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Article originally posted here by Ron Blue Trust
by Ron Blue
Wealth is created as a result of human productivity. In this video, insights are provided into how the Principle of Human Productivity is important to investing since wealth is more likely to be created where there is economic growth, and economic growth is higher in environments where human productivity is supported.
(watch the video by clicking on the image below)
What do Faith Driven Investors need to know about public equities? How can our faith inform the way we invest in large companies?
Investing in large cap companies, especially through the vehicles that most investors use (mutual funds or ETFs), feels like it is at the very opposite side of the world from owning or investing in a small business or startup. It is pretty easy to feel like an owner when you invest $10,000 (or $100,000 or $1.0M) into your friend’s small business. It’s not as easy when your $10,000 investment into Apple gets you 69 shares equaling about 0.0000000042% of the outstanding shares (1). It’s almost impossible to feel like an owner when your $10,000 investment is made into a mutual fund, that itself invests in the entire large cap market. Based on current market weighting of the S&P 500, Apple would be 6.2% of the weighted portfolio, so your share would be approximately 0.00000000026% (2). But the reality is that $10,000 is the same, and you are an owner in each situation.
Large public companies are a big part of our economy. Just to give some perspective, the S&P 500 is around 75% (or $35.6 trillion) of the total market capitalization of the US financial markets (3). The 505 companies in the S&P 500 employ around 28 million people (4). Assuming the diversity of the workforce is somewhat equal to the overall population diversity in the U.S., there are approximately 8.6 million “practicing” Christians (5) working for these 505 large public companies. In short, there are lots of committed Christians employed by and leading these companies.
Given the vast size of the market compared to our investments, it is only logical to ask, “How much of an impact do I even make on these companies?” Why does it matter that I have a particular worldview when my 100 shares of Philip Morris aren’t going to change anything? And if I can double my money through the dividends and share growth in PM, the impact of those dollars can be more meaningful. This rationale misses the points raised earlier – you are an owner.
The reality is large public companies are highly diverse, and have activities across various geographies, industries, and customers. The complexity of the organization’s operations and supply chains can place them in controversial places, sometimes unwittingly to the company leadership. Within large companies, there are many committed Christian workers, at all levels of the organization. The larger the company, the more it may look like the world around it, with people of all faiths and values. And every one of them is part of the human condition of living in sin, but also made in God’s image.
How then should our faith inform the way we invest in large companies? As with all aspects of investing, it should start with the question “What are the faith values most important to you that you wouldn’t want to profit from violating them?” Putting it another way, “What issues are most important to me and my faith? How far am I willing to go to prevent any involvement in an issue most important to me? What is the trade-off between avoiding all large companies, and trying to find investment professionals that can balance your Christian worldview with this sector of the investing market?”
Let me suggest there are three options when considering where and how to invest in large public companies. First, you can avoid the entire sector because you feel every company in the large cap market is flawed or their leadership is sinful. Second, you can simply invest in the same way as any investor would into the sector, investing into funds or ETFs that match your preferred benchmark. Third, you can choose to be selective in how you invest in large cap companies. That may be through direct indexing or it might be through the careful consideration of a mutual fund or ETF that aligns with your faith values.
Option three is the approach I would suggest fits best for Christian investors. However, in all three approaches we should be mindful to invest with humility. There are pitfalls to our faith in each approach. Recognize this as a journey every Christian needs to follow for themselves, and it’s a journey that never ends. By avoiding all investments in this category, we may be more like the steward who buries the master’s money in the ground rather than investing it to increase its value. Or we may act like a hypocritical Pharisee and see ourselves as better than others because of our behavior. At the same time, investing in the entire market without consideration of ownership may lead to compartmentalizing your faith and rationalizing the decision. Even if you don’t feel you can avoid certain companies or industries through your investing, are there other ways you can show through your actions that you are a Christian? You may be in a position to engage companies and leaders of companies that you feel are proactively anti-Christian. Or support those around you who are Christians and work within these companies. Or support the growing number of Christian employee resource groups and help them influence those around them.
