Episode 91 - Discovering Faith Driven Investing At Harvard with Mary Naber
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Today we’re joined by Mary Naber of Sage Stone Wealth. Mary has spent her entire career in the financial services industry including serving as an SVP and Advisor at Merrill Lynch. Mary’s expertise in the field of ethical investing is highlighted in over half a dozen books and multiple magazines. She joins us today to share her story of finding faith driven investing at Harvard and discuss the value proposition of faith driven investing. Tune in!
Episode Transcript
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Mary Naber: It is said to be “Pareto Efficient” when at least at least one person is better off and nobody is worse off. So, in the very last paragraph of my Journal of Investing article: “Individuals and institutions can make a Pareto Efficient move by investing with Catholic or other religious and ethical principles from the comparable return and the added utility and social benefit of a clean conscience.” So, here's the value proposition with Faith Driven Investing. It's that at no cost to you, to me or Luke, or anyone listening—at no cost, material or financial, when you choose to integrate your faith and your investments, you gain something amazing in your life today.
Narrator: Welcome to the Faith Driven Investor podcast. If you’re a fund manager, investor or financial advisor driven by your faith, or want to be driven by your faith, then you’re in the right place. The best way to stay connected in the Faith Driven Investor community is to sign up for our newsletter at faithdriveninvestor.org. This podcast doesn’t exist without you, our community. One of the things we’ve heard the community ask us for is help in finding great deals to invest in, and so we’ve launched Marketplace. It’s a new platform of funds and direct deals. Everything from private equity and real estate funds to ETFs. From philanthropic to market rate deals spanning the U.S. and emerging markets. Check it out at faithdriveninvestor.org/marketplace. While you’re there, please send us any thoughts you have about how this podcast might better serve you or any questions you have about being a faith driven investor.
DISCLOSURE: All opinions expressed on this podcast, including the team and guests, are solely their opinions. Hosts and guests may maintain positions in the companies and securities discussed. This podcast is for informational purposes only and should not be relied upon as specific investment advice for any individual or organization.
Narrator: Welcome back everyone to the Faith Driven Investor podcast. Our guest today is a trailblazer and also fascinating. Prior to founding Sage Stone, Mary King served as a Senior Vice President Investments and Wealth Management Advisor at Merrill Lynch in Beverly Hills. She is the author of “Catholic Investing – The Financial Effect of Screens” published in the Journal of Investing, the first published empirical research documenting the financial impact of socially conservative screens. Her article, “Christ’s Returns” was featured in Christianity Today twenty years ago and was a precursor to the movement among faith driven investors.
Mary’s expertise in the field of ethical investing is highlighted in over a half a dozen books and multiple magazines. She is the first undergraduate in the history of Harvard University to receive a double major in Economics and Religion, and she did it with honors. She joins us today to revisit the ideas in her article, Christ’s Returns, and reveal how what was a defensible strategy twenty years ago is still defensible today. Let’s listen in.
Henry Kaestner: Welcome back to the Faith Driven Investor podcast. I'm here with my great friend, business partner, lifelong friend Luke Roush. Missing him, he's moved to Tennessee. We're just—as we're talking with Mary, who lives in California—talking about the fact that we used to be able to go down to Capitola and go surfing and stand up paddleboarding at Santa Cruz Harbor and different things like that. So Luke, you are missed.
Luke Roush: Hey, I miss—I miss watching you struggle down there on that surf.
Henry Kaestner: That’s right… Struggling with one of my boys who decided that he was strong enough to not need a wetsuit,
Luke Roush: And that was special. In January. That was very impressive. I am just going to go ahead and go on record.
