Investing with a clear conscience: How should Catholics manage their money?

 

CNA Staff, Nov 25, 2024 / 06:00 am (CNA).

In today’s complex society, it takes effort to ensure that your hard-earned money, once invested and out in the financial ether, doesn’t fund the kinds of things that Catholics abhor — like abortion, pornography, or unethical labor practices.

But surely the Church itself, with its significant invested assets, has this figured out already… right?

Though the principles behind Catholic investing have been clearly articulated in recent years, sources told CNA that many Catholic entities still have a long way to go to make sure their investments actually align with those principles.

Case in point: when Daniel Catone, founder of Arimathea Investing, and his team of financial experts started digging into the finances of Catholic entities who approached them, they discovered something extraordinary — and surprisingly pervasive.

Nearly all of their Catholic clients, including many U.S. dioceses, were unwittingly funding — sometimes to the tune of millions of dollars — products and practices that directly contradict the faith.

“We have to look at the reality of the choices that we’re making with our dollars, [because] just as Our Lord will call us to account for every careless word that comes from our mouths, so too will the Lord call us to account for every careless dollar that left our wallets,” Catone told CNA.

Arimathea is just one of a growing number of Catholic firms seeking to help individuals, ministries, and dioceses align their investment portfolios with the teachings of the Catholic Church, all while seeking competitive financial returns.

What has the Church taught about investing?

The Church has weighed in quite comprehensively — and quite recently — on the topic of investing, both at the level of the bishops of the United States in 2021 and at the worldwide level with the 2022 Vatican document Mensuram Bonam.

Mensuram Bonam — the title of which means “a good measure” — casts a wide net, exhorting investors to consider the ethics and consequences of their actions, especially how their investment choices will affect the world’s most vulnerable. It emphasizes that Catholic investors should seek not only to avoid harm but also actively promote good.

The document identifies a set of core principles for investors rooted in Catholic social teaching.

The principles include the recognition of the dignity of every human being; promoting the common good; working in solidarity with the most vulnerable; caring for the environment; and subsidiarity — the idea that decision-making should be done at the most appropriate level.

The guidelines also lay out specific exclusionary criteria that Catholic investors need to be aware of and screen for. These include the funding of abortion, armaments, nuclear weapons, contraceptives, embryonic stem cell research, pornography, addictive substances, human rights violations such as breaches of labor laws, corruption, and unfair business practices.

The development of Mensuram Bonam was prompted, in part, by a controversy in recent years over the Vatican’s own investments.

In April 2021, an Italian investigative news program accused the Vatican’s treasury of investing 20 million euros (then around $24 million) in several pharmaceutical companies involved in making emergency contraception, or the “morning-after pill.” A subsequent 2022 policy was drawn up mandating that the Holy See’s financial investments cannot contradict Catholic teaching.

The U.S. Catholic bishops’ “Socially Responsible Investment Guidelines,” released in 2021, applies to the U.S. investment landscape many similar concepts found within the latter-written Mensuram Bonam.

The bishops urge the importance of discerning whether investments will protect human life, which means avoiding any company involved in abortion, euthanasia, and assisted suicide, embryonic stem cell research, human cloning, and other practices the Church teaches to be evil.

At the same time, investors must endeavor to promote human dignity and the common good, the bishops wrote.

This means Catholic investors should avoid companies known to persistently violate the human rights of their workers or who operate in countries with poor human rights records. Companies with ties to pornography, human trafficking, or a non-Catholic view of gender identity and expression should be avoided, the bishops noted.

This also means eschewing investments in certain “harmful habitual behaviors” and “addictive materials” such as gambling, tobacco, and recreational drugs; also firearms, the bishops said, except for legitimate hunting, military, or law enforcement use.

At the same time, the bishops urged investors to support positive things such as renewable energy sources; biodiversity and water resources; affordable housing; and, in the face of an often negative outlook from many Hollywood productions, virtuous media that strengthens families and contributes to a more positive and humane culture.

‘A fully integrated life’

After a successful two-decade career in finance overseeing billions of dollars in investments, Catone, who has a master’s degree in theology, went all-in on what he calls “faithful investing.”

He founded Arimathea in 2023 as an asset management company that conducts in-depth, tech-forward research to ensure its clients’ portfolios — “dollars meant to be used for the people of God” — are truly Catholic-aligned.

By trusting large secular firms like BlackRock or Morgan Stanley to manage their money, many Catholics are unknowingly funding organizations and practices that directly contradict the Church’s teachings, he reiterated, citing Arimathea’s own rigorous research.

These include investments in companies like Microsoft, which not only pays for employees’ abortion travel but also has been known to violate workers’ rights in developing countries; other companies that directly cause abortions by distributing Plan B drugs; even companies such as hotel chains that directly profit off the sale of pornography, he said.

“I came to the realization that the secular world was, in a way, pulling the wool over the eyes of the Catholic Church. And shocking as this may sound, most people do not become bishops because they’re really good at picking stocks, and so they rely upon the expertise of these secular organizations,” Catone said.

He urged Catholics to examine their own investments, such as their 401(k), with a trusted financial adviser.

“Step 1 is to stop treating our money as ‘out of sight, out of mind.’ Because the Lord is calling us to live a fully integrated life,” Catone said.

“Our Lord Jesus Christ needs to be the Lord of every part of our life … and that also includes our 401(k) and our IRA. So in order to wake up, the first step is to open our eyes … because we can’t repent of what we don’t know.”

