by various Vatican dicasteries.
Two such statements — the U.S. Conference of Catholic Bishops’ Socially Responsible Investments Guidelines, updated in 2021, and the Pontifical Academy of Social Sciences’ 2022 document Mensuram Bonam: Faith-Based Measures for Catholic Investors — provide us with key principles and an excellent starting point for faith-consistent investing.
FOUNDATIONAL TEACHINGS
Recent years have seen a growing interest in environmental, social and governance (ESG) concerns on the part of asset managers and companies. Investors are increasingly taking ESG factors into account when deciding what to do with their money. These concerns lead to excluding bad corporate actors from investment portfolios and consciously seeking out good ones. Many of these ethical concerns are also shared by Catholic teaching. As Mensuram Bonam observes, “Many of the underlying factors for ESG resonate with the aims underlying CST [Catholic social teaching]” (42).
Yet, ESG has definite limitations, and the same Vatican document notes that “ESG is not a synonym for CST,” adding that there are “no internationally ascertained and validated evaluation criteria” for ESG investing. Some deeply important dimensions of the Church’s teaching escape the ESG lens. Thus, there could be cases where a firm scores high on ESG criteria “while producing or marketing a specific product that is incompatible with the norms and values of faith” (42).
In the U.S. context, it is evident that some ESG concerns are actually driven by views hostile to the faith. For example, since the Supreme Court’s 2022 Dobbs v. Jackson Women’s Health Organization decision overturning Roe v. Wade, it has become commonplace for many corporations to advertise their public support for abortion or to tout abortion-related travel coverage for employees in states with laws that aim to protect the lives of the unborn. According to some, this is an application of the human rights concerns of ESG. For Catholics, the direct killing of the innocent can only be a human rights violation of the first order.
Likewise, legitimate ESG concerns for promoting authentic diversity in labor practices and corporate management are sometimes highjacked by politics. The result is that including certain numbers of people who identify as gender non-conforming or same-sex attracted in labor and management is seen as equally important as positive features of human diversity such as race, ethnicity or sex. Those who oppose such practices are often silenced regardless of their sincerely held religious or moral beliefs. While both sides might appeal to “social justice” as the basis of their positions, definitions of what this entails clearly differ widely.
Rightly understood, Catholic social teaching is broader than just a set of political or economic concerns. Its foundation is the nature and dignity of the human person made in the image and likeness of God (cf. Gen 1:26-28). It includes and integrates the Church’s teaching on the sacredness of human life from conception to natural death and the irreplaceable nature of the family as the basic cell of human society. A society or a business can only be just if it is built on these foundations. In other words, Catholic social teaching can be used synonymously with the moral teaching of the Church.
DO NO HARM
The USCCB guidelines point to two overall goals for Catholic investors: avoid harm and work for change. In terms of concrete investment strategies for avoiding harm, the U.S. bishops mention two: 1) Refuse to invest in companies whose products and/or policies are counter to the values of Catholic moral teaching; and 2) Divest from such companies.
The decision to forgo investment in a problematic company or to divest when it becomes clear that a company is engaged in morally illicit activity is a decision based on concerns about unacceptable forms of cooperation with evil and the possibility of giving scandal to others.
In some cases, only a small part of what a company does may be morally problematic. In these cases, the bishops point out, prudence is needed to determine whether the activity or the amount of a company’s profits which it comprises is morally significant or whether it could be an occasion of scandal. Even if much of what a company does is good or the investment promises significant returns, if the form of cooperation is morally unacceptable or there is significant possibility of scandal, the company should not be held by the Catholic investor. St. John Paul II in his encyclical Veritatis Splendor (The Splendor of Truth) reminds us of the teaching of St. Paul: “it is not licit to do evil that good may come of it” (cf. 79-83; Rom 3:8).
This principle is foundational. Yet, there is more to being a Christian than just avoiding evil. We are called to positively do good — to love God and our neighbor, and to put this love into action. This call holds true in the realm of business and investment. When Christians enter the marketplace, they are called to pursue and promote virtue in their business dealings and to use their money for more than the mere pursuit of profit.
