{"id":30209,"date":"2020-10-30T19:16:53","date_gmt":"2020-10-30T23:16:53","guid":{"rendered":"https:\/\/test.greenmoney.com\/2025\/?p=30209"},"modified":"2022-02-27T23:44:08","modified_gmt":"2022-02-28T04:44:08","slug":"responsible-investment-and-the-faith-based-investor","status":"publish","type":"post","link":"https:\/\/test.greenmoney.com\/2025\/responsible-investment-and-the-faith-based-investor\/","title":{"rendered":"Responsible Investment and the Faith-Based Investor"},"content":{"rendered":"
>> Back to January 2022 Issue<\/a><\/div>\n
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(Originally published November 2020)<\/em><\/h5>\n<\/div>\n

\"LLoyd<\/p>\n

A Tipping Point?<\/h2>\n

There can be no doubt that the field of responsible investment is in the midst of a series of significant changes. Rating systems are moving from the qualitative toward the quantitative, and subjective research techniques are being challenged by artificial intelligence and big data. The structure of the industry is also shifting, with mainstream investment managers entering a field that for many years has been served mainly by specialized boutiques. Brian Bruce, the editor of the Journal of Investing<\/em>, recently surveyed the 30 largest asset management organizations and found that every one of them now claims to have Environmental, Social and Governance (ESG) capability.1<\/sup><\/p>\n

Some might also note a shift in emphasis in the field away from values \u2013 especially religious values, and toward disclosure standards and empirical tests of ESG performance within an industry. One way to see this change is in the relative prevalence of exclusions, which tend to be more values-based, and ESG integration, which tends to have a more quantitative and sustainability-oriented character. The distinction can be subtle, but it is very important: exclusions are typically about what a company does, ESG integration is typically about how the company does.<\/p>\n

The Global Sustainable Investment Alliance reports that the two approaches are now roughly comparable in scope: exclusions are employed in the management of $19.8 trillion in assets globally; ESG integration accounts for $17.5 trillion, but is growing faster (but many managers employ both techniques, so there is some double-counting in these figures).2<\/sup><\/p>\n

So does this represent a tipping point? Will values-based exclusions soon be eclipsed by newer approaches? I strongly doubt it, for two reasons.\u00a0 First, the wealth management market \u2013 particularly in the U.S. \u2013 is more focused on religious values than many realize. And second, faith-based investors have not just been a part of the responsible investment movement, they were its creators, and remain vital to its success.<\/p>\n

A Faithful Market<\/h2>\n

While surveys find that perhaps \u00bc of the investment assets in the U.S. are managed according to some type of responsible investment policy3<\/sup>, this figure seems low when you consider the beliefs of the population. When asked in a recent Gallup poll if they believed in God, 87% of respondents in the U.S. said yes.4<\/sup> And, despite a decline in churchgoing, most still identify with a particular religious tradition. According to the Pew Research Center, roughly 2\/3 of Americans consider themselves Christian, although demographic and cultural changes have led to significant change over the past ten years (see chart).5<\/sup><\/p>\n

\"Religious
Data source: Pew Research Center, chart by the author<\/figcaption><\/figure>\n

 <\/p>\n

The novelist John Updike noted that religion can be \u201ca mode of defiance, insisting, This is what I am<\/em>.\u201d6<\/sup> For most Americans, it remains an important marker of identity.<\/p>\n

Here is a story that I have heard several times in recent years, with different investment teams in different organizations: A new ESG product is developed, embodying the best modern techniques and perhaps incorporating some new innovations. The marketers call prospective investors to test the waters, and the word comes back that there is strong early interest \u2013 if<\/em> the product can be adapted to the needs of faith-based investors.<\/p>\n

The tipping point, if it comes, still seems far off.<\/p>\n

Influence on Responsible Investment Practice<\/h2>\n

Religious investors have been a vital force in the development of modern responsible investment. Pax World, the first responsible investment mutual fund in the U.S., was launched in 1971 by Methodist ministers Luther Tyson and Jack Corbett.7<\/sup> In that same year the Interfaith Center on Corporate Responsibility (ICCR) was founded, and over the next half century members of that organization have been actively engaged with corporations on issues ranging from the South Africa boycott to climate change.8<\/sup> In 2020 ICCR members filed 281 shareholder resolutions, resulting in 114 substantive agreements for change at corporations.9<\/sup> .<\/p>\n