Drum notes that risk and best practices are agnostic. “Over half of our clients choose Saturna for reasons other than our faith and values-based focus. Our investors look to us for our deep experience and tenure in demonstrating competitive investment returns,” he says.
But he says faith-based investing presents a clear opportunity for financial advisors “whatever the values and interests are.” Faith is a differentiating factor, and he says one of the best ways for financial advisors to differentiate their own practices is to help clients incorporate those values and interests into their investments.
Effectively, this becomes an ethically tailored investment policy statement that can be tactically implemented. Screening, then, involves seeking out more sustainably managed companies in which to invest. Many studies claim a more ethically centered management increases the probability that a company will succeed. A widely quoted study by LRN, a New York-based consultancy, found that among high-performing companies, two-thirds are increasingly focusing on values instead of rules. “That compares with one in three of the lowest-performing companies,” the study says.
Investors in private placements, too, are interested in values. Even faith-based private equity funds are gaining in popularity. The Global Impact Investing Network (GIIN) recently highlighted the work of Christian Super, an Australian superannuation fund that invests in private equity on the principles of the Christian faith.
However, it’s in the public markets that the rise in faith-based investing is showing its might.
The Interfaith Center on Corporate Responsibility (ICCR) has 300 members representing faith communities, socially responsible asset managers, unions, pensions, NGOs and other socially responsible investors with combined assets of over $400 billion. ICCR members engage hundreds of public corporations annually in an effort to foster greater corporate accountability and to effect social change. And it’s working: The number of companies in the S&P 500 that issue sustainability reports has risen to more than 80% of the 500 index names, up from just 20% in 2011. Sustainable investments now capture one out of four dollars invested in the capital markets, up nearly 40% from the numbers a year ago.
Whether it’s public or private, pooled fund or individual portfolio, investors seemingly are opting to trade more and more on faith. For faith-based advisors, things should be looking up.