If you decide the third option is something you’d like to explore, the great news is that there are an increasing number of investing options and resources that can help you and your advisor navigate that path. The number of mutual funds and ETFs that are explicitly faith aligned continues to grow, allowing more choices and increasing the chance many of them will align with your faith values. There are a growing number of more sophisticated investing solutions available, like separately managed accounts or direct indexing, that can create an investment portfolio that is customized to your personal values. And the number of financial advisors that have experience in faith driven investing also continues to grow. They can help guide you and your family on this journey of investing decisions, but just as importantly about the rest of your financial well-being from a Christian faith perspective.
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(1) Based on closing price of APPL on July 29, 2021 of $145.64, $10,000 would buy approximately 69 shares. As of the same date, APPL had total outstanding shares of 16.53M.
(2) Source: finasko.com/sp-500-companies-weightage/, accessed on July 30, 2021
(3) Source: spglobal.com, accessed on July 20, 2021
(4) Source: liberatedstocktrader.com, accessed on July 20, 2021
(5) Source: Barna Group estimates that 31% of Americans are “practicing Christians”.
Photo by Arisa Chattasa on Unsplash
But remember the Lord your God, for it is He who gives you the ability to produce wealth and so confirms His covenant, which He swore to your forefathers, as it is today.
– Deuteronomy 8:18 (NIV)
As business leaders, we are inundated with numbers. Sales, profit, revenue, dividend payouts, market share, ROI, PE ratios, compensation levels, tax brackets, income statements, cash-flow projections, balance sheets, and budgets are often a part of our daily narrative. Numbers.
From a global perspective, many of us are focused on stock market indices such as the S&P Index, NASDAQ, NYSE Index, Dow Jones Industrial Average, Japan’s Nikkei 225 Index, Hong Kong’s Hang Seng Index, Korea’s KOSPI Index, Britain’s FTSE-100, France’s CAC-40, and Germany’s DAX 30. More numbers.
The core of most of these numbers, or metrics, is centered on one concept: Profitability.
Business growth and profitability are certainly important for us as His ambassadors in the workplace and in the marketplace. But, how do we keep all of these numbers in the right perspective? A Godly, Kingdom perspective?
One way to keep our focus on God when it comes to the numbers, is to reflect on what His Word says. We know that it is God who gives us the ability to gain wealth (Deuteronomy 8:18) and that He desires for us to prosper (3 John 1:2). Let’s take a moment to compare and contrast the concepts of profitability and prosperity.
We know that profitability is generally defined as the state or condition of being profitable or yielding a financial profit. An enterprise is typically deemed profitable or unprofitable based purely on its financial status and results. In this way, profitability is defined based primarily on the parameters of financial results.
Prosperity, on the contrary, is generally defined as a prosperous or successful condition or a state of good fortune. The concept of prosperity is broad in scope and includes a number of elements and criteria that may deem an enterprise or individual as being prosperous. Unlike profitability, prosperity is not based primarily on financial parameters.
One way to think of prosperity and profitability, in relation to one another, is that prosperity is an overarching umbrella concept, which includes many different forms of success with profitability being just one of them. Unlike profitability, prosperity denotes a broader range of richness and wealth. Prosperity is not just about money. Prosperity is a state of spiritual and material abundance that extends beyond the temporal boundaries of the world. Prosperity transcends beyond the worldly parameters of economics, materialism, and consumerism. Prosperity extends beyond revenue targets, compensation packages, and tax brackets.
The business world values profitability, but God values prosperity. “Trusting in the Lord leads to prosperity” (Proverbs 28:25, NLT). As Christian business leaders, we must detach ourselves from the world’s value system and not relegate ourselves to just focusing on profitability. We must raise our value systems to a Higher level by pursuing total prosperity instead of just profitability. Don’t pursue money. Don’t worship the numbers. Pursue and worship God. Follow His financial plans for your business and you will prosper (2 Chronicles 26:5). Prosperity should be our primary concern, and profitability should be secondary because profitability is simply one aspect of prosperity. The only place where profitability should come before prosperity is in the dictionary.
Azure , a Calvert Impact Capital portfolio partner, is an initiative that mobilizes capital and technical expertise to upgrade and expand water services for the poor in rural and peri-urban communities of El Salvador. Azure was launched through a partnership between Catholic Relief Services (CRS) and the Inter-American Development Bank’s Multilateral Investment Fund (IDB/MIF).
