by Johan du Preez

Written with the support of Gavin van den Berg and Sam Vos.

Background

At the Tree of Life Foundation, regarding the allocation of capital with a Kingdom agenda, we feel strongly that:

• Collective effort enables bigger strategic projects / higher level of economic influence in the target geographical area

• Local participation and investment management is crucial to avoid pitfalls due to cultural differences, lack of oversight, etc.

With this in mind, we have done the following in South Africa:

• Set up actively managed unitized private equity and other investment portfolios on the Donor-advised Fund (DAF) platform we offer (tol.org.za/donor-advised-fund/).

• Set up private equity vehicles for those wishing to invest with private money rather than DAF money (not further discussed in this White Paper).

• Facilitated local investment participation (currently the bulk of capital we manage is from South African investors) and active investment oversight via a South African registered Financial Services Provider (FSP).

Whereas we have covered our views on Collective Christian Capital and the continuum of investment approaches in previous CEF White Papers,1 this paper focuses on Impact Investment (i.e., an “Impact First” as opposed to a “Return First” investment in the referenced paper) and a specific example of investment in a social enterprise where a lack of capital was the bottleneck to growth for an otherwise extremely scalable and impactful business model.

Overview of Impact Investing and Social Enterprises

A commercial enterprise has the sole purpose of maximizing profit and shareholder return. Transcending this traditional purpose of business, a social enterprise is (broadly) defined as an entity with specific social objectives, aiming to maximize both social and economic returns. Social returns include benefits to societal welfare, environmental sustainability, and—as Kingdom-oriented investors—the advancement of the Gospel.

Social enterprises have an important role to play in bringing healing and restoration to a broken world. Having a mandate to focus on social and environmental upliftment allows social enterprises to bring about change, where normal businesses are constrained.

A growing trend of identifying the need to improve social and environmental issues is being driven globally by secular institutions. In line with the United Nation’s Sustainable Development Goals, this trend has been driven from the top-down by means of an increased awareness of ESG factors taken into consideration when allocating capital.

Impact investing is the art of allocating capital with specific social and environmental objectives in mind. It is worth noting that not all impact investments require investment into social enterprises, but these concepts are deeply intertwined.

Current Limitations of Impact Investing

Noting the benefits of social enterprises, why are there not more? As is the case in traditional business, capital is at the heart of developing a sustainable economic entity. Unfortunately, social enterprises face barriers to attracting much needed capital.2 These barriers to capital include:

• The difficulty of social impact measurement. Converting subjective matter into a quantitative, nominal figure is further complicated by contrasting views on what constitutes impact.

• The balancing of financial and social returns. While these two types of returns are not mutually exclusive, investors’ propensity to concede financial return for social return is further complicated by the difficulty to quantitatively measure social returns.

• An underdeveloped impact-investment market. A shortage of scale, quality impact-investment opportunities backed up by an established track record, limits investment opportunities. As a result, limited intermediaries (brokers, consultants, fund managers, etc.) exist. This in turn creates liquidity concerns, high transaction costs, and a skew toward higher-risk investment opportunities.

As a result, attracting sufficient funding for social enterprises with the potential to bring forward substantial change is often challenging.

Our observation in the Christian investment ecosystem is that there is a high presence of social impact opportunities in Third World countries but, at the same time, a lack of capital. Furthermore, the mere addition of capital to many of these opportunities does not guarantee success—more often than not, the management needs advice in refining and focusing on the core strategy, how to successfully scale (systems & people), corporate governance, measuring and reporting capability, etc.

In the First World on the other hand, there is often significant capital available that is earmarked for impact by the owners thereof, but they often face obstacles in sourcing suitable investment opportunities, thoroughly investigating them (due diligence), as well as implementing post-investment oversight. Sadly, this often gives rise to indiscriminate impact investing with the best of intentions but disappointing results (similar to how foreign aid in the form of grants/donations often do not affect the change initially hoped for).

Impact Investment Case Study: U-Turn Retail

U-turn (www.homeless.org.za ), today a registered Public Benefit Organization / charity in South Africa, was founded in 1997 by Colleen Lewis to focus on the care of homeless people in her area of Cape Town. Colleen initially operated from her home (providing food and Bible studies), but due to the growing need and concerns from neighbors, operations moved to the St Stephens church hall in Cape Town.

In 2006, Colleen stepped aside and handed the management over to a management team led by Sam Vos. Programs included feeding programs, Bible studies, an accommodation centre where homeless people were housed, and ad hoc service delivery to address whatever the needs were of a homeless person showing up for help.