Henry Kaestner: Yeah, that was maybe a little foolhardy too. He has thawed out, he’s back and I am also back. We had two Faith Driven Investor conferences last week, which were super cool. We had one in Nairobi and we had one in Cape Town, actually right outside of Cape Town in a place got Stellenbosch. And I'll tell you that God is on—Aslan is on the move. As our friend David Wills likes to say, Aslan is on the move. We had a Faith Driven Investor gathering in Nairobi the February before COVID, so just a couple of years ago, not even two years ago. And seven people came and they were a great seven people. We had a great breakfast, but I thought we might get more. And this time we had one hundred and forty. We had the CEO of Telkom Kenya Mugo Commodities become a friend. He led one of our panels. We had the chairman of the largest insurance company. We had the Senate Majority Leader, everybody getting together and talking about “What can a Kenyan Christian community do to lead the way, putting their own skin in the game, making faith driven investments in Kenya, East Africa and the broader African continent?”. And then the same thing happened a couple of days later in Stellenbosch, an incredible setting and one hundred leading Christian investors that are really serious about their faith and are at the helms of some of the largest investment banks, trading companies and funds in South Africa. Getting together, worshiping together, praying together, it was just, it was super cool. So I'm back now. We are doing the podcast and I'm just really encouraged because there is a movement here and lots of different people are getting it. Pastors are getting it. Individuals are getting it. Again it is a good chance to just, as we get ready to introduce our guest, it’s a great chance to really introduce what is really at the cornerstone of the movement is that it's really not meant to be prescriptive or presumptuous at all. It's about us getting down on her knees with our spouses and asking God how we might steward the assets that He's entrusted us with. And for some, that might be investing in solar farms in the Nevada desert. For others, it might be investing with our Christian brothers and sisters in Nairobi, and some of them it may be taking a new look at the way they manage their public equities. And so for all of that, we have this great honor and this podcast of being able to talk to leaders who've been doing this and wrestling with this for a long time. And very few have wrestled with this longer than Mary. And Mary, I'm just I'm really grateful that you're on with us, and I want to mention one thing that you and I have. And I don't know if you know this about me, but you and I have the common experience of having worked at Merrill Lynch, Mother Merrill, and I had some formative experiences. My introduction to the financial markets was at Merrill Lynch in Manhattan, downtown in the World Financial Center, where I was actually there for the first World Trade Center bombing, which was a crazy experience. And I learned so much about financial markets and the special privilege that it is to be invited into a family's life to contemplate some real important decisions around financial planning. There's an intimacy there that I hadn't expected in that job, and it was one of the most rewarding parts of it. And so you've made a career in doing that. So but I'd like to hear about what your financial experience was. Tell us about it. First of all, welcome to the program. Thanks for joining.
Mary Naber: Thank you, it's great to be here.
Henry Kaestner: So tell us about it growing up as a kid. What drew you to the financial world? I think that you probably started earlier and maybe were less mercenary about it at the beginning, as I was. I like to think I matured in my thoughts of the financial markets with time. But for me, at the beginning, it was just a job, but you were thoughtful earlier. Tell us about your story growing up. What brought you into it? And yeah, just who are you, where do you come from?
Mary Naber: Thanks. Well, I'm Mary and I'm originally from Salinas, California. I had the tremendous blessing of growing up at the First Presbyterian Church in Salinas. And it was at this small church, where as a young five or six-year-old, I still remember sitting in one of those little wooden chairs during Sunday school and the Sunday school teacher explaining that there is a simple exchange we could make. If we simply ask Jesus to come live in our hearts you could have a best friend forever. And for a little child, the idea of a best friend forever, I mean, it just doesn't get better. I could exchange something small, my heart, for the unconditional love of the Creator, forgiveness from all sin, redemption, restoration, passion, purpose and a best friend forever. Yes! I’d say that it was also a little lesson in the economics of God: that He is always our best investment. Anything small we give Him, He is faithful to multiply and return. I think about offering five loaves and two fishes, He feeds the 5,000. We plant a mustard seed, He grows it into the largest of garden plants. We give Him our investment portfolio, imagine really the ways that He can multiply that gift for today in eternity. I'll note that it was also at the First Presbyterian Church where I was enthralled by 80’s worship music, enjoyed the sermons of our pastor, Dr. Ladra…
Henry Kaestner: Who's your favorite band? 80s worship music. For those of us who remember things like, I don't know, Jars of Clay, etc.. Amy Grant, who's your favorite?
Mary Naber: Oh, I really love Jars of Clay as well. Caedmon’s Call, if anyone remembers. I got to host and produce their first concert at Sanders Theater in Harvard.
Henry Kaestner: Oh wow!
Mary Naber: Sold out a thousand-seat theater. So that was a fun little investment in college of our Campus Crusade group.
Henry Kaestner: A thousand Harvard students showing up to Caedmon’s Call concert?
Mary Naber: Well, we actually marketed the concert throughout Boston colleges.
Henry Kaestner: Still, that’s great. Yeah.
Luke Roush: That’s a big win. A big win in Boston.
