Investing for good can still be a good investment

Catholic mutual fund companies explain their process of moral investments

By Aprille Hanson
Associate Editor

Second in a three-part series on Catholic Responsible Investing

The concept of Catholic Responsible Investing — considering the tenets of the Catholic Church before deciding where to invest money — has picked up steam in recent years as more people become aware of the options of moral investments.

The task of avoiding investing in companies that support immoral behaviors in the eyes of the Church, such as abortion or pornography, is easier thanks to financial advisors or companies that screen for companies Catholics can safely invest in.

For institutions or organizations, like hospitals, schools and parishes, there are several firms that screen for moral Catholic investments, including Christian Brothers Investment Services, which the Diocese of Little Rock uses.

“You’re not an institution so where does that leave the individual investor?” said Greg Wolfe, Diocese of Little Rock finance director.

For the individual Catholic, it’s a bit tougher. For example, CBIS does not handle investments for individuals, but there are mutual fund providers out there.

Mutual Funds

Before the 1980s, it was common for individual investors to buy stocks or bonds in a particular company, like Wal-Mart or Exxon.

“Now people don’t do that so much. They tend to buy these mutual funds and the mutual fund is just a conglomeration of a bunch of stocks, could be bonds too,” Wolfe explained. “If you have investments you might be able to go to whoever your broker is and ask the question ‘Do you have any products that are screened for Catholic issues?’”

Two mutual fund companies that specialize in stocks and bonds that are already screened for Catholic issues are Ave Maria Mutual Funds (which offers six funds) and Epiphany Funds (offering three). Each firm uses its own discretion on what specific Catholic issues to screen out.

The Diocese of Little Rock offers to all employees, including in churches and schools, mutual funds from these companies through retirement account investment options administered by Fidelity Investments, Wolfe said.

Ave Maria has the most fund options and 60,000 shareholders, almost all Catholic. Chairman and CEO George Schwartz, a Catholic, founded the company in 2001 and has worked in the investment profession for more than 40 years. He said more people of the “baby boomer” generation are interested in CRI, or Morally Responsible Investing as Ave Maria Funds refers to it. Ave Maria requires a $2,500 minimum investment.

“It’s evolved … it’s a function of generally good investment performance,” Schwartz said of CRI. “It’s also a function of people getting older and thinking about the hereafter … They start thinking about how they live their life and that goes to their investments.”  

At the request of two clients, Tom Monaghan, founder of Domino’s Pizza and Legatus, an international organization of Catholic CEOs; and Bowie K. Kuhn, former commissioner of Major League Baseball who died in 2007, Schwartz started screening out companies that go against Church teaching.

A seven-member board — including several well-known Catholics like Monahan, retired Notre Dame Coach Lou Holtz and Archbishop Emeritus Adam Cardinal Maida, who serves as the board’s ecclesiastic advisor — established the criteria the company screens for:

• Abortion: any company that engages or supports abortions, which can include clinics, hospitals, insurance companies and pharmaceuticals. Any company that donates to Planned Parenthood is also not an investment option.
• Embryonic stem-cell research and affiliates are screened out.
• Pornography: any company that participates in production or distribution — which includes hotels and cable companies — is excluded from the investment portfolio.

However, Schwartz said only 150 companies out of the Russell 3000 Index, the largest 3,000 publicly held U.S. companies, are thus left off Ave Maria funds.

“It’s not like 150 companies that we’re missing the boat on,” Schwartz said. “There’s plenty of opportunities to invest in good companies that don’t violate Catholic teaching.” 

The company watches closely to make sure their companies do not stray from Catholic values.

For example, if a company decides to start donating to Planned Parenthood, it will receive a letter from Schwartz saying “how disappointed we are because they violated one of our screens” and if they do not stop, the relationship ends.

“If they become offenders in the future, we’re going to have to sell the stock,” Schwartz said. “ … I think it’s a great way to invest and I hear from shareholders all the time that they can sleep at night knowing their money isn’t supporting abortion or pornography.”

Sam Saladino, a Catholic and CEO of Trinity Fiduciary Partners, launched Epiphany Funds as an option for Catholics and any morally responsible investor. The minimum investment is $1,000.

“I was basically an advisor working with individual clients and institutions, and several of them were looking for a Catholic investing product. I looked around and while there are several institutional options, there weren’t many options for the normal investor,” Saladino said. “Through a process of prayer and discernment, because it was a very big risk, I left the firm I was at and started Trinity.”

That was 10 years ago and around 2007, Saladino found that more Catholic mutual funds were needed and Epiphany was founded to do what was best for the consumer in terms of screening practices.

The company trademarked the TFP Scorecard, a simple structure for Catholic screening:

• Exclusions: This includes automatically screening out companies affiliated with abortions, contraceptives and some with poor environmental practices against Catholic teaching. Like Ave Maria, Trinity also screens out companies that donate to Planned Parenthood. 
• Negatives and positives: “The goal here in general is having this company around and selling a product, does that help, does it make a difference in the world? … Is it helping people or the company, are they providing work for people?” Saladino said.

Once these factors are determined, companies are either included or excluded from the investment portfolio. Epiphany will also advocate for changes in a company on behalf of the investors and update them quarterly on the progress made.

“When we started 10 years ago there was no shot in the planet of making headway. They didn’t care what you did. Nowadays, they take it very, very seriously. If (a mutual fund) calls, you get a response,” Saladino said.

If a company does not make a change, it will be sold out of the portfolio.

Saladino said it’s tricky to navigate deeper moral screenings. For example, someone who is opposed to any defense investing could run into a moral problem with Kraft Food Groups because they provide a lot of macaroni and cheese to the military and are a top contractor, Saladino said.

“That’s probably not what their issue is,” Saladino said. 

While the fear in the past may have been less return on investments, this is not the case anymore, Saladino said.

“I will tell you anecdotally you can achieve your return goals as well,” he said. “All the investors in this space, everybody is making return from their investments.”

 

Part three next week: Moral traps and the religious implications of not investing morally.

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