Article originally posted here by GreenMoney Journal
Justice, justice, justice shall you pursue.
For many of us who engage in impact investing, this verse from Deuteronomy 16:20 is a familiar one, our clarion call to pursue a path of justice and healing – which includes the responsible stewardship of our personal and communal assets. Many more Americans have become familiar with this verse, as the words hung in the chambers of esteemed Supreme Court Justice Ruth Bader Ginsburg, a touchstone for her as she pursued a life committed to justice.
Today, the call for justice is growing louder, with a global pandemic that has laid bare the deep fissures in our society and a legacy of systemic racism and economic inequality that we as a nation can no longer ignore. And in the midst of this crisis and churning, we are also experiencing a great awakening to the possibility of transforming society, as we acknowledge our interdependence, and make real a world that is just, equitable, and sustainable.
For all investors, but particularly for communities of faith in these turbulent times, the prospect of impact investing offers an abundance of meaningful opportunities to realign and reaffirm how our values support our investment strategies. From a congregation that decides to make a deposit in a local credit union or Black-owned community development bank, or to a church-based pension fund that invests in climate resilience, there are multitude of options and approaches across asset classes and impact themes for investors to explore.
Maria Ines Galvis, a sheep farmer in Colombia, received a loan from ECLOF International , a faith-based organization with a mission to promote social justice and human dignity through microfinance. ECLOF International is a Calvert Impact Capital portfolio partner.
Like many of us working in this dynamic space, my own impact investing journey began well before the term was coined. In the late 90s, I had the good fortune to work alongside visionary leader Jeffrey Dekro to organize the first and only national initiative to encourage American Jewish individual and institutional investing in CDFIs and low-wealth communities. Our “why” was steeped in Jewish values, teachings, and our historical experience as immigrants. To undertake the “how,” we looked to leaders across faiths as our models and partners, as well as to secular funds like Calvert Impact Capital, as we supported congregations, foundations, and communal organizations to make their first impact investments over the course of a decade-plus. We also launched an interfaith disaster response fund, focusing on critical recovery programs post-Hurricanes Katrina, Rita, and Sandy, demonstrating the power of interfaith investor partnerships.
In doing this work, we were part of a long and storied tradition. Faith institutions helped create the impact investing market as we know it today. Over the decades, faith communities have served as true pioneers and risk takers, demonstrating again and again that impact investing is a viable strategy in pursuit of justice, offering opportunity to our most vulnerable and disenfranchised communities, locally and globally.
Calvert Impact Capital portfolio partner VisionFund , the world’s largest Christian microfinance network, provides comprehensive courses on sustainable farming and provides micro-loans for clients such as Indrani to grow their businesses.
At Calvert Impact Capital, one of the first impact funds in the US, faith investors have been our partners since we began our work 25 years ago. By that time, faith investing in US community development financial institutions (CDFIs) and international microfinance was an established practice, with Catholic orders and women religious at the vanguard. Today, faith investors currently represent more than 15 percent of our $500 million capital base. They include congregations, churches, health care systems, mutual funds, and foundations, and span denominations and affiliations – Catholic, Baptist, Mennonite, Jewish, Unitarian, Methodist, and many others. We also know that many of our 5,400 individual investors are inspired by their traditions; our most recent investor survey revealed that 26 percent of respondents “invest because of my faith.”
As Director of Faith Based Initiatives, I serve as a resource and a connector for faith institutions and their financial professionals — chief investment officers, financial advisors, and asset managers — leveraging Calvert Impact Capital’s impact investment expertise. Since 1995, we have helped over 150 faith-based groups develop their first impact investing programs or enhance programs already underway; overcome barriers with internal finance committees, leadership, external financial advisors, and fund managers; explore creative ways to deploy their assets; and connect with other faith investors doing this work to share successes and lessons learned. We understand well that for many faith investors travelling from the faith-specific “why” to the “how” is a process of discernment, listening, and eventually, action. We also work very closely with financial advisors and professionals who are committed to supporting their faith clients on this journey.
