Faith communities could triple impact investment capital for SDGs

Global faith communities hold an astounding US$ 3 trillion in assets, own about 8% of the world's habitable land and run or manage about half of all schools worldwide. Last week, I attended the Faith in Finance Summit in Zug, Switzerland to discuss with financial investors and religious leaders of eight religions how they could align their investment with their values.

Currently most faith-based investments are subjected to negative screening, excluding activities such as gambling, weapons manufacturing and pornography from their portfolios. A few years ago the Church of England was very embarrassed when it discovered that it was invested in Wonga, an extortionate pay-day lender, whom the Archbishop of Canterbury had previously condemned. It divested shortly after the disclosure. Some incorporate positive screening criteria to ensure that their investments meet higher environment, social and governance criteria (ESG). There is growing evidence that, when integrated into portfolio construction, may offer investors potential long-term performance advantages.

However, very few have sought out 'impact' investments which actively seek to deliver positive social and environmental impact as well as financial returns. Typically these issues are addressed via the faith communities charitable arms, while their investments are made purely considering financial returns. Why is that the case? One problem is that impact investments are perceived as necessitating the sacrifice of at least some financial return. However, recent research by All Street showed that impact venture capital funds generated an internal rate of return of 9.5 per cent over the period studied, comfortably outstripping the broader venture capital sector. The other major problem is knowledge and the ability to identify values-aligned investment opportunities as there is no specialist provider serving the faith communities.

If global faith communities allocated only 10% of their total assets towards impact it would grow the current pool of impact investing from current USD $114 billion to over US$ 400 billion. It would catalytically accelerate our ability to meet global challenges from improved education, access to healthcare, provision of clean electricity and tackling poverty and enable us to meet the Sustainable Development Goals (SDGs) by 2030.

“Responding to the cry of the poor and the cry of creation are a biblical calling. Faith leaders can have tremendous impact by aligning their investments with their values” said Cardinal Turkson, the representative for the Vatican. 

The next step in the process is to develop investment guidelines, define strategic investment targets, and develop tools that could measure the full range of impacts. In the Jewish tradition there is a concept called 'tikkun olam', which means man partnering with God to heal the world. That sounds like a worthy calling for all religions.

Read The Economist's view here.

Reuben Coulter, CEO of Transformational Business Network, attended the “Faith in Finance” conference convened by ARC (the Alliance of Religions and Conservation) as the first step in developing guidelines for faith-consistent investing, and a practical concern focused on financing the UN Sustainable Development Goals (SDGs). The views expressed are his own.