Mary Naber: Yeah, it's exciting, it's great music… But that was the 90’s. But yeah, I was 16, and I set up an appointment to meet with my pastor. I explained to him that I loved every aspect of business, but I love Jesus too. So maybe I should consider going into the ministry. This is 1992, and he said, “Mary, Christians are needed in the business world too.” And it was an absolute paradigm shift for me.
So, when I was about 18 in the fall of 1994, I flew across the country to Cambridge, Massachusetts, to attend Harvard as an undergrad. At the time, I still saw the two fields, my interest in business and love for Jesus, in two separate compartments. I wanted to pursue a double major in econ and religion, and God ended up using one of the most secular universities in the country to challenge me to integrate both fields. Now I set the case at Harvard: at the time, in order to graduate with a double major, a senior was required to write one thesis that combines both fields and would be accepted by both departments as academically rigorous. Well, the Harvard Econ Department also viewed econ and religion in two different spheres. They refused to approve my double major with Religion. They told me the two fields had nothing to do with one another, that the double major had never been done before and that it would be impossible to combine the two. Of course, the econ administrator didn't know of Jesus’ promise in Matthew 19, Mark 10 and Luke 18, that with God, all things are possible.
And so I accepted the challenge, of course, in the hope and faith that I would find a senior research thesis that worked and maxed out my courses in the Religion department. And I savored seeking out areas where the two fields overlapped. In Professor Diane Eck’s World Religion Course, I wrote my term paper on “Islamic Banking: A Topic of No Interest”. In my sophomore tutorial course, I wrote my research paper on the game theory methods used by three major religious traditions in the recruitment and retainment of attendees, in which I introduced one of the most famous game theory examples, that of Pascal's Wager—the brilliant argument that it's always best to bet that God exists. Now in this process, I discovered something quite surprising. I found that economics on its own—the bland macroeconomic problem sets were dry and uninteresting. But economics from a perspective of faith, viewed from an eternal and spiritual perspective, was profoundly more meaningful, joy-filled, fascinating and way more fun.
So at a secular university frequently hostile to the Christian faith, God led me to a passionate commitment to integrating my love for Jesus into economics, business and work and I simply wanted nothing less. So it was actually spring of my junior year where I first became exposed to the practice that was traditionally known as Socially Responsible Investing. For that spring semester, I took a small seminar course at Harvard Divinity School. It was titled “Money Media and Morality: Investing in the Civic Good”, taught at the time by, HDS, Harvard Divinity School's Director of Corporate Ethics. Yes, HDS was way ahead of the curve in appointing such a director in the mid-90’s. It was in this course that I was first exposed to Socially Responsible Investing, the thoughtful consideration of ethics and values in investment decisions. And for anyone new here at the program, just to cover it, in that course I learned about portfolio screening - that's the avoidance of sin stocks like tobacco, gambling from one's portfolio of publicly traded securities. I learned about shareholder action to engage corporate boards for cultural change. And in that course, I learned about creative impact investments that generate both a financial return and social good. I was absolutely fascinated. In all my financial and capital markets courses at Harvard from ‘94 to ’98, I had never once been exposed to the practice of social investing. Again, these classes lacked purpose or meaning. With SRI, which we now call faith driven investing, finance suddenly became imbued with deep significance because I began to see how the allocation of capital impacts the lives of the neighbors we’re called to love. With faith driven investing, I began to see how finance could be an avenue to fulfilling God's great commandments to love Him by honoring Him with the stewardship of His talents and loving others, by taking care not to profit at their expense.
Luke Roush: Maybe just to pause there for a comment. Actually, so that concept that you just articulated is not a new idea today, but back in, you know, late summer of 2001, that was kind of a novel idea. Maybe just speak a little bit about the relationship that you have with one professor who kind of helped you get focused on this and helped you to contextualize some of the research that you did. I’d love to just have you pause for a moment and actually just speak about that discovery process, where your research led you in terms of conclusions, and how all those things tied together.
