Investing for Kingdom Impact

by Steven Doerr

Consult any financial advisor about where to invest your savings, and four considerations will influence their guidance: risk, return, personal circumstances, and taxes. The goal of financial planning is to maximize financial return within the risk paradigm appropriate for the client. With some portion of our income, we can also support charities. Historically, Christians have maintained this binary view of good stewardship: Either we invest to maximize financial return, or we grant to charity to have an impact for the Kingdom.

In the last decade, investors have become increasingly energized by the potential for business to accomplish good and solve the world’s problems. As “impact investing” grows, so too does the debate about how much financial return an investor should seek. Some believe that to target anything less than market-rate returns is unnecessary and reflects weak fundamentals; still, others argue that some of the most attractive opportunities to generate significant impact may not always generate market-rate financial returns.

What is our role as “faith driven” investors? Should we think about the issue of financial return differently than those who are not faith motivated? Scripture is clear that we have a responsibility to use our resources to provide for our needs, support the local church, and assist others in crisis; the focus of this paper is how to steward the “remainder.” Jesus consistently taught that the world’s ways are not aligned with those of His Kingdom. If we approach investing for Kingdom impact using the world’s paradigm (or the traditional paradigm) for what makes a good investment, we are at risk of making the wrong decisions. Perhaps faith-driven investors should assess and select businesses which are able to be financially sustainable, and then, prioritize them based on their potential for wholistic Kingdom impact.

Brief Recap of Impact Investing

“Impact investing” refers to “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”[1]

The three largest global asset managers, BlackRock, Vanguard, and State Street—which combined manage over $15 trillion in global assets, equivalent to more than three-quarters of U.S. GDP—are now not only developing “impact investment” products but also have declared their intentionality to support the impact investing ecosystem.[2],[3]

Two investor segments are influential decision makers in this trend: 1) Female investors are nearly twice as likely as males to consider positive impact along with financial return, and 2) 67% of millennials place a high value on making an impact.[4]

The 2020 GIIN survey estimates that more than $715 billion has now been deployed into direct impact investments. The International Finance Corporation put the estimate even higher at $2.1 trillion.[5]

Recently and in parallel, Christians have begun to think about the potential for business to change the world and further the Kingdom. Books like Toxic Charity, When Helping Hurts, and numerous others have informed the faith driven community about when “giving” is the best option and when other alternatives might be more effective at achieving the defined objectives.[6],[7] Very importantly, it has become increasingly evident that business can further the Kingdom in ways that charity cannot.

“Faith-driven investors” also seek a Kingdom impact alongside financial returns.

Return Expectations

Typically, impact investing implies private equity (PE) and private debt (PD). Market-rate return expectations for PE range from 16% in developed markets to 18% in emerging markets and for PD from 8% -11%.[8] Investments that can generate these types of returns tend to be concentrated in certain industries conducive to high growth / rapid scaling, like information technology, and frequently include the objective to exit after 4-6 years.

There are many high financial return investment opportunities in the faith driven space. However, for investors, it is also important to recognize that the financial return we require from a business is, in effect, “the price” we are charging for our investment dollars. One friend takes this dynamic into consideration as he makes investments. In one instance, he was able to reduce the interest rate on his loan by 3%, enabling the business to productively employ more marginalized women—the primary reason for his investment in the first place. It made me wonder, how much more Kingdom impact could faith-driven investors have if they required less financial return?

Previously, a CEF colleague wrote a white paper and applied the biblical concept of “gleaning” to the question of financial return. “Investment gleaning” allows some of one’s personal financial return to provide the marginalized with access to the means of provision created by God.[9]

Many investors are planning to reinvest the financial returns into another impact investment. If this is the intent, it is really worth reflecting on the long-term Kingdom impact that an approach of primarily seeking the highest financial return projects will ultimately accomplish?

When crafting a portfolio, one option might be to invest to maximize financial returns with some potential for Kingdom impact. A second option might be to select investments with the highest potential for Kingdom impact, which are financially profitable / sustainable (or the entity will cease to exist).

Assuming all the investments reach their potential, then what is the result? As an investor, which portfolio would be the best? Which would you want to own? The answer to that question would depend on which portfolio best achieves the objectives of the investor. We know that God is the Owner of everything, and He has entrusted us with the responsibility to “invest” and steward His stuff. Therefore, the key question is: What are the Owner’s objectives?

Scripture is pretty clear that God has two primary objectives for His followers:

  1. Great Commission: Go and make disciples of all the nations.[10]

  2. Great Commandment: Love God, and love your neighbor as yourself.[11]

How might these objectives factor into an impact portfolio?

Great Commission – Most of the “least reached” reside in parts of the world where traditional missionaries are not welcome. One Christian entrepreneur commented: “If I want to spend significant time with locals [in a Muslim community], my choices are to join the army, go to prison, or start a business.” Companies operating in these places need capital from patient, aligned investors.

Great Commandment – One of the best ways to love your neighbor as yourself is to provide them with good jobs, products, and services that can enhance their quality of life. What most people need are Jesus and a job. There are many excellent businesses with potential to have amazing impact directed right at the Great Commission / Great Commandment objectives. However, although these businesses are profitable and sustainable, they are unlikely to deliver PE / PD market-rate returns to investors.

Would a more biblically-aligned approach be to construct a portfolio by first screening for businesses that meet a base level financial return threshold, and then, rank them according to the potential for Kingdom impact, rather than starting with a traditional filter of “market-rate return projects”?


Is Planning for Spiritual Impact a Good Idea?

