Socially Responsible Investing for Catholics: An Overview

Investing! The word itself dredges up lots of emotions, perhaps, mainly excitement, fear, and confusion. For a long time, I didn’t see any connection between my Catholic faith and my investment choices.

That all changed when I discovered that the US Conference of Catholic Bishops had created its own Investment Principles and Socially Responsible Investment Guidelines.

I’m quite late to the party, admittedly.

These Investment Principles were published in 2003 on the USCCB’s website. But you’re not alone if you’ve never heard of them or have no idea what they mean or how to implement them.

I got you.

I plan to publish other blog posts on why socially responsible investing is important and how you can get started with it, so this post will function only as an overview of what the USCCB’s SRI Guidelines actually are.

Please note: This post is meant to be informational only and should not be construed as investment advice.

What is SRI?

Socially responsible investing is an umbrella term that encompasses investment choices that aren’t driven solely by how much money one wants to earn. Rather, SRI choices are driven by the investor’s morals, ethics, and values. Instead of just asking, “What kind of financial return can I expect on this investment?,” the SRI investor may ask, “What kind of social good can come from investing in this company?” or “What industries will my money be supporting and do I agree with their actions?”

Therefore, instead of focusing only on making money, the USCCB calls for aligning its investment choices with the morality and virtues of the Church. In its letter Economic Justice for All, the Conference affirms that “their stewardship [of financial resources] embraces broader moral concerns.”

The USCCB wants to make money?

Ok, maybe you’re wondering: why does the USCCB want to make money? Is that amoral? Shouldn’t the USCCB only care about the common social good and not about finance?

For one, regardless of the resource, God calls everyone to be stewards, to take good care of what He’s bestowed on us. To spend money recklessly and mindlessly or to use money to promote evils would be a great example of not being a good steward of your finances.

The parable of the talents is an excellent explanation of this concept. The master was delighted with the servant who best took care of his talent, nurtured it and shared it. His talent then gave fruit to more talents. If we look at the Church’s financial resources this way, then we know we’re called to shepherd those resources responsibly and not squander them.

The USCCB also has practical reasons for needing good investment returns, like funding retirement for priests and religious. (You’ve probably heard about states that are on track to run out of money for their pensioners. The USCCB doesn’t want that happening to its flock, so its has to be responsible with its resources.)

Additionally, the USCCB has a duty to pay its bills, including salaries, utilities, property costs, etc. If you want to know more specifics about the causes and projects that the USCCB funds, you can read more about the Conference’s strategic plan here.

To recap, the guiding investment principles for the USCCB are to:

  1. Exercise responsible financial stewardship over its economic resources” (aka get good investment returns)
  2. Exercise ethical and social stewardship in its investment policy” (aka invest in morally and ethically sound companies)

What is ethical and social stewardship?

Thankfully, the USCCB dives deeper into what it means by “ethical and social stewardship,” saying that these “strategies are based on the moral demands posed by the virtues of prudence and justice.”

Here’s how the USCCB outlines its main components when evaluating whether to invest in the stocks of a company:

  • Does it protect human life?
  • Does it promote human dignity?
  • Does it promote a global nuclear and/or conventional arms race?
  • Does it pursue economic justice?
  • Does it protect the environment?
  • Does it encourage corporate responsibility?

By these standards, the USCCB says it will avoid investing in companies that make money off of the following activities:

  • performing abortions
  • producing contraceptives or abortifacients
  • producing adult entertainment
  • biological, chemical and/or nuclear weapons
  • embryonic stem cell research
  • human cloning
  • landmines

The USCCB also says it will also remove its money from companies that discriminate based on gender or race. Honestly, it’s very hard to tell purely from a company’s financials whether it discriminates based on those factors.

Finally, the investment guidelines call for the Church to use its position as a shareholder to promote the following:

  • the elimination of sweatshops in the supply chain
  • worker safety
  • family-friendly benefits
  • generous wages
  • clean energy/renewable energy
  • the reporting of social, environmental and financial performance

Sounds great, but are there any companies out there like that?

So where does that leave us, as far as investment options go? Naturally, the choices will be more limited than they would be for a typical investor who is not following SRI guidelines.

But that doesn’t mean that an SRI portfolio automatically performs worse than a non-SRI portfolio. It also doesn’t mean that an SRI portfolio automatically performs better than a non-SRI portfolio (though, it would be really nice if God gave SRI folks some superior investment returns #Prayers).

To further complicate or maybe simplify things (depending on how you look at it), the USCCB doesn’t publish a list of publicly-traded companies that fit this criteria. So it’s not like you can just Google “Approved Catholic SRI Companies to Invest In”, stick your money there for 30 years, and call it a day!

However, thanks to investment advisors who’ve done the research, everyday Catholics like you and me can find more investment choices than even that have been vetted according to the SRI guidelines.

But remember that no “seal of approval” exists from the USCCB for any investments or investment products. So if you’re looking for that, you won’t find it!

Ok, so I’ll name a few publicly-traded companies that have passed the investment adviser’s “sniff test” so to speak, but before I do that, it’s important to keep in mind a few things. Just because these companies are part of a Catholic socially responsible portfolio does not mean that:

  • the company espouses Catholic values
  • any member of the company’s executive management is Catholic or Christian
  • the company would publicly support Catholic moral teaching
  • it has any association with the Catholic Church

Catholic S&P 500

The Catholic S&P 500 (with ticker CATH) is a newer investment option. It’s made up of companies from the S&P 500 that fit the Catholic SRI Guidelines and it excludes companies on the S&P 500 that don’t fit the guidelines. This may shock you, but as of August 2020, the top 5 companies in this fund include:

  • Apple
  • Microsoft
  • Amazon
  • Facebook
  • Google

Ok, like me, your first thought may be: how is it possible that those companies fit the bill? This is where I’ll remember you and myself that this has nothing to do with whether these companies are pro-Catholic or not, but rather it has to do with how they make their money.

Take Apple, for example. It does not make money off of abortions, contraceptives, military weapons, biological/chemical weapons, embryonic stem cell research, landmines or human cloning. So, you can see how it would pass the negative screening test.

At the same time, Apple executives could publicly support the pro-choice agenda and still be part of the Catholic S&P 500 because voicing support for a cause is different than making money off of it, in the eyes of SRI Guidelines.

Apple has been accused of using child labor in its supply chain, so it’s no saint of a company, but in this circumstance, the USCCB likely would “actively promote and support shareholder resolutions directed towards avoiding the use of sweatshops in the manufacture of goods.” That means, in theory, the USCCB would use its voice as a shareholder to influence change within the company.

Evaluating a company’s supply chain can be complicated. Unless the company has a Fair Trade designation, then you can’t tell from a balance sheet or from looking at the type of goods it sells whether slave or child labor was involved.

Sometimes companies claim not to know how intricate their supply chains get or where certain materials are sourced. That’s not an excuse, but it can serve as an explanation for how companies that have been accused of human rights violations could still end up on the Catholic S&P 500.

Side note – This why I’m very passionate about ethical fashion and will soon have more posts on how to shop ethically!

More to Come

There is more to come in future blog posts on how to get started, where to find Catholic Socially Responsible Investment options, and how to stay informed!