Mary Naber: Okay. So, the professor—the Director of Corporate Ethics at Harvard Divinity School—her name is Dr. Marcy Murninghan. And she was just a great inspiration and was the one to suggest to me when I was looking for a senior research thesis that I go to a think tank I really admire and respect and see what research they needed done. I wouldn’t say that apart from the academic guidance, that we got deep into the spiritual imperative, that came maybe a couple of years later. But she provided just that tremendous piece of advice for any senior looking to do a thesis or graduate student doing a dissertation to go out and find what research needs to be done. It turns out I had been interning—I interned that summer before my senior year—at a company called KLD. KLD - acronym for Kinder, Lydenberg and Domini. They were the leading research firm providing the social research database—it’s called the Socrates database—to institutional investors, tracking which companies were in industries of concern. And they were absolutely the leaders. They were located in Harvard Square, just a bike ride from Lowell House where I lived. That was a fantastic benefit. And speaking of Merrill, this was now ‘96/‘97. Merrill had hired KLD to monitor one of their first ethical funds, and one of my roles was doing a deep dive in the due diligence of those underlying holdings to ensure that nothing had changed at those companies to bring any of those holdings into question. So, thinking through my thesis, my senior year…
Luke Roush: Sorry, who were the clients that you were representing as you were kind of asking these questions? Like, who cared? Like, who are you ultimately working for here?
Mary Naber: Oh, when I was working at KLD?
Luke Roush: Well like yeah, trying to assess whether there were problematic things or not in different companies. Who cared about that?
Mary Naber: Right. So well Merrill Lynch had established this fund and they had designed the parameters. And, if my recollection is correct, I am pretty confident they were the traditional socially responsible screens: tobacco, gambling, alcohol, military and nuclear power. And so this fund had those specific securities that did, in fact, meet those screens—they were not restricted due to those screens. And yet, because companies can always merge or buy new subsidiaries, it's always good to stay on top of, you know, the research related to what's going on in those individual companies. And that's what I got to do. And that relationship was amazing. I had an opportunity in my senior year to speak with the Director of Research at KLD, Dr. Steve Lydenberg, and I said, “Well, what research do you need done?” And he said, “Well, we have a lot of Catholic clientele. We could use some research on what issues are of concern to them.” And so that was really the genesis of my senior research thesis, which was developing a methodology and profile of the Catholic investor. And of course, then doing the research to see how investing with Catholic principles would impact returns.
And in the late nineties Catholics were a great case study. Their “sin stock” concerns bridged the traditional social screens of tobacco and gambling, with the emerging social conservative pro-life concerns of abortion and pornography. Plus, at the time, and still, I'd say Catholics had a very rich history of social faith driven investing, especially at the institutional level.
Nuns, of course, were very active in shareholder engagement, and screening was utilized at Catholic hospitals, universities and other institutions.
In 1991, Pope John Paul II wrote in his encyclical letter: “The decision to invest in one place rather than another, in one productive sector rather than another, is always a moral and cultural choice.”
Also in the early 1990s, the National Conference of Catholic Bishops had released the NCCB/USC Socially Responsible Investment Guidelines that served as a guide for Catholic investors, and my research, which I supplemented through extensive interviews with U.S. bishops and other Catholic finance leaders and a group of Jesuits in Harvard. I invited myself to their place for dinner. But 90 percent of my work…
Henry Kaestner: That’s awesome. I love that. So, I had a Jesuit high school. I love the Jesuits and I love the fact that a co-ed at Harvard decided “I'm going to go ahead and crash the Jesuits’ dinner party.”
Mary Naber: Yes, it’s one of my highlights, and I have many.
Henry Kaestner: How do they tell you so you go ahead, you’ve got a—you’ve got a head of steam about how you're thinking about all this. The Pope is coming out with an encyclical, and a bunch of guys are sitting around just trying to meditate and pray, and then you challenge them with this. How did they respond?
Mary Naber: I found them to be very receptive, very kind. I really enjoyed so deeply those connections I was able to make in the context of interviews. I got to interview some incredible Bishops who had written some incredible encyclical letters, one called “Economic Justice For All”. And what I found actually and discovered in the context of that research— was that these guidelines that were written in the early 90s, didn't include a screen for adult entertainment or pornography. It was, again, something corporations/publicly traded companies were getting more and more involved in. And I made a recommendation in my thesis, which I sent along to the framers of those Guidelines, that they needed to update their Guidelines. And a couple of years later, in fact, the NCCB/USCC Socially Responsible Investment Guidelines now includes adult entertainment/pornography as a screen for avoidance investing. So but again, it’s…
Henry Kaestner: It’s important work.