Sam, being a qualified Industrial Engineer, saw the need for a more structured process through which U-turn could help people moving off the street. Due to lack of resources, this could not be done overnight (the 2006 turnover was a mere ZAR 500k, or $35k USD at current exchange rates), but they kept gradually chipping away at it until the process of “occupational therapy combined with work opportunities” settled in 2009.

I first learned about U-turn when Sam and Jonathan Hopkins attended Triga Ventures (a cutting-edge South African Organization similar to Praxis in the U.S.) in 2019, where I have the privilege to serve (www.trigaventures.org).

U-turn follows a holistic approach to homelessness as can be seen from Figure 1 below and is acknowledged as a thought leader with regards to this social dilemma in the local community. They recently published a well-researched paper on The Cost of Homelessness due to the combination of Humanitarian, Developmental, Reactive, and Punitive measures associated with it.3

From the above, it is evident that the provision of work and associated skills training form an important part of the overarching process that U-Turn follows. During the initial years, the government provided funding and work opportunities (e.g., cleaning up graffiti), but due to the unpredictability of these government programs, U-Turn established its first charity store in 2012. The benefit of the charity store as the employment and training component of U-turn’s program was that U-turn could be in control of their own funding as well as the length of period someone needed to be employed before moving on.

Today, they have 7 physical stores, one e-commerce store, and one laundry sorting facility—9 significant operations. Having developed and refined the IP to run these stores over a number of years, there is ample room to scale this. As part of the bigger employment ecosystem, they see the current retail operations as “but one stream of work,” and (besides significantly scaling retail operations), they have ambition to set up other things like a textile recycling plant, a recycling plant for household goods, etc.

U-Turn Retail’s shops operate like thrift shops (with the normal impact benefits of recycling secondhand goods rather than for it to end up in landfills) but with a further social and spiritual impact twist. The shops play an essential role in equipping participants, as they gain real-world work experience while earning a stipend. Ultimately, it is envisioned that participants secure an independent job in the open labor market, become active members of society, and stay off the streets. Currently, 83% of the individuals who graduate from the program remain productive members of society. (See https://youtu.be/SNW6F2061QQ and https://youtu.be/H31xUAJsmek as examples of individual testimonies).

The retail business sources second-hand goods (mainly clothes) via donations. It then sorts, cleans, and transports the goods to the retail outlets. Each of the 7 retail stores has a store manager, which oversees between 3 and 4 participants. The retail business has recently made business improvements to reinforce sustainability while employing a sub-optimal number of employees, as job-creation is their core purpose.

Currently, U-Turn Retail has the capacity for 40 rehabilitants to gain work experience. Operating in a city estimated to have 14,300 people living on the streets,3 the supply and demand relationship is sorely one-sided. To expand the rehabilitation intake, more jobs are needed. To create more jobs, growing the store network is key. While the retail business has the proven ability to sustain itself economically, its cash-flow generation is not sufficient to finance the accelerated retail expansion required to satisfy the current employment need. It is for this reason that TOL, as capital provider via our Impact First Portfolio, decided to partner with U-Turn to provide a capital solution where ordinary “Return First “capital may struggle.

To set-up a new store requires a capital expenditure of ZAR 260,000 (roughly $17k USD), with each new store creating employment for an additional store manager and 4 rehabilitants. The average monthly new store EBITDA is estimated to be roughly ZAR 8,700. To fund this expansion with external capital, a 5-year loan carrying 10% interest will require an approximate ZAR 5,700 repayment per month. The low level of cover underscores the risk associated with this investment. Investors not willing to forego the financial return adequate to compensate for the high level of risk would struggle to commit capital to U-Turn.

A ball-park interest rate figure for a justifiable risk-reward payoff in South Africa would likely be closer to 20%. For the committed impact investor, the 10% financial return differential can be justified by the creation of additional job opportunities with every store that is opened.

Since TOL provides more than capital, however, and gets actively involved in the investments we make, our expectation will be that the financial outcome at the stores may improve further. In recognition of that, we have agreed that U-Turn will pay a turnover linked fee of 7.5% to TOL but only on the turnover in the new stores and then only on the component of the turnover in excess of U-Turn’s current projections (it was furthermore agreed to cap the turnover linked fee at a 30% outperformance of turnover targets).

U-Turn Retail falls into an “Impact-First” investment bucket, with the added benefit of having a high missional rating. The business is owned by a Christian charity, run by Christian businessmen, and embedded with Christian values throughout their rehabilitation process. While subjective, TOL deems the sustainable impact opportunity a worthwhile trade-off and is willing to curtail the high return that would be required to justify the investment’s risk profile.

