Putting your money where your faith is

adventistinvestingLast week we looked at veteran Time religion writer David Van Biema‘s fun piece “Is It OK to Pray for Your 401(k)? A Theological Primer.” We’ve been calling for good religion coverage, when possible, of the current economic situation. Van Biema followed up that great piece with a really fun and interesting look at how different religions understand appropriate investment.

For each religion, we learn a bit about the overall philosophy and then some specifics about religion-based investment groups. Here’s how the Muslim section begins:

For centuries Muslims were either out of the Western stock market or burdened with a certain amount of guilt. The Koran states, “Whatever you give as riba so that it might bring increase through the wealth of other people will bring you no increase with Allah.” Since riba means “interest,” this was a powerful dampener on investment for the pious. In 1998, however, the influential scholar Yusuf Talal DeLorenzo released the so-called “Dow Jones Fatwa”, which allowed believers to invest in funds with a degree of what one of his sons termed “permissible impurity”.

Because the Muslim funds are not as dynamic as other portfolios, they experience less growth in bull markets but fewer problems in economic downturns. We then learn about Ave Maria Catholic Values, a fund that won’t invest in companies involved with abortion, contraception, pornography or providing benefits to unmarried couples of any kind.

Ave Maria’s mid-cap blend is not in the Morningstar top 5%, but another, tiny Catholic fund called Epiphany has a large blend that is in its category, and has posted an incredible (given market conditions) growth rate of about 40% from June to September. Epiphany, too, plays doctrinal hardball, basing its screening process on what CEO Sam Saladino says are “a lot of different Church teachings.” Epiphany eschews companies that contribute to Planned Parenthood, tries to avoid those that manufacture weapons or discourage unions. It gravitates predictably toward firms engaged in adult (rather than embryonic) stem-cell research, and, interestingly, to companies in the top-100 firms list of the magazine Working Mother. An Epiphany spokeswoman explained, “When looking for positive criteria to reflect family values, we felt their scorecard fit.” It may be a sign of the changes in the Church that few Catholics would have employed that definition of family values 50 years ago.

So nice to see the distinction between embryonic-destroying stem cell research and research performed on adult stem cells. Epiphany, interestingly, also won’t invest in corporations that pay their CEOs more than $12 million a year. Protestant funds are all over the place. Some avoid the classic “sin stocks” such as Playboy Enterprises. (I imagine that there would be sound financial reasons having nothing to do with morality for avoiding that one . . .) Others use shareholder advocacy to press for causes like fair-trade coffee and HIV/AIDS prevention.

Even though Van Biema didn’t find any investment funds aimed at Jews, he looked guidelines for religious Jews. The only man quoted, a professor of economics at Yeshiva, says that investment in weapons companies is always unacceptable. I imagine that’s not a universal view but we don’t get an alternate perspective. A small quibble and Van Biema packed a ton into this relatively brief story:

The faith side of religious funds is aimed at decreasing sin rather than increasing profit, and doing that well doesn’t guarantee a strong return on investment. Amana’s Salam, observing that there are several other Muslim groups that have not fared as well during the crisis as his own, explains “After you’ve screened for the Islamic criteria, you still end up with 50% of the market available,” and from then on “it’s a matter of good stock-investment skills.” Kathman has written, “If you decide to invest in any of these funds, it should be because you agree with the moral principals [sic] underlying the fund,” not because you think those principles will be the ones that assure a good return.

A nice wrap-up, too. I have been really pleased with some of these recent stories about religion and economics.

Art is from Adventist Review.

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  • Jerry

    This is a good story. First it lets people know that there are ways of putting their beliefs into financial action. It also gives people some information about religions other than their own.

    The point about stock picking is also important to keep in mind. The skill of the fund managers needs to be considered as well.

  • Ron Robins

    I got interested in spiritual/ethical investing some forty years ago as I believed that when we invest in a company we share in the responsibility for the activities of the company as well as participate in the outcomes of the company’s activities. Therefore anyone valuing their personal or spiritual growth has to take these things into account when investing.

    I also believe that if everyone does invest according to their personal values, then, since so many of core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will truly prosper.

    For anyone interested I have a site that covers the latest global news and research on ethical investing. It’s at http://investingforthesoul.com/

    Best wishes, Ron Robins


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