Mary Naber: Just my time with the Jesuits, all of those wonderful faithful Catholics that I got to interview, I'm just so thankful. I'll throw in one other quick story about a Catholic who had great input, and that was my senior thesis advisor. So it was suggested to me when I was looking for a thesis advisor that I go over to Harvard Business School. There was an associate professor who was also known to be a practicing Catholic. His name was Professor Peter Tufano. And I was just so happy that he would be willing to take me on. One of the greatest honors at the end of my research, at the end of my senior year, he said, “You know, Mary, I think I learned more from this research project than you.” Of course, I'm sure he was just humoring me, but it was really a great honor. He went on to become Dean of HBS and Dean of Saïd Business School at Oxford and is now even today researching ESG adoption in corporate environments. So it's fun to have just had the blessing of those relationships in some of the early days, and I am thankful to God for that.
Henry Kaestner: What was your main discovery?
Mary Naber: Oh, sure! It was incredible. This is just some of the best news. Investing with ethical, religious, Christian, Catholic principles will not result in an adverse impact on financial performance.
Henry Kaestner: That's pretty important.
Mary Naber: I mean, it was just super exciting. I basically, after developing that methodology, built portfolios based on different levels of stringency from the Catholic principles, and none of those portfolios showed a statistically significant difference. That is, that the difference could not be explained otherwise by chance. The same results came about based on a multivariable regression analysis. And you know, what was very interesting about the thesis itself is that I had to, of course, for those who do senior theses, I had to do a multi-page literature review. It's required that the student go look at all the research that's ever been done so as not to replicate previous research. So, super blessed, I’m at KLD, the Director of Research had those old places where we used to keep files, file cabinets, and just pages and pages and pages of papers and papers and papers. And I supplemented that with research at HBS and really found conclusively, as I said before, that 95 percent of the empirical studies conclusively demonstrate even back then in the late nineties and still today, no adverse impact on financial performance. So that was the empirical research that my research validated. And I mean, what was neat is that my research was published in the Journal of Investing in Winter of 2001. It was the first published academic paper to integrate investing and faith. And it was the first to look at how the exclusion of social conservative concerns of abortion and pornography would impact returns. All the other papers had previously only looked at those traditional social concerns. So we knew and could discover, empirically, no cost. Historically, we had over a decade of SRI funds and indices like the DSI, Domini Social Index, demonstrating not a statistically significant difference in performance. I have an argument that theoretically even—the theory—economic theory supports the idea that we will not lose unnecessarily in our financial return. So I had another professor who was heading up kind of our little senior thesis tutorial class. He refused to sign off on my thesis. He refused to sign off on the topic. He would not approve it. And the reason, he said, “Is we don'—this isn't a question. Ethical investing portfolio screening will not adversely impact your returns, and we know that.” He was relying on the efficient market hypothesis, which basically says that all known information, including SRI or ESG traits of a company are already priced in the stock. Hence, you know, no excess return or loss. Basically, he just said, “No, we know this isn't a question. It won't impact your returns.” The only way I got him to sign off on my thesis topic was by demonstrating to him back in the late 90’s, Wall Street Journal articles basically raising the question and asserting that SRI would adversely impact performance. That was the going belief back then, that was the belief that even some Christian investors had back then. But really, what my research showed is, you know, the other empirical research, the historical evidence, and the theoretical argument. Okay, one more—logic! With thousands of publicly traded companies to choose from… We can afford to be a little exclusive.
So to me, if I may just jump, the exciting news related to the fact that there is no cost when it comes to portfolio screening—faith driven investing—in your public securities. And again, let's not go overboard—like if you're saying, “I'm only going to invest in this little segment of the market” yeah, maybe there will be an impact. We're just speaking broadly. We can afford to avoid companies profiting from abortion, pornography, tobacco, gambling, casinos. There are enough companies to select from and be fully diversified. So the reason this is so exciting to me is we forget this…
Sorry, one other point. We don't really think of this anymore. I feel like it's kind of taken for granted, and this is a good thing. Just this idea that it won't impact your returns—or maybe some people out there who still think so… But the research really shows conclusively, I think the general public understanding is… No cost.
So you think about generous giving, right? The offer, the offer is you're giving up your worldly material wealth for future gain, for eternal reward.
You know that could be crowns, right, we don't even know what those true riches look like. I think when we gift to charity, we may, in fact—that eternal reward will probably be people who are saved, who have eternal life because of our giving. So the gift that God has before us, it's a tradeoff, it's a lovely tradeoff. We give up, you know, cash in our account. We give, you know, if you're wisely using a National Christian Foundation donor advised fund, you can actually wisely give shares of your company, shares of your stock. The bottom line is when we give, we're giving worldly wealth. It goes to eternal kingdom purposes. So here is the proposition and faith driven investing, and it's mind blowing to me.