Our total initial investment amounts to a ZAR 1,600,000 ($107,000 USD) investment in the form of a loan to fund the setup of 6 additional retail outlets over the coming months. Our intention is that this forms the initial step in a partnership that will ultimately lead to an equity investment enabling an even more aggressive expansion of the retail platform as well as the addition of other types of businesses that can fulfill the same role.

Benefits

Investing DAF money via the Tree of Life Foundation’s (TOL) Impact Portfolio places us in the wonderful position to support sustainable businesses with explicit impact but without the level of pure financial returns that will be required for a typical private equity investment.

As mentioned, TOL offers various investment portfolios on our DAF platform. We typically seed fund these portfolios with our own balance sheet TOL funds when they are launched. Likewise, the Impact Portfolio is currently significantly funded by TOL that will dilute over time as DAF clients buy units in the Impact Portfolio, thereby also creating capacity for future transactions. Running a unitized portfolio under a DAF platform has various advantages:

• Since there are specific portfolios with specific focus areas and benchmarks, DAF clients are clear what they are investing into and will also receive quarterly statements showing the latest value of their holding (the unit cost in each portfolio is reported quarterly).

• It facilitates the raising of like-minded capital and the availability of capital when opportunities arise (rather than to raise funds on a transaction-by-transaction basis).

• It facilitates transactions that are bigger than individual investors may have appetite for.

• Each of the underlying investments is actively managed by TOL.

• Clients spread risk across various investments in the portfolio.

• Liquidity is possible as new DAF clients buy units in the portfolio (allowing DAF clients wishing to exit the opportunity to sell their units).

• US investors can enjoy significant tax benefits from investing via a DAF (cross border equivalency to ensure tax benefits, although the money sits in a DAF in South Africa, facilitated by Trustbridge – trustbridgeglobal.com).

The Impact Portfolio is a relatively new addition to our value proposition (the first investment was made two years ago) but has massive potential given the abundance of such opportunities in South Africa and the growing awareness of impact investing as an alternative to grantmaking. It also complements our existing “Return First” private equity portfolio that has established a solid track record since it was launched on the DAF platform in 2016.

 ——

[1] Du Preez, J: Balancing Financial Returns and Impact in Private Equity Investments, CEF 2018; https://drive.google.com/file/d/1RGtgeiKdoXbGZX9PHTlqsKkBH_6tHAy6/view?usp=sharing

[2] McCallum, S.R: Private sector impact investment in water purification infrastructure in South Africa, 2018

[3] Hopkins, J, Reaper, J, Vos, S, & Brough, G: Cost of Homelessness, Cape Town, 2020.

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.

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 2019 Global Event.

by Brian Kluth

Everyone on the planet is on a generosity journey. Each person needs to be encouraged, equipped, and empowered in their faith journey to live and give generously. In today’s complex world this white paper seeks to provide practical and proven models, methods, and materials that can help leaders understand and unleash transformational biblical generosity in the hearts and lives of people everywhere.

For the sake of the readers of this white paper, I have identified and contrasted four generosity world views in the chart below. Please carefully read through these contrasting views to see which views you notice operating among people you know, in the Christian world around you, and in our larger society. I would then like to share with you 10 Ways Christians Learn to Be Generous with transferable and proven models, methods, and materials to better understand and unleash Transformational Biblical Generosity for Christians, churches, communities, and countries

Hopefully, you found the above graph insightful and helpful in recognizing the four generosity views that operate in our world and among people and leaders that you know.

10 Ways People Are Influenced to Live Generously

Now, let’s move on to how people learn to become generous. The fact is that no one is born generous when it comes to giving to God’s work. Joyful and faithful biblical giving and living is something that has to be taught and caught as part of people’s faith journeys to be all that God created them to be. Based on my experiences teaching, writing, and researching on generosity for many years, here is the link to the 5-minute training/discussion video to help you and others understand the top 10 ways people learn to become generous.

Now, let me share with you three slides to help you understand how Transformational Biblical Generositycan work among Christians of all income levels, churches of all sizes, and communities and countries anywhere in the world.

