Catholic investing joins Islamic finance, ESG metrics, and green bonds as a way of making money ethically.
The world's more than one billion Catholics look set to flex their investment muscles following the launch of a certification system for endorsing financial products that adhere to their faith's teachings and values.
In June 2020, Italian consultancy Nummus.info—which is owned by the Italian Episcopal Conference and other institutions linked to the Catholic Church— started offering the certification system, which screens investments based on a simple yes or no—do they or don't they comply with Catholic values? So far, more than 20 different banks and assets managers—including Deutsche Bank, Nordea and Raffeisen—have had their investment products endorsed by the system.
Pope Francis' 2015 Encyclical Letter, “On Care for our Common Home,” talked about social values, teachings and environmental principles, which Catholics could use to inform how they invested their money. But there was no official way of certifying whether a financial investment respected these ethical mandates.
Investment funds that adhere to Catholic teachings and principles use positive and negative screens. Contraceptives, stem cell research, tobacco, pornography, weapons, fossil fuel extraction and unsustainable activities like forestry and fishing are typically screened out in favor of investments in things like low-carbon technologies, technology transfer to poorer countries, and progressive employment practices.
But Nummus.info's certification system appears to go further. CEO Claudio Kofler,says a major turning point for promoting investment based on Catholic teachings came in September 2020, when the Italian Bishops' Conference published a document outlining social responsibility, environmental and governance investment directives for economic managers of religious institutions such as parishes, dioceses, congregations and charities. Based on this document, Nummus.info started its twice-yearly certification process for the products its clients invest in.
“The [Italian Bishops' Conference] document is not simply a no-list as it was in the past,” Kofler explains. “We're also trying to promote family and social aspects. For example, a corporation that provides benefits to pregnant women or that has a company kindergarten will get extra support.” Kofler says revisions are made twice a year and if certain investments are deemed to be non-compliant with the guiding principles, the investment manager has up to three months to sell the stocks.
Massimiliano Cagliero—CEO of investment management services firm Banor SIM, one of the 25 firms certified by Nummus.info as conforming to the Italian Episcopal Conference's investment guidelines—says the official recognition validates its asset management approach, which it has consolidated over the years. “We follow a valuable and rigorous approach, which unites responsibilities and principles towards the environment, society and governance to promote an economy that is not only based on the pursuit of profit,” he says.
Investments along Catholic lines is gaining momentum. Last year, the MSCI World Select Catholic Principles ESG Universal and Environment Index was launched, which excludes investment in companies involved in abortion or contraceptives, stem cells and animal testing. The index is denominated in US dollars and based on the MSCI World Index, which invests in tech giants like Amazon, Tesla and Alphabet.
In September 2020, Societe Generale’s Lyxor Asset Management launched its MSCI World Catholic Principles ESG Exchange Traded Fund, which screens companies based on their carbon exposure, ESG profile and support of Catholic values. The fund has net assets under management of approximately $77 million.