Henry Kaestner: Yes.
Mary Naber: That is, number one, at no financial cost, at no cost to your worldly wealth, you gain today. You get a free gain today. I put this in the Journal of Investing article back in 2001. It's my very last paragraph. I don't know how many people here know the phrase, “Pareto efficiency”.
Henry Kaestner: I don't. I don't and I bet many of our audience doesn't.
Luke Roush: I do. And I'm really proud, it’s maybe the only phrase that I remember and I'm really glad to be able to say that I know something that Henry doesn't, which doesn't happen very often.
Henry Kaestner: Oh, it happens a lot. It happens a lot. What is the phrase? So, somebody is going to have to explain, if this following paragraph is predicated on you knowing the Pareto principle, if that's indeed how you pronounce it. And maybe we'll put Luke on the spot. What is it? What's the Pareto principle?
Luke Roush: Why would I describe it, not when we have an expert on the thing and…
Henry Kaestner: Haha, well played.
Luke Roush: that would be…that would be…
Henry Kaestner: Yeah, that's right. Who are we interviewing here? Mary, tell us before you tell about the last paragraph. What is the Pareto principle?
Mary Naber: Sure, it means an economic theory, an alteration in the allocation of resources is said to be Pareto efficient when it leaves at least one person better off and nobody worse off.
Henry Kaestner: Oh, I like that.
Mary Naber: So, in the very last paragraph of my Journal of Investing article, um, “Individuals and institutions can make a Pareto efficient move by investing with Catholic or other religious and ethical principles from the comparable return and the added utility and social benefit of a clean conscience.” So here's the value proposition of faith driven investing: it's that at no cost you, Henry or Luke, or anyone listening… At no cost, material or financial. When you choose to integrate your faith in your investments, you gain something amazing in your life today. And let’s go through the list: the joy and happiness and blessing that comes from seeking to honor God in all that we do; the benefits of a clean conscience; sleeping well at night; conversation at a cocktail party. How about a chance to hang out with these very fun gentlemen at FDI conferences, and get to know the rest of the FDI community? Like…
Henry Kaestner: What a deal!
Mary Naber: I mean, and that's what we would call a Pareto efficient move.
Henry Kaestner: I love it. So, OK, I want to I want to throw that on its head just slightly. And also the ability to get to know more Jesuit priests and to break bread with them. So this is fascinating.
So a lot of times we talk about standing on the shoulders of people who've gone before us, and you will talk about Count Sivendorph and the Moravians, we’ll talk about the Guinness family. There are a bunch of different great examples, but your academic research on this is a big deal. It's a big deal. It was early on. I don't think that people I know know there's an article in Christianity Today, there's the Journal of Investing, and I don't think that enough people really appreciate, on one hand, the simplicity of what you just mentioned in that last paragraph, but also the complexity of a lot of rigorous academic research that went behind finding this simple conclusion. And it makes it that much more credible.
But one of the things that undergirds this is this kind of portfolio diversification theory that if you've got twenty thousand different issues to be able to pull from, if you just exclude eight, is that really going to impact your returns or if you're going to exclude eight hundred, even—is that going to really impact your returns? Flip that on its head a little bit. And one of the premises that we have, and taking your work and trying to build on it a bit, is that there are some amount of companies that instead of just matching the market return, there's some amount of companies that, because they employ biblical values, will succeed, not at the expense of them, but because of them that they may even do better. And I think it would be hard for us on this podcast to presume that the Holy Spirit advantage is worth one hundred twenty five basis points or two hundred and fifty or something like that. But if we go ahead and we actually come up with a more of a narrow lens and say through some of our research, we found two hundred—two hundred and twenty five or so—Christian led, faith driven CEOs of publicly traded companies. And that includes big companies like Cisco with Pat Gelsinger and Intel with Chuck Robbins and in smaller companies as well. Do you know of any researcher? What are your thoughts there? You're deeply thoughtful about what we don't have to give anything up, so therefore it’d be a great deal. But what if we take that logic the next step and say, “Well, if we have a faith driven founder who, when Fortune or Forbes interviews them, might be able to point to their Christian faith as being material to how they lead? Do you expect that you'll find a fall-off in return? How do you even process that?
