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Smaller faith groups face challenges aligning values with investment, report finds 

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Published: 27 March 2023

FaithInvest says implementing tailored strategies is too demanding for under-resourced, small faith groups. Outsourcing and joining forces with peers are seen as potential solutions.

Small-scale faith groups wishing to invest according to their values face many challenges when it comes to access the most appropriate investment vehicles | Photo by Frantisek Duris on Unsplash

Faith groups are a potentially rich source of investment in social or environmental causes that tally with their religious beliefs. But it can be demanding for groups with small-scale assets to customise an investment strategy to meet their faith-based requirements, UK-based non-profit FaithInvest says.  

In its white paper, Faith-Consistent Investing and Smaller Organisations, the NGO looks at the investment challenges faced by faith groups with assets below $100m – and often a lot smaller than that. 

If the world’s faith groups invested their assets in line with their values, the impact would be highly significant, given more than 80% of the world’s population say they belong to a faith community, the report’s authors note.

“But to achieve this requires education, support, and special purpose investment vehicles, a big ask for even a large organisation and probably impossible for smaller groups,” they say.  

Major religious institutions often have billions of dollars in assets and run their investment strategies in the same way to large investment houses. That’s not an option open to smaller faith groups, which also can’t rely on the relatively cheap and easy-to-manage off-the-shelf investment plans used by other small investors, as those strategies often don’t completely match the faith’s values.  

“Operationalising faith values in an investment programme requires adding a new level of complexity to the already demanding job of managing risk and return. But many faith assets are not held in large, centralised investment pools, instead they are often relatively small, with limited resources, and this presents challenges,” Mike Even, a co-founder of FaithInvest and lead writer on the paper, said. 

Comingled one-size-fits-all vehicles, such as mutual funds, usually allow no tailoring, which means they don’t readily allow faith groups to avoid certain types of investments or prioritise themes related to their faith. Instead they need customised strategies that require considerable resources to put together, given the trade-offs between investment efficiency and faith-driven priorities. 

The report also notes that modern investment programmes tend to be comprised of multiple asset classes, requiring a greater amount of work and decision-making, and more expertise if they are to be adapted to meet the needs of faith-consistent investing. 

Outsourcing and consortiums

The authors look at how groups from several faiths and of differing structures have sought to overcome these challenges and offers some potential solutions.  

One is for the group to devolve decision-making on investment to an outsourced chief investment officer (OCIO) platform, which takes on the role of an in-house chief investment officer’s team. Using an OCIO allows clients to maintain the ability to tailor to their needs, while sharing the resources and expertise of the specialised OCIO team. 

Alternatively, faith groups could use outside consultants to provide similar capabilities and expertise to an OCIO provider, but without implementing their recommendations by doing the actual investing. 

Finally, consortiums and networks of various types can be a source of advice and products for small groups seeking to realise their faith-based investment strategies.  

Such consortiums are more common in faiths with few large investment pools and no leading organisation with large-scale resources. They offer the least tailored solutions and still require members to do a lot of the donkey work. But they are also the cheapest option and so open the door to faith-consistent investing to the smallest and most poorly resourced faith asset owners.  

The trend towards more impactful investing by faith organisations was underlined by the launch of the Multi-Faith Just Transition Fund (MJTF) initiative, at last November’s COP27 UN climate change conference. Developed by FaithInvest and Climate Investment Funds, the MJTF enables faith-based asset owners to invest in large-scale projects aimed at supporting vulnerable communities with the transition to a low-carbon economy. 

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