FAITH organisations are advised to pursue best practice “so as to achieve a high degree of religion consistency inside the investment portfolios that serve their mission”.
Ethics represent, for them, “a novel and essential element of investment governance”, suggests a joint paper from FaithInvest — a bunch that seeks to empower faith groups to take a position in keeping with their beliefs — and the investment consultant NEPC.
In the paper, Faith-based Investment Governance, they conclude that such organisations provided spiritual and moral guidance for his or her adherents, and infrequently sought to reflect their faith values of their investments. But the paper, which builds on that of September 2021, From Faith Values to Investment, reports that only just over half of them (55 per cent) clearly stated the part played by faith of their Investment Policy Statement (IPS).
It advises them, due to this fact, to look more closely at their broader governance framework to make sure full integration of religion values throughout.
There can, it acknowledges, be perceived tensions between the necessity to generate adequate investment returns and the will to take a position in keeping with values. But, it warns, “Failure to deal with potential misalignment of investments and faith-based values can often result in reputational risk or other forms of unintentional harm.”
It suggests that probably the most effective governance structures avoid loosely defined positions and supply clarity concerning the responsibilities and limits of discretionary motion of all involved across various capacities.
“Success starts with the board of directors,” it says, recommending the appointment of people with diverse expertise, including investment experience and a shared commitment to the organisation’s mission. There needs to be regular assessments of its investment performance, it says, with metrics for achievement and tracking of key performance indicators.
Faith organisations’ beliefs, teaching, and values might be integrated or mapped to necessary documents such IPSes — something that requires “bringing a questioning spirit of faithful discernment to every aspect of governance, each when the organisational elements are being initially constructed and because the structure is enhanced or improved over time,” it suggests.
It warns: faith-based investment guidelines needs to be as detailed and measurable as their secular counterparts; all faith-based organisations grapple with the strain created between more aspirational faith-aligned goals and investment “pragmatism”. An organisation might determine to “not let the right be the enemy of the nice”, but there was growing demand for investment managers to offer more faith-aligned product offerings to deal with this issue.
The make-up of an ethics committee deserved careful consideration, it concluded, as the problems it addressed spanned finance; faith; necessary societal, political, or environmental dynamics; and topics internal to the religion organisation itself.
