Keeping the Faith

Since its earliest colonial days, America has had a complicated and often ambiguous relationship with matters of religious faith. A number of the first colonies were established so Puritans or Quakers or Catholics could live according to the tenets of their faiths without government interference. The Founding Fathers, many of whom were Deists rather than members of a particular church, acknowledged the role of a Creator but stood firmly against the establishment of an official state religion.

The debate about the role of religious belief in American life continues to this day as illustrated by the recent court challenge to the words “under God” in the Pledge of Allegiance. In recent polls, some 80% of Americans profess to believe that Jesus was and is the Son of God, while more than 30% say they consider themselves Evangelical Christians.

Although the various Christian denominations claim the majority of those Americans who profess religious belief, they by no means have a monopoly on the revival of religious fervor. In recent years, this reawakening of religious spirit has manifested itself in moves to put faith into practice, ranging from antiwar protests and corporate activism to the home schooling and anti-abortion movements. For those striving to live their faith, it’s not surprising that what they do with their money has also become an important issue. Sparked somewhat by the socially responsible investing (SRI) movement in recent years, momentum has been building for what can be called faith-based or morally responsible investing.

Like religious faith itself, faith-based investing is an intensely personal issue, and followers of Judaism, Hinduism, and Buddhism are no less likely to make investments that mirror their beliefs than Christians or Muslims, although their actions are often less overt. That said, the movement seems to have three primary components that often overlap: individual and institutional investors who only want to invest in companies that reflect their core values; faith-based mutual funds that screen out certain companies according to morally determined values; and investment advisors who attempt to make their spiritual beliefs the foundation of their businesses.

“Without question this is a growing movement,” says Jeff Chinery, senior financial advisor with the National Planning Group of Ronald Blue, a fee-only financial planning and investment management company based in Atlanta. “If a Christian couple needs counseling, they’re going to go to a Christian marriage counselor, because that’s important to them. But when it comes to finances, that same mindset doesn’t exist, although we’re starting to see a real shift. It is becoming more and more important to more people.” Chinery’s firm’s Web site describes its mission as providing “personal financial advisory services within a biblical framework to those who desire to live life purposefully.”

“All our services are couched in a biblical framework, but that doesn’t mean we tell our clients specifically that the Bible says you have to go and do this or do that,” Chinery explains. What the firm’s mission statement does do is let clients looking to follow biblical precepts know that their financial advisors share a similar mindset. “We spend a lot of time looking at what the Bible has to say about a lot of different things from debt to investments, diversification, and generational wealth transfer.”

International Wealth Management in Grapevine, Texas, is another firm that says it offers “biblically based” financial planning, which President Dennis Carpenter explains as helping clients see that their investments are in concert with their beliefs and values. While noting that he is very much in favor of socially responsible investing, Carpenter sees the faith-based approach as something different. In the hereafter, Carpenter expects not to be asked to justify what kind of return he got on his and his clients’ investments, but what he did with the gifts he was given in this life.

The option of using moral screens is part of the process in Carpenter’s consultations with his clients, but it’s not something he pushes. He sees his role as presenting the possibilities, but as in all matters, the final decision is the client’s. “You don’t want to do it from a preachy perspective, or from an ‘I’m better than thou’ perspective.”

But Carpenter says he’s surprised by how little most investors, including some churches and pastors, know about the investments they own. He blames that on the industry, which he feels hasn’t done enough to educate the investing public or to find out how important this issue is to them.

“I think advisors have been slow to move in this area” of mixing investments and faith, Carpenter says, and points to the National Association of Christian Financial Consultants as one of the organizations helping to expand the movement among advisors. Despite its biblical orientation, Carpenter says his firm does not specifically market its services to a religious audience.

As a believer in socially responsible investing, Carpenter is open to the idea of faith-based mutual funds, but doesn’t cut them any extra slack due to his own beliefs. “Some of them have great programs. Some are well screened and some are cost efficient, but not all. You have to look at these like any mutual fund,” he points out. “If the expense ratio is too high, even though the goal is admirable, you need to bring things into line with the competitive world. They need to be judged on the same criteria as mainstream funds.

“That’s the beauty of the products that are out there today. Clients can invest in concert with their beliefs and not sacrifice performance. There just aren’t enough of us out there–meaning advisors–who are trained to provide this type of service.”

“I think it is unwise to try to separate faith from any part of one’s life,” observes Dan Moisand, a principal with Spraker, Fitzgerald, Tamayo & Moisand, in Melbourne, Florida. “Spirituality is part of who we are. Planners should certainly incorporate this part of a client’s life into the planning process,” Moisand says, though it’s not as easy as it sounds. “We planners have our own ideas when it comes to faith,” he acknowledges, but argues that “it makes perfect sense to me to try to incorporate client wishes” regarding such an approach when it’s appropriate.

Funds of Faith

Over the last decade, a number of mutual funds have been created that avoid companies and industries that are in businesses or take social positions that conflict with the religious beliefs of certain groups. Whereas a decade ago an investor looking for funds that mirrored a specific moral doctrine was severely limited in his choices, today there are funds with a variety of denominational dispositions.

One of the early players in the faith-based investing sphere was Christian Brothers Investment Services, which was founded in 1981 by the Brothers of the Christian Schools because the Catholic religious order sought a way to balance the needs of faith and finance. The idea resonated with a variety of other Catholic institutions, including schools, hospitals, and dioceses. Today, CBIS operates as a for-profit company–donating a portion of its profits to support Catholic educational and social ministries–and manages more than $3.5 billion in assets for more than 1,000 Catholic institutions worldwide.

CBIS acts as a manager of managers in its investments and uses a number of screens that represent the core values of the firm’s participants, says executive VP Frank Coleman. CBIS employs a “life ethics” screen to weed out companies involved in contraception and abortion; a “violence” screen to eliminate companies involved in “the spread of militarism” (weapons of mass destruction), land mines, and retail handguns; a tobacco screen; and a pornography screen.

Coleman also points out that CBIS operates very much as part of the SRI movement and takes an activist role with the companies in which it has an ownership stake. “The Catholic approach is that no one is perfect. We’re all on the road to getting better,” he says. “We try to add a reasoned voice to the conversation with the goal of helping to bring about change. For example, we’re very concerned about environmental degradation, which has both a financial and a moral impact. We look to bring about board diversity, which is also a big issue for us.”

In the years since the launch of CBIS, a number of other funds based on Roman Catholic, Evangelical Christian, and Islamic beliefs have appeared. All use screens based on religious doctrine, but despite their similarities, each has its own particular spin. That’s not surprising, since the existence of one universal moral screen set is no more likely than one universally agreed-upon true religion.

Pornography is the one major no-no that cuts across all faith-based funds. For the Christian funds, opposition to abortion is also universal. After that, it gets a little more murky. Unlike CBIS, not all the Catholic funds have violence or tobacco screens, although the Islamic and a number of Christian funds screen out tobacco, and the Dow Jones Islamic Index fund also eliminates defense companies. Christian funds like the Timothy Funds and the Noah Fund join the Islamic ones in eschewing alcohol. Gambling and entertainment companies are also commonly excluded. Sharia (Islamic law), which prohibits Muslims from profiting from interest, means that Islamic funds also eliminate conventional financial services companies as well as those that make pork products.

All styles of funds are included in the faith-based mix–large cap, small cap, mid cap, value, growth, bonds, index. Ultimately, what they all have in common is that in addition to the strict investment criteria the fund managers use, a series of additional screens is applied that comes not from performance or P/E ratios or asset valuation but from a specific religious belief.