Transformational Generosity for Christians

A number of years ago, I was privileged to participate in several Lausanne Committee for World Evangelization (LCWE) meetings in Atlanta with other global leaders. During these meetings, we were trying to address the need for a generosity movement that would grow and spread across the world. The group grappled with what would need to happen to unleash biblical generosity among those they led and served. Because of my ministry travels to over 50 countries and my writing of biblical generosity materials for leaders in over 100 countries, I was especially seeking the LORD for, “What are the attributes of a generous person anywhere on planet earth?” What would be 100% true about a generous person living on $1/day in the slums of Asia, living in a small rural village in Africa, living in the suburbs of America, or living in a world class city and making millions of dollars a year? Through much prayer and group discussions, I eventually created the 7 Keys to Joyful Living & Giving teaching slide and a 7-Keys to Open-Handed Living in a Tight Fisted World 30-Day Bible devotional and free app (go to your app store and search for “joyfulgiving”). Hopefully, in this list of these seven key milestones, you will see what God did in your own faith journey to ignite in you the desire to live and give generously. Here is a link to the 8-minute training/discussion video on this topic for a grant-funded 6-session Church Generosity online course I helped develop for church leaders.

Transformational Generosity for Churches

For the past four decades, God has allowed me to help train and equip thousands of pastors and leaders in North America, Latin America, Europe, Russia, Asia, and Africa.  Through these experiences and many leadership conversations, I have discovered the five practices that will allow any church of any size anywhere in the world to grow givers and giving. By building on these practices, churches will be able to INSTRUCT people in God’s Word, IGNITE people’s faith, INSPIRE generosity, and INCREASE giving. Here is a link to the 5-minute training/discussion video that goes along with the Transformation Generosity for Churches teaching slide. As you watch the video and read each of the five practices, I trust God will inspire you on ways your church can unleash biblical transformational generosity that will bless families, your congregation, your community, and even the ends of the earth. Many churches have reported experiencing double and even triple-digit giving increases by following these practices that have proven to work in any church, country, or culture.

Transformational Generosity for Communities, Cities, and even Countries!

A number of years ago, I received a personal phone call from Hugh Macellan of the Macellan Foundation.  He asked if I could put together a list of Bible verses that encouraged people to live and give generously that he could share with others. So, I studied and identified 400 generosity Scriptures that I organized into a 40-Day Generosity Bible devotional. Over the years, God has used this simple 40-Day Journey to a More Generous Life Bible devotional around the world to changes people’s heads, hearts, hands, and habits when it comes to their generous giving and living. In America, thousands of churches have distributed this devotional to inspire generosity and increase giving. Around the world, the devotional has been translated into over 30 languages and been freely given out by churches on every continent.

Then, in Guatemala and in Florida, groups of churches decided to do #40DaysofGenerosity at the same time. In Guatemala, over 100 churches participated and greatly impacted communities across their country with God’s love through acts of generosity and charity. In Florida, I had the privilege of working with over 30 churches and many community groups to do #40DaysofGenerosity in the Titusville/North Brevard area. Through these initiatives, a free “givewithjoy” app was developed for Apple and Android phones along with #LoveInAction materials with #PayItForward cards and a GodsLoveforYou.com website. There are now discussions happening with leaders with MovementDay/GrandRapids and other cities, states, and countries about using the free open-source #40DaysofGenerosity customizable model, methods, and materials for their churches and communities. Here is a link to the 4-minute training/discussion video that helps provide more insights into the Transformational Generosity for Communities teaching slide. In addition, these links give insights on how God used #40DaysofGenerosity to transform lives in Guatemala and Florida.

It is my hope and prayer that these teaching models, methods, and materials instruct and inspire you personally. I also hope that the ideas presented here will help you spread biblical transformational generosity in your family, church, community, city, company, country, or culture!

Brian Kluth – Denver, Colororado

by Michael Norman

Normal Beginnings

My parents’ best friends are loud, joke-telling, game-playing people; my parents are the opposite. We were the “normal Normans” growing up. If you have seen the movie My Big Fat Greek Wedding, my parents were the non-Greek parents. My dad worked hard in our family’s small business – my mom took care of three kids in a relatively small, sleepy central Texas town where not much happened. Very normal. I confessed Jesus as savior at a young age, went to church, and all in all had a nice upbringing. I excelled in school and athletics and was able to attend university at a small liberal arts college in Texas. It was great.  

Abnormal Beginnings

I can reflect now that God took me specifically to that school to launch my “abnormal” journey. My family came from humble origins and had no experience internationally, yet I was drawn to studying international relations and business. I met my wife early in my college experience and we dated and married before we finished our education. We were young. Her family was like the Greek family in the movie. They were fun and she was beautiful, had lived abroad and could speak French! Wow! Encouraged by my relationship with her, I studied abroad and my passion for God’s world and his people was ignited. But I didn’t have a view for how this growing passion could flow forth in my life, so I took a “safe” path and went to law school.

