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Faith-based investing hits a new level with the arrival of ETFs

A US-based investment group made headlines recently with the launch of two so-called "biblically responsible" exchange-traded funds that seek to buy into companies with products and policies aligned to evangelical Christian values.
By · 25 Jul 2017
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25 Jul 2017 · 5 min read
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The Inspire Global Hope ETF, with the trading code BLES, and the Inspire Small/Mid Cap Impact ETF, are the latest examples of retail funds that use religious criteria to determine where they will and won’t invest.

Interestingly, there is a strong overlap between the investment principles of biblically responsible funds and those outlined by mainstream ethical investment funds. For example, religious and ethical funds tend to follow very similar environmental, social and governance criteria to screen out investments in companies that don’t tick all the boxes in terms of sustainability, protecting the environment, and the rights of people and animals.

Australian ETFs issuer BetaShares recently launched the Beta­Shares Global Sustainability Leaders ETF, which invests in 100 large global stocks from developed market countries (excluding Australia) that are deemed climate change leaders.

Its top holdings include IT giants Apple and Facebook, hardware chain Home Depot, pharmaceutical group Roche, and credit card issuer Visa.

The Inspire ETF biblical funds similarly shun investments in any companies involved in products or services that relate to gambling, armaments, that harm the environment, commit human rights violations, and have any involvement with terrorist sponsoring countries or oppressive regimes.

But also on its hit list are any companies that have products of services related to abortion, alcohol or pornography, and Inspire has also screened out any investments in companies supporting lesbian, gay, bisexual or transgender lifestyles.

Chief executive, Robert Netzly, defended this on the basis that “our investors want to invest according to conservative values. Certain companies choose to take a hard line stance on the issue of gay marriage, for instance, and our investors don’t want to support that issue.”

True believers

Sexual preferences and gender are a new twist in an investment thematic that is rapidly gaining in popularity.

But for those not identifying with evangelical Christian beliefs, there are also investment products that adhere to Catholic, Anglican, Methodist and other investment principles.

Last year the Global X S&P 500 Catholic Values Index ETF was launched, using the S&P 500 Catholic Values Index as its trading benchmark and basing its methodology on the socially responsible investment guidelines outlined by the Conference of Catholic Bishops.

Within a short period of time the ETF raised more than $US90 million ($121m), and since inception has achieved returns of close to 15 per cent.

Its top holdings, like BetaShares’ ETHI ETF, include Apple and Facebook, but also on its list are Microsoft, Amazon and, surprisingly, oil giant Exxon Mobil. There’s also Warren Buffett’s Berkshire Hathaway.

Does faith-based investing pay off? The short answer is, it can — but not always. In 2013, for example, four biblical funds were liquidated in one go after failing to gain investor traction: the FaithShares Baptist Values Fund, the FaithShares Catholic Values Fund, the FaithShares Lutheran Values Fund and the FaithShares Methodist Values Fund.

Irrespective of religion, ultimately success will come down to the fundamentals of investment strategy and good stock picking.

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Tony Kaye
Tony Kaye
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