Investing is often considered solely a secular endeavor where Biblically responsible investing is ignored. Before I became an investment adviser, I was told by my wife’s retirement plan advisor that we should make money and give it to charity later. He did not understand that as Christians and I an African American male that issues of faith and diversity were important to us.
What is Biblically responsible investing
Mary King cited Martin Luther in her article “Christ’s Returns, Building an investment plan beyond profit1″:
“Among themselves the merchants have a common rule which is their chief maxim … I care nothing about my neighbor; so long as I have my profit and satisfy my greed, of what concern is it to me if it injures my neighbor in 10 ways at once? There you see how shamelessly this maxim flies squarely in the face not only of Christian love but also of natural law.”
—Martin Luther, 1524
Biblically responsible investing means investing according to Christian convictions. In particular, striving to align your portfolios to Scriptural principles. As all Christians do not agree, hence our many denominations, your call to certain principles may be different from another Christian’s. For my non-Christian friends, I challenge you to investigate whether your investments are aligned to what you believe in.
Regarding Biblically responsible investing, let’s address the returns issue that may have been thrown in your face. You won’t make as much money. Many investment pros quote or compare themselves against the S & P 500. It is often quoted as the US standard for investments. Many managers pick a few of the S & P 500 in an effort to best its returns. There is a subset of the S & P 500 known as the MSCI KLD 400 Social Index (formerly Domini 400 Social Index). This index comprises companies with high Environmental, Social and Governance (ESG) ratings and excludes companies involved in Alcohol, Gambling, Tobacco, Military Weapons, Civilian Firearms, Nuclear Power, Adult Entertainment, and Genetically Modified Organisms (GMO). The Index aims to serve as a benchmark for investors whose objectives include owning companies with very high ESG ratings and avoiding companies that are incompatible with specific values-based criteria. Since 1990, it had an annualized return of 10.4%. How has your portfolio or the portion invested in the 500 largest companies fared against that return?
Biblically responsible investing analysis
There are investment research firms such as eVALUEator that evaluate how well investments fit Christian and other religious values. Mary King uncovered that the firms you invest in may not be what they seem. She highlights an information technology that made money for its investors through pornography. Firms like eVALUEator, do the painstaking work of taking a deeper dive than most. I was able to show a business whose abortion is against their values that a significant number of companies held inside their 401(k) plan actually invested in abortion.
According to research from eVALUEator, of the 23,407 companies in their database, 22,748 are clean. That represents 94%. eVALUEator’s statistics represent socially conservative values.
Biblically responsible investing options
Because many investments people invest in change frequently it is difficult to know at any given time if they are invested in something they find objectionable. Fortunately, there are investment firms whose goal is “to maintain market outperformance by investing in companies that we believe excel at creating value, operate with integrity, and profit from ethical and sustainable activities.”
These companies take the universe of investments and screen them against Christian values. These may include more companies than just the MSCI KLD 400 they may invest in.
There are a variety of investing styles from passive to active for an investor to choose from. Passive styles focus their efforts on asset allocation or how you divvy up your investments across categories like Large Cap US or International Small. Active strategies attempt to outperform an index. You can choose to determine your own allocation and plug these strategies into it or pick a manager that provides a strategy to match your risk tolerance. This is similar to the way investing has traditionally been done.
Implementing Biblically responsible investing
The first place to start is making sure that your investing goals are clearly outlined. As Mary King wrote: “Adhering to the cultural adage “What you don’t know won’t hurt you,” it is easy to hide from the truth. But we are beholden to Christ’s disquieting reminder that everything in darkness shall be revealed in the light (Matt. 10:26).” ” Second, if you already have a portfolio , we will provide an analysis of issues you find objectionable according to your faith using eVALUEator. Third, we can provide an analysis of your risk tolerance to see if your asset allocation is consistent with your comfort with the loss of principal.
Yes you can you mix faith with finances. How you should is up to you and your faith.
(1) I highly recommend Googling “Christ’s Returns, Building an investment plan beyond profit”, Mary Naber/ Christianity Today, September 3, 2001
(2) The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. The selection universe for the MSCI KLD 400 Social Index is the MSCI USA IMI ESG Index, which is made up of securities of large, mid and small cap U.S. companies selected using an ESG Best-in-Class methodology. Companies involved in the following activities are excluded from the selection universe: Alcohol, Gambling, Tobacco, Military Weapons, Civilian Firearms, Nuclear Power, Adult Entertainment, and Genetically Modified Organisms (GMO). The MSCI KLD 400 Social Index is designed to maintain similar sector weights as the MSCI USA Index and targets a minimum count of 200 large and Mid-Cap constituents. Companies must have an IVA rating above ‘BB’ and an Impact Monitor Score greater than 2 to be eligible for the Index. At every Quarterly Index Review, constituents are deleted if they are deleted from the MSCI USA IMI ESG Index, fail the values based exclusion screens, or have declining ESG performance or involvement in very severe business controversies. At every Quarterly Index Review, additions are made to the MSCI KLD 400 Social Index to restore the number of index constituents to 400. Companies are added to the MSCI KLD 400 Social Index from the list of eligible additions based on considerations of ESG performance, sector alignment and size representation. The Index is float-adjusted market capitalization weighted. The MSCI KLD 400 Social Index is reviewed quarterly coinciding with the regular Index Reviews of the MSCI Global Investable Market Indexes. Changes are effective at the beginning of March, June, September and December. Constituent selection is based on data from MSCI ESG Research.
(3) Past performance is no guarantee of future results.
(4) All indices are unmanaged and may not be invested into directly.
(5) The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.