The Rapid Growth of Faith-Based and Related Investing
by David Lee Smith, PhD
You may have read just a few of American Values Investments' newsletters, or you may be a regular reader, perusing each one as it is published. Either way, you may well recognize my by-line as it appears above this article. There is, however, one distinction between this one and most others that have preceded it: Beginning just last month, I was able to add the initials PhD after my name. You see, I recently completed the course work and dissertation that together granted me the moniker Doctor of Philosophy.
None of this is meant to be braggadocios. In fact, the only reason I mention it relates to the field - Church History - in which I was awarded the degree by a small seminary in Indiana in June. And while it may not appear especially historic - although in many places it is - the dissertation was entitled The Rapid Growth of Faith-Based and Related Investing. While it does include several elements of history, perhaps more importantly, it's unquestionably germane for our readership, both from the ranks of financial advisors and their clients as well. But rather than simply describing the dissertation's title, and with the limited space available for this article, let's look at a synopsis of the structure and approaches upon which the work is based.
From the beginning...
The dissertation contains three chapters - fewer than many, but with generally more pages than is frequently the case with other similar efforts. Chapter I lays the foundation for the two primary types of investment analyses. First comes traditional (old) research, which is highly quantitative and pays scant attention to quality and values. It's the kind that has long been associated with what has come to be called the "sell side" of the investment world. Conversely, the subject then moves - essentially for the remainder of the dissertation - to the newer form of investing, wherein values sit at the top of the list of "must haves."
Next comes an examination of the history of the newer forms of investing. In this case newer can be tied back to a 1758 meeting of the Quakers, during which the group officially forbade its members from participating in the slave trade. Then, moving right along, it's worth noting that since about 1990 many of the impetus for improvements in socially-responsible investing have emanated from an annual "SRI in the Rockies Conference," where attendees spend their time discussing and describing new initiatives.
Topics that follow along in the initial chapter include another pass at delineating the expanding differences between old and new in the investment world, an examination of impact investing (a form of investing that has existed since 2007) and is still confusing to many. As I note on the subject, "While it may be something of an exaggeration, it seems that, were one to query a dozen investors, including professionals, in a quest for a precise definition of Impact investing, the questioner might well emerge with a plethora of separate, and sometimes radically varying, responses."
The Millennials are coming fast.
Moving along, the expanding role of what has become known as Millennials as investors also receives meaningful attention. Indeed, it's an appropriate observation that that group now constitutes the largest demographic in the U.S. However, from a purely pecuniary perspective, the more conservative baby boomers group still collectively packs the hardest investment wallop. As such, faith-based investing remains among the most significant forms of SRI. And every bit as importantly, it's likely to remain so for years to come.
There are other significant topics covered in the chapter. Indeed, borrowing from writer Lisa Smith in an Investopedia piece, one finds coverage of the faith-based approaches of many - but certainly not all - of the world's major religions, including Catholicism, Judaism, Islam, and the numerous protestant denominations (including the Church of England).
The final topic in the kick-off chapter involves the relative success of socially-responsible investing. We'll keep that assessment brief by noting that, a contributor to Forbes, who writes under the pseudonym MoneyShow, said in an article in the magazine just a few months ago, "Is there any evidence that SRI filters will improve your investing performance? The research is limited, but so far, it leans in favor of SRI investing. In other words, more responsible companies do tend to be better investments."
Making the companies more desirable...
As noted, the first chapter is infinitely more complex than either of the two that follow. As such, the attention to the second and third chapters will be marked by considerable brevity, vis-à-vis their predecessor. Chapter II is based primarily on an approach quite different for the first chapter: It switches to the corporate side, primarily discussing methods that can improve corporate cultures, such companies are increasingly able to attract the interest from SRI- and faith-based investors. The methodology employed is the provision of synopses of several books, each of which deals with the combination of faith and work, corporate culture, corporate ethics, or improving the attitudes and functionality of a workforce.
The book that garners the most attention is entitled God at Work: The History and Promise of the Faith at Work Movement, by Princeton professor David W. Miller. In it, Miller looks at how the Faith at Work movement developed and considers its potential value for business and society.
More on the stellar chaplaincy movement...
Finally, Chapter III is largely devoted to a subject about which only a sliver of the U.S. - and the world's - citizenry knows much about: the burgeoning corporate chaplaincy movement. It's a topic about which I've written previously. And it's a movement with at least a couple of key objectives. First, it stands to strengthen the cultures of those companies involved in it, and second, it has the potential to perform the estimable function of closing what has come to be called the Sunday-Monday gap - the schism between weekend worship and weekday work.