Religious beliefs often guide charitable giving. But they can also guide investment choices.
In today’s world of bespoke clothing and customized coffee, more and more investors are looking to extending the trend of personalization to their portfolios. For many, this means making sure their investments and values are aligned. A staunch environmentalist may buy shares of an electric carmaker, for example, while someone passionate about gender equality may divest from a company with an all-male board.
Still, some investors may be reluctant to tell their advisors about one very personal area of interest: their religion. While their faith may guide which charities they support, people may stay agnostic when designing their portfolios and building personal wealth.
They don’t have to. Faith can align with financial decisions in an approach called biblically responsible investing, or BRI. An increasing number of investors today are choosing this path and making sure their holdings match their religious beliefs – in other words, putting their money where their morals are.
What is BRI?
BRI is a type of impact investing – using investment returns to help further specific causes. For devout Christians, this often entails screening out “sin stocks” and avoiding companies that support:
- Adult entertainment
BRI may also exclude companies that lobby for or engage in activities seen as opposing Christian doctrine, such as medical interventions deemed contrary to the pro-life movement.
An investment advisor who specializes in BRI can help design a portfolio that reflects these beliefs. A professional with the CKA Designation, an accreditation recognized by industry regulator FINRA, has been certified for having in-depth knowledge of both finance and scripture. Another resource is Kingdom Advisors, a membership community of Christian advisors.
Some asset managers focus exclusively on BRI and offer exchange-traded funds (ETFs) with built-in BRI screening. Other firms use proprietary technology to evaluate individual stocks according to Christian principles.
The approach applies to other religions, too, under the more general term of “faith-based investing.” For example:
- In Islam, Shariah law prohibits Muslims from contributing to businesses associated with alcohol and pork and from collecting interest on investments.
- In Judaism, the principle of tikkun olam – repairing the world – may steer investors toward causes that help fight climate change or social injustice.
Quantifying the size of the BRI market, or even the broader faith-based investing market, is difficult. However, in 2020 impact investors around the world channeled a combined US$2.3 trillion toward strategic causes.
But does it work?
Investors pursuing a BRI strategy can find options across all asset classes, in both developed and emerging markets. But screening out certain companies and vehicles may come with trade-offs:
- Higher fees – Some biblically responsible ETFs may charge more to cover the additional research required
- Increased risk – An exclusionary approach may limit the possibilities for diversification
Like all strategies, BRI can’t promise results. And some proponents stress that Christian doctrine prioritizes doing good is the goal versus solely chasing returns. Yet the available data suggest investors don’t have to choose – that despite excluding certain investments, they may still generate returns comparable to those earned through a traditional approach.
And they can still meet their goals: The Global Impact Investing Network found that 90% of impact investors are happy with their returns. Almost 20% even report outperforming their expectations. Academics from the Wharton School and the University of Chicago Booth School of Business have formed the Impact Finance Research Consortium to gather more data and further study impact investing such as BRI, more more testament to the growing appeal of a purpose-based investment approach.
TIFIN Personality aims to help align each person’s unique set of beliefs with their portfolio. The Financial Personality Assessment reveals whether somebody is a Purpose investor, or if they prioritize other areas such as Security, Touch or Viewpoints. The information gained can help you start guiding your clients invest in line with their values and interests.