We moved cities and I started school. My wife was working in an industry she loved (study abroad) when the opportunity to start a company presented itself in the same industry. We were young and we jumped at the chance. We lived on student loans and small paychecks and life was good. I started practicing law as both my wife’s business and our passion for the nations grew as we got to interact with wonderful people around the world through her business.

Abnormal at Full Speed Ahead and Calling Whispered

I began practicing law in a corporate practice with some great lawyers. I learned how business works, how decisions are made in the corporate setting and participated in some exciting ventures. My wife’s company grew. We started having kids – we ultimately had five – and life felt full. It was “up and to the right” for us. My wife’s situation allowed us to do really gratifying things like travel with our kids for extended stretches. I left my corporate legal job and began being more entrepreneurial myself. I was working mostly on my own and we had flexibility. Our lives seemed charmed to the onlooker.

As you may have noted, until now I have not said much about my faith. “Up and to the right” can make it hard to see your need for dependence on Christ. I had a real faith, but it was confined to a traditional way of thinking about faith, family and work. Thankfully during this time, one of my good friends became involved in the “business as mission” movement. This was early in the 2000s when the BAM movement was originating. He asked me questions like, “how does your faith intersect with your work?” and “how does your faith show itself beyond Sunday activities?” God used these thoughts to grab my heart. I felt alignment in my spirit for the first time; a real calling to align my faith and my daily life in Kingdom of God expanding activities. By early 2008, I convinced my wife that I should leave my legal practice and start a company with a friend. We had some money saved and an idea that we believed could have global ramifications that we could use for God’s Kingdom and Glory. It was exciting. How could we fail?

Crash and Burn but Calling Obeyed

The financial crisis hit and our fledgling business never got off the ground. Then my wife left her day-to-day job in her company, and our income changed dramatically. Then we experienced deep tragedy in our family. Up and to the right was over. We then knew at a deeply visceral level how badly things could go. It was a painful and difficult time. Deep inside though, my business partner and I knew that we weren’t supposed to go back to “normal.” We knew we had a defined calling, so in mid-January 2009, he and I got on our knees in our little office and prayed for God to do something with our business for his Glory – we knew we were called, but didn’t have a clue which way to go.

Shalom

Doors began opening and people pulled us in some very unexpected directions. A new company was borne from that moment. It was a huge dream: we were going to develop a diagnostic test to solve one of the biggest unmet needs in global health. We saw firsthand what God’s favor meant as real miracles happened – my faith “box” was being enlarged almost daily. New colleagues encouraged us with how God had called them into a faith/business journey as well.

But it was also hard. We lived without salaries for several years and used up our savings. We learned and grew, but it was difficult for our spouses. (As an aside, my view is that my wife has a far more difficult calling than I do, as she gets to feel the pain, but often is not a part of the cool moments that happen along the way. She is a praying saint who is a rock for me.) We worked diligently and were successful at slowly raising the money needed to develop the product from a globally prominent group of investors and global health stakeholders. We were at the forefront of the global Christian impact movement and making good progress on our product. We were living out real answers to questions that my friend had asked me ten years before. It was so “abnormal” that my kids struggled (and still do) to say what their dad did for a job, but we felt that we were being obedient.

Then our clinical trial failed. Our stakeholders and investors said they wouldn’t fund any more work on our technology. We had to lay off our staff. Seven years in, it was over. I had lost our investors’ money – some of whom are reading this (and are still my friends) – and we didn’t solve the big health problem.

But shalom was not lost in this process. We had pain and sadness, but over the previous ten years, God taught me how to live shalom. It is not rooted in my performance or the financial success of my business, but in the obedience to God’s call on my life. That is the source of shalom. I sought to manage the business in a way that lived out God’s grip on my life. Though my investors did not like losing their money, they did not come to me with the question of “how did this happen?” or “what went wrong?” We had communicated well and been transparent. Life science innovation is risky. We were doing something that could fail, and it did; but we worked in a way that was still glorifying to God and we continued to press on from there.  

Some who backed us in our former company introduced us to our current company. I believe we are living out our calling through this new endeavor. I also believe we will succeed financially and that the learning we gained in the previous company has increased that chance. No matter what happens, I will strive to continue living shalom, because it is not dependent upon my financial success or how well I manage a company or whatever else may happen in my life, but rather on my daily obedience to God’s calling.

This is one of the 2020 CEF Whitepapers. For more information on the Christian Economic Forum, please visit their website here.

At the end of every podcast, we like to ask our guests to share what God has been teaching them in this season of life.