Two Calvert Impact Capital staff members visit Israel Manor Inc. Life Center, a Calvert Impact Capital portfolio partner, in Northeast Washington DC, as construction is underway. Now open, Unity Healthcare provides health services and community spaces, and is co-located with Israel Manor Baptist Church.
Faith-based investors are natural leaders of the impact investing movement and we want to ensure they are fully equipped to reach their potential. This is why over the next year, we will offer a series of training opportunities and resources to educate faith investors and build a deeper impact investing practice among them.
In this effort we join a growing network of both secular and faith organizations, including the Global Impact Investing Network (GIIN), Interfaith Center on Corporate Responsibility (ICCR), FaithInvest, Catholic Impact Investing Collaborative (CIIC) and many others, who share a commitment to seeing faith institutions engage more fully in the impact investing ecosystem and with whom we actively collaborate. And we also want to hear from you: What challenges are you facing as a faith-based investor or as a financial professional working with faith communities? What resources do you need? How can we help or work together?
Answering the call to be part of the solution to our urgent local and global challenges has never been more urgent. Drawing from the examples set by many faith investors so far, we encourage congregations and institutions of all faiths and religious traditions—and the community of financial professionals who support them—to seek justice and put faith into action through impact investing.
We welcome opportunities for conversation, collaboration, and partnership. Please visit the Calvert Impact Capital website or email me directly – ajoseph@calvertimpactcapital.org
This is the rallying cry of Tom Phillips, a faith-driven investor, entrepreneur, and long-time advocate in the global anti-trafficking space. Phillips first became aware of human trafficking nearly twenty years ago after purchasing a building on a Memphis city street where prostitutes walked up and down soliciting business. Worry for his business soon turned to concern for the women themselves. His first action step was a call to a couple local ministries, one in law enforcement and the other in rescue and recovery. Both partnered to help women safely exit the sex trafficking industry, part of what Phillips later learned was just one manifestation of the global crisis of human trafficking.
At its root, sex trafficking is an industry – one that takes different forms in different regions around the world. According to the International Labor Office, forced labor in the private economy generates US$150 billion in illegal profits per year. Of that US$ 99 billion comes from commercial sexual exploitation. It is an industry animated by a dark and complex web of factors no single organization can address on its own. But it took Phillips a while to see that business, his own area of expertise, was a vital part of the solution.
“It was when I started to travel internationally about 15 years ago that I saw how truly global this crisis was. Human trafficking began to get press around 2015 through the work of many ministries endeavoring to end it.”
But a frustration began to take shape as Phillips engaged more deeply. “Only one side of this was being addressed: Rescue. Everyone loves the stories of rescue. But this was not a comprehensive solution. And without a job these women were going right back into trafficking. It’s all they know.”
Once Phillips realized the problem, he began to put the pieces together. “I call it a cradle to grave solution. We need to provide jobs so vulnerable women don’t get trafficked. And what’s better is once they get out, they’re staying out and they come back and help in the anti-trafficking space. They help create even more jobs and the passion is there to make it so no one else has to experience the same things they did. It’s incredible. Talk about an outsized return on investment!”
Tom envisions an innovative model that bypasses the normal grant cycles driven by varying agendas and timelines, to create a truly coordinated, collaborative model that he and his collaborators have titled Justice, Hope & Liberty (JHL).
“I’m tired of reading grant requests that piece together parts but not all of what’s needed. So my aspiration is to bring together a group of funders to provide the resources needed to design and test a multi-year, comprehensive model from regional research, to policy revisions, to law enforcement training, to rescue, aftercare and job creation. Our aim is to test the model in one region and replicate what works in other regions around the world.”
The model Phillips’ envisions is one in which businesspeople play a critical role – not just as funders of the work to be done – but as active participants. “We’ve got Freedom Businesses that provide jobs. But many are started by people who lack business expertise. I’d love to see the Faith-Driven business community rally to invest, mentor, and support these folks. Go out and visit them a couple times a year. It’s time to get your hands dirty!”
Not only does Phillips see an opportunity for the faith-driven investor community to help individual businesses, but to help create strategy for the industry as a whole.
“We need to identify business models capable of being scaled. We need bold strategy to see this industry grow to the place where there’s a job for every survivor. And more. We need job creation to help prevent trafficking in the first place.”