Investing with purpose: the rise of responsible investingFINANCE, Human Resources, Latest News Wednesday, September 16th, 2015
We live in a vocal age. People want to share what they had for breakfast on Facebook and live tweet their personal opinions of a TV show for the world to see. Our society is filled with individuals who want their voices to be heard — and it appears that Americans are now putting their money where their mouth is, too.
By Don McLeod, CFP®
More than ever before, individuals are aligning their finances with their personal beliefs. The noted increase in charitable giving in the United States, as shown in recent findings from the National Center for Charitable Statistics, is a great example of this positive shift. But, individuals are not only trying to use their finances for good by helping others; they are investing in companies that align with their values, too. For example, last year, one out of every six dollars invested under professional management — $6.57 trillion or more — was invested in a socially conscious investment strategy, as reported in the 2014 Report on Sustainable, Responsible and Impact Investing Trends in the United States by US SIF: The Forum for Sustainable and Responsible Investment.
While the strategies go by various names — environmental, social and governance investing (ESG), socially responsible investing (SRI), biblically responsible investing (BRI), ethical investing, impact investing and many more — the goal of these fund managers is to reflect the beliefs of the investors they serve.
This trend toward SRI is especially good news for us as Christians, because it allows us to use our finances to protect the values we cherish most — while still achieving our financial goals.
What is socially responsible investing (SRI)?
SRI is an industry term used to describe investments made based on the beliefs of an individual or corporation with the ultimate goal of making a positive impact. There are a variety of criteria used to determine if an investment falls under the SRI category, but socially conscious investment decisions are primarily categorized based on personal views about the environment, economy, social issues and / or specific products and services.
One form of SRI is advocacy investing, where an individual chooses to invest in a company due to practices or stances the company has in place that align with his or her personal beliefs. For example, some investors choose to support a company based on their implementation of eco-friendly initiatives in an effort to protect the environment.
Another common strategy of SRI is known as screening, where the fund manager excludes companies from their investment portfolio due to practices or stances that do not align with a set of core beliefs. For example, Christian-screened funds might choose to avoid investing in companies in the alcohol, tobacco, gambling, pornography and / or abortion industries.
Does SRI impact performance?
While personal values are the main driver in choosing SRI, socially conscious individuals also expect to achieve competitive returns on their investments. Many investors have feared they would have to sacrifice one for the other, but the interest and shift toward SRI across the investment industry shows that performance with values is an attainable option for investors.
A recent study by the Christian Investment Forum shows that return performance was not reduced due to incorporating Christian-based SRI. In fact, over the last five years, a composite of the returns from all the equity mutual funds within the Christian Investment Forum outperformed the industry average by 77 basis points on an annualized basis.
How can your church use SRI?
The most common forms of SRI can be found in mutual funds that are created based on either set of criteria mentioned above. While SRI options are available to any individual who wants to personally invest in line with their values, many churches and ministries also offer SRI options through their employer-sponsored retirement plans.
The ministers and staff members at your churches have devoted their lives to a greater calling, and it would make sense that they would welcome the opportunity to invest differently, too.
You might want to consider researching the investments currently in your plan to make sure they align with the values of your church or ministry.
If you are investing a church endowment or reserve dollars, consider encouraging your finance committee to research SRI options. Your church members would likely feel better knowing that their contributions are invested in line with their beliefs.
How can you access SRI?
SRI mutual funds have become increasingly available as demand has increased in recent years. In fact, Peter Ortiz stated in a recent Ignites article titled “Social Fund Launches Jump as Distributors Drive Interest” that 15 new mutual funds with SRI investment strategies have launched so far in 2015 — double the number of SRI fund options launched in 2014.
Among the options available to you is GuideStone Funds — the nation’s largest Christian-screened mutual fund family. GuideStone, which formulated its screening philosophy decades ago, offers investment options across all major asset classes to help meet your employees’ investment needs while staying true to their values.
Don McLeod, CFP® is a Regional Director of Retirement Relationship Management at GuideStone Financial Resources in Dallas. With more than 21 years of experience, McLeod helps churches, pastors and executive leaders financially prepare for retirement.