The Parable of the Sower

4 Again Jesus began to teach by the lake. The crowd that gathered around him was so large that he got into a boat and sat in it out on the lake, while all the people were along the shore at the water’s edge. 2 He taught them many things by parables, and in his teaching said: 3 “Listen! A farmer went out to sow his seed. 4 As he was scattering the seed, some fell along the path, and the birds came and ate it up. 5 Some fell on rocky places, where it did not have much soil. It sprang up quickly, because the soil was shallow. 6 But when the sun came up, the plants were scorched, and they withered because they had no root. 7 Other seed fell among thorns, which grew up and choked the plants, so that they did not bear grain. 8 Still other seed fell on good soil. It came up, grew and produced a crop, some multiplying thirty, some sixty, some a hundred times.”

9 Then Jesus said, “Whoever has ears to hear, let them hear.”

10 When he was alone, the Twelve and the others around him asked him about the parables. 11 He told them, “The secret of the kingdom of God has been given to you. But to those on the outside everything is said in parables 12 so that,

“‘they may be ever seeing but never perceiving,
    and ever hearing but never understanding;
otherwise they might turn and be forgiven!’[a]”

13 Then Jesus said to them, “Don’t you understand this parable? How then will you understand any parable? 14 The farmer sows the word. 15 Some people are like seed along the path, where the word is sown. As soon as they hear it, Satan comes and takes away the word that was sown in them. 16 Others, like seed sown on rocky places, hear the word and at once receive it with joy. 17 But since they have no root, they last only a short time. When trouble or persecution comes because of the word, they quickly fall away. 18 Still others, like seed sown among thorns, hear the word; 19 but the worries of this life, the deceitfulness of wealth and the desires for other things come in and choke the word, making it unfruitful. 20 Others, like seed sown on good soil, hear the word, accept it, and produce a crop—some thirty, some sixty, some a hundred times what was sown.”

Rob West:

What’s fascinating to me is when the disciples are questioning Jesus around really the implications of this story that he’s just told about this parable of the sower, and they wanted to know what these various soils represented. When he describes what choked out the word from burying a 30- 60- hundredfold return in the sowers lives, he says that it’s the worries of this life, the deceitfulness of wealth and the desires for other things.

And I think that’s just so fascinating, The love of money has the potential to be one of the most common things that will dethrone God from first position in our lives.

And I think that’s exactly what this parable is speaking to. It’s that the worries of this life, the deceitfulness of wealth and the desires for other things, which probably is going to in many cases be material possessions, that has the potential to choke out the word from bearing fruit in our lives.

And so God has just really been impressing upon me the unique opportunity we have to think differently about what God has entrusted to us. And I think that really underscores, if you will, the opportunity of the Christian advisor as well.

At the end of every podcast, we like to ask our guests to share what God has been teaching them in this season of life. Wade Myers recently joined us to discuss how God is using him during COVID-19.

You know, given the whole COVID impact and the recession, there are so many entrepreneurs that are in trouble, that are anxious, that are being forced to lay off employees, being forced to shut down. And what I’m really grateful for is we have all of our analytics in our platform that we can turn on for free and just say, well, let us help. Let us just help you get through this.

And, you know, raising capital for companies that need it, saving jobs. And so one of the things I’m really grateful for right now is just being faithful and being a good steward of what, you know, is right at my disposal and just offering to be a wonderful help to those that need it and to really try to make a difference with that at the same time.

One of my five children is fairly ill right now and we’re wrestling with that. And so the other thing God is telling me is to just execute well on all fronts. On the family front, you know, as well as the business front. There are all these balls that we’re constantly juggling and just trying to do it all well and trying to lead faithfully through good times and bad times and through, you know, good health and bad health and just coming out the other side and knowing that it’s just a growth opportunity.

And so as I meet with entrepreneurs right now, they’re struggling and are worried. The nice thing is God has taken me through a lot of experiences where I’ve learned a lot of hard knocks and made a lot of mistakes. So there is a degree of empathy that God is able to use to help them just, you know, understand that you’re not alone.

Because most entrepreneurs feel very isolated and lonely and like I’m a failure. Right. It’s like, no, this is a different environment. Let’s help you through it. So I’m really grateful to be in that position.

But clearly, God is saying take what you have and offer it. A lot of what you have free right now just to help businesses get through this next, you know, three months, six months, whatever it is, until people can get back on their feet.

by Luke Bolton

Three Views on Values-Based Investment Screening

Few experiences impact your perspective as quickly as living abroad. Life in America was normal for our family, but when we moved to Asia a few years ago everything changed. Our local neighbors saw things quite differently than we did. We quickly learned that everything we did could be seen from multiple perspectives.