On Arimathea’s website, Catholics can send their investment portfolio to the company, which will then screen it, for free, offering a kind of “report card” on the ethicality of each investment from a Catholic perspective, Catone noted. He added that Arimathea’s research is informed by a strong understanding of Catholic theology — a rarity among investment firms — as well as what he calls a “literal reading” of the 2021 USCCB document.

Arimathea is also working to develop a network of accredited advisers who are trained in the principles of Catholic social teaching and can guide Catholic investors, he said.

The goal is not merely to avoid “bad” companies but also actively seek out investments that promote human dignity and the common good, he emphasized.

One way to do this is through proxy voting, a tool for influencing corporate behavior and promoting change from within that Catone said can be helpful in pushing companies to adopt more ethical practices. He said Catholics should be actively engaged in trying to improve the companies they invest in and have had some success at that in the past.

Catone said the success Arimathea has had financially demonstrates that it is possible to invest in a way that is fully in line with the Catholic faith without sacrificing monetary returns.

“What we’re trying to show at Arimathea is you can draw the line … and say you know what? No abortion, no pornography, no drugs, no slave labor. And you know what? The returns are great,” he concluded.

Excellent and authentically Catholic, together

Shane Giblin, CEO of The Abbey Group, told CNA that the cultural milieu following the 2022 overturning of Roe v. Wade exposed “a bit of a crisis in the area of Catholic investing.”

The Abbey Group came about in the late 2010s after St. Michael’s Abbey in Orange County, California, under Giblin’s fundraising leadership, managed to raise $150 million to build a new abbey, far outpacing expectations.

They started doing pro bono consulting to help other Catholic entities replicate their success, launching officially in 2020 with a goal to help worthy Catholic causes generate and grow the resources they need to fully live out their mission. The Abbey Group is selective in its projects, evaluating them based on alignment with Catholic teachings, the potential impact of their endeavors, and the strength of their leadership.

Giblin said in the wake of Roe’s overturn, the “screens” that were being applied to many Catholic investment portfolios needed to be reevaluated; it wasn’t clear how effective they were, or what they were doing to potentially limit returns, he noted.

The other thing that Giblin said he noticed was that many Catholic investors weren’t allocating much to private equity — the buying and selling of shares in privately-held businesses.

“What we saw was a great deal of interest and encouragement in creating an alternative investment solution that is authentically Catholic, specifically something in the private equity space,” Giblin said.

To address the need, Giblin said Abbey Group Capital has partnered with Carrick Capital Partners, a firm run by a faithful Catholic, to help its clients grow the money they raise — and do so in a way that aligns with the Church’s teachings.

The partnership, which benefits from the spiritual guidance from the Norbertine priests at the abbey, ensures investments align with Catholic values, such as avoidance of abortion and positive support for mothers wishing to keep and raise their children, Giblin said.

Giblin said he hopes their approach will inspire others in the Catholic community to adopt similar strategies, ultimately contributing to a more dynamic and competitive landscape in Catholic investing.

“It seems all too often that the Catholic space has to make the decision between either being excellent or being authentically Catholic. I think that’s a problem that we need to really break ourselves out of, a dynamic we need to run away from, because they’re not mutually exclusive terms,” he said.

“I’ve seen a resurgence of late that gives me a lot of hope. I think that people are starting to become far more rigorous and far more attentive to the necessity to steward these resources with a great deal of vigilance when it comes to what they’re investing in and what they’re not investing in.”

Difference between secular investing, ESG, and Catholic investing

Richard Todd, CEO of Innovest, a Catholic financial firm based in Colorado that manages about $50 billion, said there was little awareness of the possibility, or even the need, for Catholic-aligned investments back in 1996 when he founded his firm.

But that landscape has changed significantly with the rise of large, secular investment firms “taking advantage” of trusting Catholics, he said.

“The ‘other side’ has been taking advantage of Catholics for, I would say, probably the last 10 years, but very specifically in the last five,” Todd told CNA.

“It used to be, as a Catholic investor, if you owned a company, you could trust management to do what’s right for the company. But it’s no longer the case because of this pressure that these large asset managers are putting on.”

Todd said Innovest works with clients to develop customized investment guidelines that reflect their unique values, allowing organizations like dioceses and universities to articulate their specific ethical concerns and ensure that their investment portfolios are truly aligned with their mission.

They then design diversified portfolios that include traditional stocks and bonds, along with alternative investments such as real estate, private debt, and private equity.

Todd, echoing Catone, emphasized the importance of going beyond simply avoiding harmful investments, emphasizing the importance of seeking out companies that promote positive values. He said Innovest looks for companies that prioritize human flourishing and foster a strong company culture, and also reiterated the importance of Catholics with large investments using proxy voting to influence companies for the better.

“Many organizations that are Catholic don’t pay any attention to proxy voting. They end up voting for things that are completely outside their values, outside Catholic values. We believe that understanding how proxies are voted is really crucial,” he said.

He noted that a popular framework of values-based investing, environmental, social, and governance (ESG), also known as impact investing, can include elements that are “anti-Christian” or misaligned with Catholic values. He said he seeks to educate clients on the differences between secular investing, ESG, and Catholic investing.

Like Giblin, Todd said he firmly believes that investors do not have to sacrifice financial returns to invest in alignment with Catholic values. He pointed to the rise of competent asset managers who are adept at managing Catholic-values portfolios while achieving market-competitive or even superior results compared with secular portfolios.

“I think, though, that there are [still] very few in the Catholic world that think this way. I think we’re in the first inning,” Todd said.

“There are some, I think, that are moving in this direction that are prominent and well known. Our hope is that their courage will help lead others to really take a serious look at the way they manage their money. But there’s a lot to be done.”