Faith-Based Funds Offer Opportunities for Responsible Investment and Microfinance

By: Brian Cashin, Editor-in-Chief

Being religious about investing can have multiple meanings. For some investors, rigorously efficient investment techniques and profit maximizing procedures requite the label of a ‘religiously attentive’ investor; for others, religious investing incorporates moral beliefs into financial goals and principles. Recent trends reveal the existence of valuable opportunities for investment that merge steady profits and high moral standards into one doubly beneficial package in the form of “Faith-based funds” or other securities provided by religiously affiliated investment organizations.

Faith-based funds and religiously affiliated investment organizations vary in their standards and structures, but initiatives such as improving educational opportunities for the poor, ending hunger and homelessness, promoting sustainable environmental practices, curing diseases, expanding affordable healthcare, and fostering socioeconomic equality exemplify faith-based objectives.[1] The core principles of faith-based funds emphasize profit realization through ethically and socially advantageous means, and as a result these organizations play an important role in today’s efforts to increase the scope and impact of socially responsible investment. Much like well-known leaders in the field of socially responsible investment such as the Credit Suisse financial services company, faith-based funds are connecting contributors with the dynamic framework of their investment and its impacts. Whereas Credit Suisse has implemented new social banking programs that enable investors to discuss investment ideas and market trends with their banking managers and have direct access to the tracking of their investment,[2] a variety of faith-based funds enable contributors to communicate with fund supervisors about how their money is being specifically put to use within the broader workings of the fund.

Religiously affiliated investment organizations offer important opportunities to both nonreligious and religious investors that are often not fully utilized. Religiously unaffiliated investors are often hesitant to invest in religious organizations because of the perception that charity and social justice are not conducive to significant profit creation. However, the strong performances of many faith-based funds over the past decade challenges this notion. For example, the Eventide Gilead Fund (ETGLX) is a Christian-focused mutual fund founded in 2008 that has averaged a 14.9% return annually, 6% higher than the average annual return of the S&P 500.[3] The co-manager of the Gilead Fund, Mr. Finny Kuruvilla, attributes the success of the fund to the careful attention paid to the ESG (environmental, social, and governance) characteristics of the companies receiving investment. By studying and analyzing the customer satisfaction data of companies, the Gilead Fund ensures that it invests only in companies that have garnered widespread community approval while maintaining a distinctive commitment to innovation and long-term sustainability.

Likewise, the Amana Mutual Funds Trust is an Islamic-based U.S. investment organization that seeks to cultivate economic self-sufficiency in developing countries by providing no-interest loans to companies integral to the economies of these nations. This fund seeks to honor Islamic principles in all of its investment proceedings, and in doing so it has been successful in fostering reliable economic growth in developing nations where other socially responsible investment strategies have been ineffective.[4]

Microfinance comprises the core of socially responsible investment because small, family based financial services strengthen the fabric of communities in ways that larger investment projects can not. Many religiously affiliated microfinance institutions commit to uplifting communities one household at a time by providing personalized financial improvement and guidance services to needy families. Catholic Relief Services works with a network of subsidiaries and affiliates to transfer money pooled in shared savings funds to some of the world’s poorest individuals in the form of microloans used to build houses, buy livestock, or support domestic craft making and artisanship to lift families into self-sufficiency. Contributors can choose to pool their money into special, designated microloan program funds supervised by Catholic Relief Services. The program funds are then used to provide loans to countries and regions that have been identified as being in extreme need of community financial development. These loans cultivate financial sustainability and higher living standards alongside sound, reasonable earnings that can then be withdrawn by contributors for use in other related community improvement projects.[5] Microfinance efforts welcome investment from all investors who share in a commitment to improving human communities in long-lasting and viable ways.

Paying attention to the investment aims and techniques of faith-based funds and investment organizations is becoming increasingly necessary as advocates of socially responsible investment efforts seek to more closely coordinate their proceedings with like-minded organizations across the country and around the world. Since these faith-based investment institutions already possess a foundation of loyal investors, a steady supply of funding, and infrastructures well-suited to meet the specific human and societal needs that they aim to address, these organizations are of key importance to all investors who seek to maximize the positive impact that they can endow upon society while still generating sound returns on their investments. Whether embarking upon a morally-motivated mission to promote social equality or a subtler first-step in adopting socially responsible mindsets and portfolios in one’s investments, faith-based funds provide footholds from which interested investors can craft a personalized approach toward earning socially beneficial profits.

Works Cited:

  1. Carlozo, Lou. (2015, June 3). “8 Investments that Make a Difference.” Retrieved February 20th, 2016, from http://money.usnews.com/money/personal-finance/mutual-funds/articles/2015/06/03/8-investments-that-make-a-difference

2. Enskog, Dorothée. (2016, 1 January). “Social Banking- A Future Business Model.” Retrieved March 1st, 2016, from https://www.credit-suisse.com/us/en/news-and-expertise/banking/articles/news-and-expertise/2016/01/en/social-banking-a-future-business-model.html

  1. 3. Huang, Nellie S. “7 Great Socially Responsible Mutual Funds.” (2016, March). Retrieved February 21st, 2016, from http://www.kiplinger.com/article/investing/T041-C009-S002-7-great-socially-responsible-mutual-funds.html?page=3
  1. 4. “Amana Mutual Funds Trust.“ Retrieved February 21, 2016, from http://www.saturna.com/amana/developingworld_fund.shtml#page=page-1

5. “Faith. Action. Results. Microfinance.” (2016). Retrieved February 27th, 2015, from http://www.crs.org/our-work-overseas/program-areas/microfinance

 

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