Looking at something from multiple perspectives is a valuable practice in many contexts, such as in teamwork and relationship building. By seeking to understand the perspective of others, we can develop empathy, deepen our understanding, and demonstrate respect for others – even if we do not agree.

Joining a Community

Those who participate in the faith-driven investor community come from a variety of backgrounds, united by a desire to integrate Christian faith and investing. To say we are dealing with a debated topic from a wide range of viewpoints is to admit the obvious. But as I see it, diversity of thought can be a sign of health in this movement characterized by creativity and rigorous thinking within a framework of unifying principles.

While there are many ways to honor the Lord and reflect biblical thinking in our investing, one recurring topic in the public market conversation is values-based screening. Since our views on it are diverse, the purpose of this article is to invite greater understanding across a wide spectrum of viewpoints.

One Among Many

Retail investors often associate faith-based investing with just one thing: screening for values alignment. But professionals who follow this topic likely realize faith-based investing is a broader concept than just screening. Faith-based investing has inspired many strategies in the public markets such as applying biblical wisdom to evaluating risk, engaging in corporate advocacy, integrating aspects of impact investing, applying positive moral screening, and applying negative moral screening.

Although faith-based investing entails other strategies, this article focuses on screening as it was first historically and remains well known today. Three perspectives on screening have emerged in the faith-driven investing conversation. Each view seeks to grapple with Scripture and can be heard as part of the larger conversation within this movement.

1. The Moral Obligation View

The first view sees screening as a moral obligation given by God in Scripture. It is often associated with the term Biblically Responsible Investing (BRI) which emphasizes the idea that God holds investors morally responsible for the companies represented in their portfolio. Failure to invest in a morally screened way feels, to them, like sinning against God, violating his will, and aiding and abetting acts of harm against humanity. Those who take this viewpoint usually emphasize the concepts of ownership, source of profits, and association with evil.

A. Ownership – The concept of ownership starts with the textbook definition of “common stock” as the right to a basic ownership claim in a corporation. Stock ownership is equated with company ownership in this view, and company ownership is equated with being morally responsible for what the company does. The application of this idea takes many forms, but it is often expressed in a question like, “Do you know what you own?”

B. Source of Profits – A second point addresses whether it is right to receive profit from evil deeds. This argument builds on verses that deal with money gained by ill-means, such as Prov 10:2 (“Treasures gained by wickedness…”), Prov 15:27 (“…greedy for unjust gain…”), Deut 23:18 (fees for prostitution not received in the temple), and Matt 27:6-7 (temple leaders refuse to take back Judas’ “blood money”). This view emphasizes that God cares how people make their money. Therefore, God must also care what companies we invest in since those companies send profit to their investors. Which leads to a question like, “Would you want to profit from someone having an abortion?”

C. Association with Evil – A third emphasis of this view is the desire not to be associated with evil, namely the evils committed by publicly listed companies. Authors from this viewpoint often say they are seeking to invest in a way that allows them to have a clean conscience or profits that are pure. Because they see investing as a significant moral relationship between investors and companies, they are bound by conscience to determine which moral issues to screen out and to screen them to the best of their ability.

Because this view sees screening as a matter of obedience to God, those who hold it often demonstrate a high level of persistence and sincerity in promoting a screened approach to other Christians. However, in the broad scope of all Christian investors, this view represents an articulate but growing minority.

2. The Strategic Opportunity View

The second view sees screening is a strategic opportunity to make an impact for good in a fallen world. It tends to be associated with terms like faith-based investing, stewardship and impact, or values-based investing. Those who hold it see screening as one way to reflect Christian faith and values, to make a difference in the world, and to express better stewardship as investors. Failing to use a moral screen, for them, feels like a missed opportunity rather than a sin. This view emphasizes concepts like creating value, the complexity of public markets, and the pervasive influence of sin and grace.

A. Creating Value – The concept of creating value goes back to the biblical story of creation where God entrusts a fruitful world to the care of his image bearers. People were given the task of cultivating creation, thus adding value by applying their creativity and skill to the world. It also builds on the great command of Jesus to love our neighbor as ourselves. This view seeks to invest in morally uplifting ways, not because the investor-company relationship is morally significant, but because the investor-neighbor relationship is morally significant. It asks the question, “How can my investing bless the world?”