St. Augustine told his North African congregation, “The Lord says this: ‘Take this gold which I’m giving you, and make good use of it. Instead of adorning yourself with it, you should adorn it. Instead of hoping to derive honor and beauty from it, your way of living should beautify your gold and not bring disgrace upon it’” (Sermon 21).
Both Mensuram Bonam and the USCCB guidelines point to proactive measures that investors can take to use their investments to effect positive change. The U.S. bishops seek to influence corporate cultures, policies and decisions through “dialogue with management, through votes at corporate meetings, through the introduction of resolutions and through participation in investment decisions.” They encourage partnering with other like-minded investors to increase the impact of this advocacy and to engage in impact investing aimed at promoting the common good, especially for the poor or historically marginalized groups.
PRINCIPLES IN PRACTICE
The two interrelated strategies of avoiding harm and working for positive change are implemented through an evaluation of companies’ products, practices, and commitments in a variety of areas corresponding to components of Catholic teaching. The USCCB guidelines focus on the following areas: protecting human life, promoting human dignity, enhancing the common good, pursuing economic justice, and saving our global common home.
To protect human life, the USCCB document excludes investment in companies whose work includes direct participation in or support of abortion, euthanasia or assisted suicide. It defines “direct participation” as the manufacturing of materials produced and/or marketed specifically for abortion (including abortifacients), euthanasia or assisted suicide, as well as companies that perform abortions or facilitate assisted suicide or euthanasia. It also excludes companies engaged in assisted reproductive technologies (such as in vitro fertilization), embryonic stem-cell research, or human cloning.
The guidelines mention the importance of pressing companies that have some tangential connection to abortion, euthanasia or assisted suicide (e.g., a food service company that donates to Planned Parenthood) to eliminate this connection, while also advocating for drugs and vaccines both domestically and abroad to be affordable and not reliable on cell lines derived from procured abortion.
Concern for human dignity, the U.S. bishops explain, may require divesting from companies known to violate the human rights of their workers or to collaborate with governments that consistently do so. It also means eschewing investment in firms whose “sole purpose is to appeal to an indecent interest in sex … through the production of sexually explicit films, videos, or internet sites or services” or that “directly participate” in gender transitioning procedures. Finally, the bishops will not invest in “companies that manufacture contraceptives or derive more than 10% of their revenue from the sale of contraceptives.”
A third area of focus in the guidelines has to do with enhancing the common good, defined by CST as “the sum total of social conditions which allow people, either as groups or as individuals, to reach their fulfillment more fully and more easily” (Catechism of the Catholic Church, 1906).
When Christians enter the marketplace, they are called to pursue and promote virtue in their business dealings and to use their money for more than the mere pursuit of profit. ... Faith-consistent investing aims at putting love into action.
Promoting the common good is a moral responsibility of every member of society. The U.S. bishops eschew investment in companies that produce weapons of mass destruction or those which do not discriminate between enemy soldiers and noncombatants, such as anti-personnel land mines. Instead, they allow for investment only in companies which produce weapons for “hunting and/or legitimate military or law enforcement organizations.” They likewise reject “companies whose primary purpose is to derive revenue from gambling or the production of tobacco or the recreational use of cannabis,” as these products or practices are potentially addictive and destructive to communities.
In the pursuit of economic justice, the guidelines focus on positive measures aimed at effecting change for the good. These include the promotion of profit sharing, worker-led social responsibility, and initiatives to enhance human dignity, and economic justice such as supporting ethical banking, fair credit and lending, more affordable housing options, and increased capital to better serve historically marginalized communities.
Finally, the U.S. bishops, following the lead of Pope Francis, address our moral responsibility to save “our global common home” for future generations — a task that involves a whole series of proactive, prudent and practical measures.
FAITH INTO ACTION
In the parable of the talents, Our Lord tells of a rich man who entrusts some of his wealth to his servants (Mt 25:14-30). The first two servants invested wisely, earning a 100% return and their master’s praise. The third dug a hole in the ground and earned nothing. In the end he lost what he had been given and was punished and cast out by his master.
On one level the parable offers lessons familiar to investors: Successful investment cannot be a passive activity.
But the parable is about more than investing. Matthew 25 also contains parables on readiness or the Last Judgment — the definitive return of the Master. In that context, we can take the “talents” of the parable more broadly as all the gifts entrusted to us by God. Christian witness and discipleship are also not passive enterprises. Faith must be put into action.