Mary Naber: Oh, absolutely. So, you know what's so interesting that was discovered in my research and Dr. Lloyd Kurtz, he has the website, sristudies.org, hundreds and hundreds of papers and empirical papers. And so on the number one point: as long as you're diversified, your returns shouldn't sacrifice in financial performance. I talked about the theoretical argument. Well, the practical realities is that there can be—if you are focused in the market, you can find features. In my research, it was investing in employee relations and investing in community development—that actually resulted in an abnormal excess return. Okay. And Lloyd Kurtz said he found this as well. He was working with some investment firms to exploit this, and I think the general idea is it may now be completely exploited through ESG. But absolutely, I completely concur that there's no reason why if you're not… I mean, if we just look at how God has blessed so many of those in the FDI community doing this work, it's abnormal outperformance... But I'm always careful, right, past performance is no indication of future success. And you know, a number two, you want to avoid kind of the prosperity gospel stuff.
But at the end of the day, I do believe, and I have seen, even in my own client portfolios, that that faithfulness…? God is amazing and He does things that just kind of defy anything we could be talking about in economic theory. And so I just, I have seen that, I give God the glory for it. So I absolutely agree that excess abnormal return and opportunities to exploit those still exist in parts of the market, and also God's provision. So, yeah.
Henry Kaestner: So I like that. You know that past performance is no indication of—say it again. Past performance is no indication of future performance, right? Or past results…. And yet scripture does tell us some things about financial return, laying up treasures in heaven.
Mary Naber: Oh, yes.
Henry Kaestner: We know that when you talked about it before, about the Parable of the Mustard Seed. There's some great biblical examples of being faithful and how that actually does deliver great investment returns.
And maybe, as we believe, we believe that you may find some alpha in financial markets in a way that the secular world can look at it. But we know undisputedly that when we are able to think differently, we may even get a return this 30, 60 or 100 times fold if we're not primarily focused on the worries of the world and the deceitfulness of riches, right?
Mary Naber: Absolutely, yes. And that was the other benefit to the whole Pareto efficient proposal here that at no cost, and perhaps as you've suggested, perhaps abnormal outperformance and excess alpha, giving that exchange of worldly wealth, we get benefit today. Wait, hang on! Benefit tomorrow in God's Kingdom. In Luke 16:11, If you have not been trustworthy in handling worldly wealth, who will trust you with true riches? And so, it's so exciting—faith driven investing—assists us in being trustworthy in handling worldly wealth so that by His grace, our God may someday trust us with true riches. Now what is that great responsibility? Crowns? Treasures in heaven? He promises true riches and treasures in heaven and just to think, I mean, we start with that 10 percent and we're encouraged to go 20-40-60% giving. Why would we leave resources that God has entrusted to us off the table when we can be investing those into eternal Kingdom purposes, to be honoring Him with all that He's entrusted to us? And I mean, in addition to loving Him, loving our neighbor by avoiding investment in companies that hurt or harm or again prey on their addictions and weaknesses. Wait, it's also an act of evangelism. Because if we as Christians invest no differently than the world, how then is Jesus so enticing? And so even in our day to day, I believe that we are taking action that may perk the interest. I mean, certainly, I have quite a number of clients who aren't followers of Jesus. But you know, like you were saying earlier—those kinds of conversations, those type of relationships that this type of work allows, there are opportunities to share Jesus’ love, and share the story of His means of salvation. So to me again, this whole message of faith driven investing, that you're getting all these extra benefits at no cost is, I think, one of those stories that not a lot of people are thinking about, or even as you suggest and I concur, the possibility of that excess alpha. And that, by the way, I will celebrate our Lord Jesus who has brought that about. I think we see that when we look at the performance of the different managers involved in this movement.
Luke Roush: One of the things we always like to ask, folks, is what God has been teaching them lately and it doesn’t need to be like this morning or last night, but more just how has God been speaking to you lately, Mary, in terms of your work or, you know, things in your community all to just get what's on your heart.
Mary Naber: Just another thought I had when I was thinking through this, this particular podcast—you're talking about that 10-20 percent to give. Let's not leave 40 or 50 that we invest or save or spend on the table. And I also believe if we can through when we pay our taxes, do we say a prayer that God would use those resources and do something to redeem them? Right. So we can pray over all aspects and consider God in all aspects of everything He has entrusted us.
