11 APR, 2022
By Constanza Ramos
This week Catholics in Europe celebrate the Holy Week, the week between Palm Sunday and Easter, observed with special solemnity as a time of devotion to the Passion of Jesus Christ. On this note, as many investors seek to align investment decisions with their personal beliefs, we wanted a have a look at some investment opportunities in the catholic faith as a commemoration of this special date for catholics. These are some of the faith-based funds and ETFs invest in companies with the Catholic Church’s criteria in mind, so that investors can keep them on their radar.
Aligning investment decisions with personal beliefs. Usually, the most powerful reason for an investor to choose an investment with environmental, social and governance criteria is to align personal beliefs with their way of investing. It makes sense: if an investor is privately committed to topics such as recycling or caring for the environment, it is logical that he also seeks that his investments meet the same criteria.
The Invesco MSCI Europe ESG Leaders Catholic Principles UCITS ETF, launched three years ago, aims to respond to investors who wish to align their investments with the ethical criteria determined by the Catholic Church. This ETF offers exposure to European mid- and large-cap companies that comply with the values of the church, excluding all companies and sectors that go against these principles, with activities that may threaten life and dignity, such as conventional weapons, adult entertainment, abortions, animal testing or stem cell research. To ensure that the portfolio is truly in line with these Catholic values, the composition of the ETF was set after a long and in-depth process of consultation with the Church.
In addition, the methodology of the index that the ETF tries to replicate involves using a best-in-class selection process, which aims to incorporate those companies that have the highest ESG ratings. This allows that the ESG rating of the ETF -according to MSCI ESG Research- to be the highest, AAA. The fund’s portfolio is totally published on the manager’s website, so investors can find out about all the positions that are part of that portfolio at any time. In this way, the ETF seems to be a transparent alternative, easily accessible and at a competitive cost (0.3% per year) to invest taking into account Catholic ethics and values.
E.T.H.I.C.A. is an ethical fund which actively invests in Eurozone companies which offer the best available combination of financial and ethical qualities. More concretely, the objective of E.T.H.I.C.A. is to invest in accordance with the principles of the social doctrine of the Catholic Church while outperforming the Eurostoxx 50 index.
The fund aims to offer an investment solution to Church-related but also other organizations (companies or individuals) who wish to invest according to their ethical values. In its investment process, E.T.H.I.C.A. applies the 6 principles of the “Ethical guidelines of financial management” from the Catholic Church: Human rights, respect for life, promotion of peace; Respect for fundamental labor rights; Development of social progress and employment; Environmental protection; Compliance with market rules; Compliance with governance best practices. These principles are declined in 23 criteria, for which there is a broad correspondence with our Conviction SRI Investment policy.
Despite this general correspondence between the Social Doctrine of the Church and our Conviction SRI policy, a few exclusion criteria are very specific to the Church’s approach. For instance, the integrity of the human person and respect for life principle specifically rules out abortion-related practices, contraceptives which prevent nesting and embryo stem cell research. Another important specificity is that the Church’s guidelines imply the exclusion of companies involved in weapons, adult entertainment, gambling or tobacco.
As part of the Conviction Equity Strategy, E.T.H.I.C.A is a prudent, fundamental-driven, core blend fund with a long-term investment horizon in line with the Church’s need for capital preservation. E.T.H.I.C.A also has strong sustainability credentials, notably a 5 globes sustainability rating from Morningstar 1 – the best possible rating. Worth noting, the fund outperforms its benchmark over the 3-year, 5-year and 10-year periods 2.
1 Morningstar sustainability rating as of 28/02/2022; a ranking, rating or award is not an indicator of future performance and is subject to change over time.
2 Data as of 28/02/2022. Past performance does not predict future returns.