If we are going to invest for Kingdom impact, we need to carefully assess an investment’s likelihood of producing those results. No one invests in a business without a compelling business plan, and the best investors are skilled at evaluating the potential for an attractive financial return.

What is less common is for the business to develop a Kingdom Impact Plan including clear objectives and prayerful and thoughtful plans for intentional spiritual impact.

You may ask, does it make sense to have a plan for Kingdom impact similar to a financial plan? Some might contend that it is not our place to “plan” for what only God can do. In fact, is it possible, that having a Kingdom Impact Plan could even inhibit the work of the Holy Spirit?

Scripture seems to suggest otherwise. God has a plan, and Psalm 33:11 says, “The plans of the Lord stand forever, the purposes of His heart from generation to generation.” God has even revealed His “big picture plan” to restore His Kingdom starting in Genesis. First, He divided up the world into various “ethnic groups” at the tower of babel.[12]Then, He promised Abraham that all “ethnic groups” would be blessed through his seed; finally, we see this promise fulfilled in Revelation where John observes some from every tribe, tongue, people, and “ethnic group” worshiping God.[13],[14] Jesus had a strategy for his time on earth—as part of the big picture plan. His primary approach was to focus and invest into the lives of just twelve and then to entrust them to do the same. We can read about the plan Paul executed, under the guidance of the Holy Spirit, for church multiplication throughout the book of Acts.

It is also true that Jesus’ daily execution was “flexible,” and throughout the gospels, we see Jesus regularly “checking in” with the Father for daily, and even moment-by-moment, updates. Paul did the same, seeking specific guidance from the Holy Spirit along the way. Perhaps the best approach for our businesses is to prayerfully develop thoughtful Kingdom Impact Plans and then, hold them loosely, while consistently “checking in” with the Father the way Jesus did.

Investor Due Diligence Questions About Kingdom Impact

Basic questions to reflect on:

  1. Has the entrepreneur taken time to prayerfully consider how God might uniquely use the organization to accomplish His will?

  2. Does the organization have a Kingdom Impact Plan or equivalent?

  3. Does the Plan have sufficient detail that can be implemented and measured?

Kingdom Impact Plan

Practically speaking, redemptive enterprises range in the thoroughness and details of the way they plan to engage the world. Some plans are as simple as “the CEO is a Christian,” and others consist of a comprehensive Kingdom Impact Plan or similar name. There are many excellent books, curriculums, and tools to assist entrepreneurs and organizations to walk thru the process of developing a plan for Kingdom impact—a few are listed in the endnotes.

Kingdom impact consists of providing for peoples’ social, emotional, and community needs as well as nourishing their souls with the Word and love of God.

Some of the key components or process steps for an entrepreneur / organization to consider are:

Identity of the Entrepreneur – Who am I, and what is my purpose? Your identity and worth rest entirely in Christ, but why has God created you specifically? A valuable exercise is to develop a Life Purpose Statement which can enable you to set direction as well as help you get your bearings in confusing times.

Context – What is the local context that the business is operating in? How might the external political, cultural, economic, demographic, and spiritual influences of the context influence the company? This can be particularly important to reflect on for businesses that are operating in cultures and foreign geographies, such as what some refer to as B4T / BAM.

Vision and Strategy – What is the purpose of the organization? What problem are we trying to solve or need are we trying to meet? How can the purpose of the organization best be articulated in the Mission / Vision and Values, which reflect the unique purpose that God has called the organization to fulfill? The values set the framework for the company’s culture. The culture of an organization is not only one of the key determinates of success, but more importantly, living out the values is the greatest opportunity to be salt and light and reflect the reason for the hope that is in us.

Relationships – Transformation and discipleship happen through relationships. Relationships can include employees, customers, community, vendors, and authorities. How can the values that have been identified practically be “incarnated” in the way the company interfaces with its stakeholders?

Business Policies and Processes – How can the spiritual vision and values be translated into specific policies and processes? What does “faith” look like in the company policies in the context of the culture and key relationship areas.

The Entrepreneur and the Business’ Spiritual Life – The entrepreneur and the business each have distinct spiritual lives. What spiritual disciplines do you find important? How do you plan to grow in your relationship with God and to “abide in Him,” keeping in mind that He is your source of direction and energy, and “Apart from Him you can do nothing?”[15]

And the Master replied, “Well done, good and faithful Impact Investor!”

 

 

Kingdom Impact Plan Resources

 

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[1] https://thegiin.org/impact-investing/need-to-know

[2] https://www.blackrock.com “6 questions about impact investing investment funds”

[3] https://www.statestreet.com “Aim Higher: Helping Investors Move from Ambition to Action”

[4] https://thegiin.org/publication/ “2020 Annual Impact Investor Survey”

[5] https://thegiin.org/publication/ “2020 Annual Impact Investor Survey”

[6] “Toxic Charity” by Robert Lupton

[7] “When Helping Hurts” by Brian Fickert and Steve Corbett

[8] https://thegiin.org/publication  “Impact Investing Decision-Making: Insights on Financial Performance”

[9] “The Biblical Concept of Gleaning and Its Implications for Faith Driven Investing” by Aimee Minnich

[10] Mathew 28:19

[11] Mathew 22:36-39

[12] Genesis 11:9

[13] Genesis 12:3

[14] Revelation 7:9-10

[15] John 15:5

 

Article originally hosted and shared with permission by The Christian Economic Forum, a global network of leaders who join together to collaborate and introduce strategic ideas for the spread of God’s economic principles and the goodness of Jesus Christ. This article was from a collection of White Papers compiled for attendees of the CEF’s Global Event.

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