But another kind of thought I've been reflecting on is this idea that I think—consistently through Scripture and during the FDI talk, I had this opportunity to kind of share John Wesley’s sermon, “The Use of Money: Gain All You Can”, and that would always be quoted to me “gain all you can” as though as long as you're gaining all you can, it doesn't matter that we care—so far as how the money is made—as long as you get all you can, right? No, no, no, no, absolutely. We absolutely have to think about the source of our wealth. And John Wesley goes on to say that, and Scripture goes on to say that. And I think my point here is that, I think scripture consistently suggests that if we have not taken consideration as to the source of our wealth, that even our generous giving may be in vain.
Okay, that 10, 20 percent, you know, don't be the believer who drops that off at church and then leave, because one of the Scriptures that moved me so deeply is that of Isaiah, in Isaiah 1, where he is prophesizing “Stop bringing meaningless offerings, your incense is an abomination; though you make many prayers, I will not listen. Your hands are covered in blood.”
Why would it make sense to us that God would ever want us to put before Him on the throne gifts made through ill-gotten gains? I wouldn't be that interested either. And so why would we take the risk that that which we're giving may be considered meaningless if we haven't considered the source of our wealth?
Henry Kaestner: That's a really important concept. That's a really important concept because, you know, the traditional framework for a Christian, for many Christians, including myself to some extent, has been “I want to make as much money as I possibly can over here with my left hand, and then to the extent I understand the biblical message of generosity, I want to give away as much as I can over here. And what we've been talking about at faith driven investing of course, is that the very process of making the investments over here might accomplish the same ministry and missions goals we have over here. And you're saying yes, but also that original framework we had may not have been as effective as even we thought at the time, which is “make as much money as we can, regardless of how we get those results, and therefore that giving, that generosity and that's what really matters”. And you're suggesting no, no, no, no. In the event that we get investment returns and investing in things that were Corbyn or just, you know, just difficult and messy,… I'm not a theologian, so I should know the Corbyn reference better. But if they're invested through ill-gotten gain or things that were not holy in and of themselves, then that giving actually doesn't glorify God in the way that maybe we had thought.
Mary Naber: Yes, you said it perfectly. Thank you. I completely concur.
Henry Kaestner: You’re welcome. So the passage is from Isaiah?
Mary Naber: Isaiah 1:15, yes…
Henry Kaestner: Mary, this has been awesome.
Mary Naber: Oh, thank you. I've had so much fun. Thank you this opportunity.
Henry Kaestner: It's infrequent that we find, you know, I think that we are all, including these podcast hosts, are starting to really think about it much more deeply and that God has done a work in all of our hearts. It's clear that you've been thinking about this for a very long time, and I'm grateful for your work and I'm grateful that our listeners get a chance to hear how you put together these just awesome arguments that starts off with some of the basic things from game theory and Pascal's Wager and just extend it through to what you do as a job in the financial markets and you bless us and thank you.
Luke Roush: And we got into Pareto efficiency, which is a first on the Faith Driven Investor podcast. A big win.
Henry Kaestner: Thank you for bailing Luke out.
Luke Roush: Hey, one last thing to wrap. So talk to us. Just one thing that God's told you recently about your walk.
Mary Naber: So I would say I am a single working mom of three, and I have those days where I don't get to spend time in the morning with the Lord. So I obviously think in a stewardship financial mindset, we always think first fruits in terms of our giving, and I just feel like He's really imparting on me the importance of the first fruits of my time in my day. And I was deep i- the vision that He struck me with was not building the house on sand or rock, but me trying to walk on shifting sand. On those days, I haven't built my day, my time, my meditation and prayer on Him that I'm literally like living in a little state of semi-anxiety. Not really. I'm not super anxious, but I mean, just off-kilter and on shifting sand. And yet those days when I get to spend that time with the Lord and get up a little early and it's always suggested you grab your coffee—haha, just to wake up. To enjoy those times and start that day on the rock is like a night and day different experience, and I thank God for that. I thank God for how He shows up when we, not always, but you know, He will be there saying we might not always feel it, but He is there and that is something He continues to teach me.
Luke Roush: Grateful for that. Mary, appreciate you. Appreciate your groundbreaking research many, many years ago in an arena that has become, I think, more in vogue and more interesting and larger and yet you're one of the first movers. So we're grateful for your work in that regard and grateful for your friendship.
Henry Kaestner: Indeed.
Mary Naber: Oh, thank you. So all take care.