Navigating Faith & Finance
Coauthored by Terry Keeley & Rob Brown
Faith traditions differ substantively in both form and substance, yet they all share a tenuous relationship with finance. For example, most raised in Judeo-Christian traditions have been taught they must choose between God and Mammon, meaning they may either love their divine maker or their money, not both. In Islam, usury - the charging of interest on loans, aka “making money out of money” - is strictly forbidden by the Koran (Surah 2:275-280). And Eastern traditions ranging from Hinduism, Buddhism, and Sikhism to Daoism and Shintoism all maintain finance should remain subservient to the pursuit of certain eternal virtues, like the promotion of human dignity, ecological balance and the abolition of poverty.
In short, active tensions between our spiritual beliefs and our day-to-day life persist: faith and finance need to be constantly reconciled. Their harmonious co-existence requires thoughtful navigation. When it comes to investing, faith-inspired financial practices have resulted in two fundamentally different approaches. The first and most common is best described as “sin avoidance.” Many faith traditions prohibit capital investments in select industries and services that are thought to undermine virtue, like alcohol, tobacco, gambling, firearms and sexual immorality, or high-interest lending and human embryonic cloning. Multiple faith traditions have also imposed intermittent investment bans on specific countries and companies, including South Africa during the era of apartheid or, more recently, carbon-based energy producers out of concern for climate change. The US Conference of Catholic Bishops stands out for their detailed guidelines for screening out potentially offensive companies from investment portfolios. Baptists, Anglicans, Mormons, Methodists, and Presbyterians, as well as multiple orthodox and reformed Jewish communities have also promulgated ethical investment rules dedicated to screening out bad actors and actions. Globally, the UN estimates that approximately $4 trillion has been invested in ethically-screened funds. IEL estimates at least three quarters of this $4 trillion is faith-based.
While a screening process may align a portfolio with various ethical standards, its practical effectiveness is limited: avoiding so called “sin stocks” does little, if anything, to end sinning. Centuries of divestiture from alcohol, tobacco, gambling and firearms has prevented few if any from drinking, smoking, betting or buying a gun. Aligning one’s investments with one’s core convictions often produces the benefit of a clear conscience; it does not, however, ensure one’s conscience becomes more manifest in the world. Nor does the screening out of potentially offensive businesses promote a significantly more tangible goal: fostering businesses which advance the beliefs and actions that faith-based organizations hope to promote.
Which brings the second category of faith-based investing into focus. A smaller, yet more rapidly growing component of faith-based investing seeks to support the allocation of investment capital into businesses which promote more divine outcomes proactively. These faith-based, so-called impact investment strategies are similar to screened investment strategies because financial and moral objectives are aligned. They differ, however, because verifiable, often scripturally-desirable social, environmental and/or economic objectives are actualized, alongside some financial return. The total size of the impact investment market globally is now estimated to be $1.6 trillion. IEL estimates about one-fourth of this is faith-based. The impact investment market overall is now growing at an estimated, annualized rate of 20%. Our research suggests the faith-based component of the impact investment market may be growing even faster.
The US-based Southern Baptist Church operates one of the largest and oldest faith-based mutual fund complexes in the world, with about $20 billion in assets under management. Their GuideStone Fund family illustrates the two different approaches to faith-based investing described above. GuideStone’s ethically-screened mutual fund offerings cover multiple asset classes and investment styles, including target-date and target-risk funds. They also operate two impact funds: one comprised of fixed income, another comprised of global equities. According to their website, “exclusionary screening and corporate engagement efforts can only go so far in promoting positive, long-lasting change in our world. That’s why GuideStone believes IMPACT INVESTING is the new frontier for faith-based investing.” GuideStone’s equity impact fund - sub-managed by Janus Henderson - specifically seeks to promote “sanctity of life, spreading the Gospel, human dignity, and the stewardship of God’s creation.”
While GuideStone Funds focuses exclusively on faith-based investment opportunities in the public securities markets, Sovereign’s Capital focuses more on faith-based investment opportunities in the private markets - notably private equity, venture capital and fund-of-funds. Their primary strategy is to identify companies and funds that are led by faith-driven teams that have significant potential for outsized returns and impact. In addition, they sponsor an exchange-trade fund (ETF) that identifies public companies with exceptional, spiritually-integrated cultures that encourages their employees to flourish. So far their “spiritually-integrated thesis” appears to be working: since its inception in 2023 through Q-1 2025, Sovereign’s Flourish Fund ETF net asset value has outperformed its S&P 1500 equal weight index by nearly 200 bps.
Conscientious living requires being present and mindful. Mindfulness requires deliberate choices based on one’s time-honored values and principles. For men and women of faith, those values and principles are usually based upon scripture and other sacred teaching. Aligning one’s financial practices - i.e., where one banks, how much one saves, where and how one invests - with one’s faith is a natural, even necessary consequence of mindful living. At IEL, we remain dedicated to helping every investor ensure their capital is doing exactly what they want it to do – financially and spiritually - with full transparency and analytic rigor. No where is this more important than in faith-based investing, where one’s wallet and soul harbor no contradiction.