B. Complexity of the Public Markets – This view sees screening as a strategy, rather than obligation, because of the complex and indirect relationship that exists between investors and companies. The complicated nature of the public markets is well recognized, and rarely understood. Depending on the type of security purchased, many layers of advisors, managers, analysts, bankers, directors, regulators, advocacy groups, financial markets, and governments contribute to its overall social context. In other words, retail investors and public companies don’t sit at a table and decide which goods and services to offer. Many factors outside their control play into those decisions. Given the limitations of knowledge, lack of investor control, and structural distance between them, this view does not to see the investor-company relationship as a significant basis from which to argue for moral responsibility.

C. Pervasive Influence of Sin and Grace – A third emphasis in this view is the comprehensive influence of sin on all human endeavor (Gen 3:17-19). Since the whole world is corrupted by sin (Rom 8:20-23), this view concludes that every company is imperfect, and every investment supports to the employment of sinners. But God’s grace is also pervasively at work so even the worst companies are not as wicked as possible. This leads them to trust that God’s grace is at work through normative investments as well as those that are morally screened. It can lead to screening methods that do not aim for “zero-tolerance” results. It also motivates them to seek other strategies like corporate engagement to compensate for the inevitable expressions of sin in the corporate world.

Since this view takes a moderate position on screening, it tends to be slightly less visible or vocal in the faith-driven investor community. This view is also often held by Christian professionals who work in an investment management context where zero-tolerance approaches are not viable.

3. The Unnecessary Distraction View

A third view sees screening as an unnecessary distraction from the central purpose of investing. It often avoids the term BRI and prefers faith-driven or principles-based instead. This view does not see screening as a moral responsibility, but as a matter of Christian liberty or conscience. They may express their values by engaging in corporate advocacy, but more often focus on how faith impacts the Christian’s overall financial experience (i.e. generosity, integrity, contentment, excellence, etc.). They see the investor-company relationship as insignificant and instead emphasize engagement in the world, the goodness of profitable investing, and character development.

A. Engagement in the World – The idea of engagement in the world goes back to Genesis and God’s call for people to be active managers of his creation. Both Christians and non-Christians are invited to collaborate (as far as possible) in cultivating the earth and developing society. In this view, one of the greatest examples of engaging in relationship with non-Christians is the earthly ministry of Jesus. Since Christ was a friend of sinners and received gifts of monetary value from sinners (Matt 9:10-12), they do not see entanglement with sinners in the markets to be wrong. Instead, it is part of their calling to be a godly presence in the world.

B. Goodness of Profitable Investing – Their second argument is that the purpose of investing is to seek a profit, and that seeking a profit is a morally appropriate goal. The roots of this idea go back to God’s design for human productivity in Genesis. Investing to make a profit is rooted in God’s design and reinforced by Jesus who used profitable investing to depict a “good and faithful servant” (Matt 25:14-29). The productive use of capital (such as, providing liquidity in the markets) is a moral good sufficient to justify investing without the additional layer of moral screening.

C. Character Development – This view also emphasizes the moral and spiritual concerns investors face on a personal level rather than a corporate one. Those who see screening as unnecessary tend to also see it as a distraction from important projects like developing a heart for contentment, generosity, and trust in God’s provision. Since this view rejects the claim that screening is obligated by God, they also tend to see those who promote screening as being legalistic or imposing their conscience on others. 

In the broad scope of investing, this view speaks to the majority perspective of Christian investors. But, as their faith-based approach does not involve screening, they often tend to be overlooked in the faith-driven investor community.

Conclusion

This article briefly introduced three views on screening but did not offer critical assessment of each view. Instead we have sought to lay the groundwork for future discussions by identifying several viewpoints held by believers on this matter. Evaluating the pros and cons of each view is an ongoing, collaborative project for the faith-driven investor community.

Since biblical truth can be seen in each view, we can welcome each of them as they wrestle with matters of truth, faith, and doing God’s will in the markets. Given this diversity within the faith, no single viewpoint can fully define what it means to be a faith-driven investor. Perhaps the best strategy in light of this is to honor the faith of those who differ from us and commit to a love that is patient, kind, and “does not insist on its own way” (I Cor 13:5).

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Required Disclosure:

The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual. No investment strategy assures financial success or protects against loss. Past performance is no guarantee of future results. Investing in mutual funds involves risk, including possible loss of principal. 

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. WaterRock Financial, LLC is a separate entity from LPL Financial.
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Luke Bolton earned a BA in Theology at Northland International University and an MA in Biblical Studies at Central Baptist Theological Seminary. He brings seven years of experience in the financial services industry and serves as Director of Operations at WaterRock Financial. He and his family are members at Bethlehem Baptist Church in Minneapolis.