Love of God and neighbor must bear fruit in good works. More than simply avoiding evil, it must actively seek to promote justice, to give witness to the faith, and to share the love with which we ourselves have been loved first (cf. 1 Jn 4:19).
In the parable of the Last Judgment (Mt 25:31-46), the Lord divides humanity into groups of sheep and goats. What separates the two groups is precisely their response to the marginalized — the hungry, the thirsty, the naked and the imprisoned. The righteous learn that in caring for these persons they were, in the words of Mother Teresa, caring for Jesus in his various “distressing disguises.”
The return they seek is not just financial. Faith-consistent investing aims at putting love into action in order to build God’s kingdom in our suffering world. Ultimately, it hopes to hear the affirmation given to the wise servants of the parable of talents: “Well done, my good and faithful servant. Since you were faithful in small matters, I will give you great responsibilities. Come, share your master’s joy” (Mt 25:21, 23).
Editor’s Note: This essay was abridged and adapted from a white paper published in partnership with Knights of Columbus Asset Advisors. For the complete text and more information, please visit kofcassetadvisors.org.
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JOHN GRABOWSKI, professor of moral theology and ethics at The Catholic University of America in Washington, D.C., serves as an advisor to Knights of Columbus Asset Advisors.
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Invest With Integrity
Knights of Columbus Asset Advisors celebrates 10 years of serving Catholic institutions and families, building up the Church through ethical investing and charity
For the past decade, Knights of Columbus Asset Advisors has helped Catholic dioceses, institutions and individuals ethically manage their investments to ensure they are consistent with Catholic social teaching. Now with $28.9 billion in assets under management for nearly 6,000 clients, KoCAA, a wholly owned subsidiary of the Knights of Columbus, has grown significantly since it was established in February 2015.
The idea to enter the underserved Catholic institutional investment market came in 2011, from a K of C- sponsored conference in Chicago on the topic of sustainable and ethical investments. Dioceses, religious orders and other institutions had searched for decades for ways to invest confidently without risking their integrity and Catholic values. Discussions during and after the conference suggested that the Knights, with its robust record of faith-consistent investment for its general fund, could offer a solution.
“It’s important to Catholics that their investments are not in conflict with their faith and values,” said Anthony Minopoli, KoCAA president and chief investment officer. “Part of our mandate as the Knights of Columbus is that we refuse to invest in companies whose products or policies contradict Catholic teaching, so people can have confidence in that.”
All securities managed by KoCAA are likewise screened and analyzed to ensure they align with Catholic values, based on guidelines from the U.S. Conference of Catholic Bishops. After six years of primarily serving Catholic institutions, KoCAA launched the Investment Advisor Representative program in 2021, providing individual investors — both Knights and others — access to faith-based investment solutions.
“We are poised to become the go-to financial resource for Catholic families,” Supreme Knight Patrick Kelly said in his inaugural annual report in 2021. “Father [Michael] McGivney created the Order to protect those families. And we are advancing that mission into exciting new territory.”
To that end, from guaranteed income fixed annuities offered directly through Knights of Columbus to growth opportunities from KoCAA mutual funds, Catholic families can take a holistic approach to their financial and retirement goals. Investors can also find KoCAA-managed funds on popular wealth management platforms.
And unlike an investment firm’s typical model, where profits go to the shareholders or partners, a portion of KoCAA’s profits returns to the Knights of Columbus and supports the Catholic Church, evangelization and charity within the community. As investments grow with KoCAA, so too the potential positive impact on causes close to the hearts of Knights.
“We want to help Catholics achieve their financial goals so they can care for their families and communities,” Minopoli explained. “And unlike Wall Street firms, our priorities don’t just include strong performance and competitive fees, but also compliance with Catholic teachings, and our profits support the charitable mission of the Order and the Church.”
KoCAA is also finding ways to promote faith-consistent investment funds in all corners of the world. In November, KoCAA sponsored the second Mensuram Bonam Summit; held in London, the summit was named after a 2022 document from the Pontifical Academy of Social Sciences that discusses key principles that Catholics should consider in relation to ethical investing.
For more information, please visit kofc.org/familyfinance.