Six Key Tenets of Christian Investing

Written By: Richard Todd

Christians and Christian organizations should be intentional about their investing, especially in this era of cancel culture, as they are being pushed to the sidelines and are being de-platformed and debanked! Blackrock, Vanguard, and State Street control over 80% of public companies, and they have squashed diversity of thought on boards and, consequently, in the workplace. In addition, they are pushing abortion and transgender treatments in benefit plans.

For Christian institutions, fiduciary law provides sound principles that will lead to success. However, they should not stop there.

The following list outlines several steps each Christian organization should take when managing their assets, operating assets, foundations, endowments, retirement plans, and deposit and loan funds.

1. Use the right advisor. Many of us have stories of someone we met in Church asking us to invest in a deal or product that did not perform as expected. It is important to work with a firm and its professionals that have values alignment, but it cannot end there. Ensure that the advisor is a fiduciary, fee-only, and without proprietary products, which is  a conflict of interest. Assure that the advisor has withstood the test of time and has clients and a specialty that is similar to you. For instance, all firms that can manage an endowment well do not always have the same ability with a 403 (b) plan.
   
   Case in point. A relatively well-known “Christian” advisor promotes their advisory ability but implements the portfolio with proprietary products that are relatively new, unproven, and expensive. They are conflicted and likely receive more compensation with that approach.
   

2. The asset allocation process is crucial. Every investor portfolio has unique characteristics; time frame, liquidity, and downside risk tolerance are all key items that will drive portfolio design. We recommend conducting a formal asset allocation study at least annually. Markets change, and investors should construct portfolios differently today than four years ago. In addition, portfolio circumstances will also drive an allocation. If significant distributions are coming from the portfolio, it should be more conservatively structured. Conversely, significant contributions, perhaps through good development and fundraising, provide a formula for being more aggressive.
   
   Case in point. Interest rates were historically low after the COVID-19 meltdown. Any increase in interest rates at those levels would be detrimental to a portfolio. Generally, bonds were not going to be the quality diversifier that they had been historically and were at higher risk. Today, yields are much higher and more attractive. Future returns in the bond market are anchored on current yield. A long duration in the bond market today makes more sense than in 2021. Portfolio contribution should be thoughtful, continually evaluated, and forward-looking.
   

3. Manager due diligence should go beyond number crunching. There are investment products, managers, and strategies that have superb track records, but the formula for future success has diminished. We are in an era of investment firm acquisitions, and key portfolio managers are leaving in droves as firms are merging. People manage money. There are pure quantitative products with less human influence, and your advisor should be evaluating qualitative elements to make sure that historical performance will be repeatable.
   
   Case in point. Peter Drucker said, “Culture eats strategy for breakfast.”  Like any business, if a money management firm has a lousy culture, a good track record will likely not be repeated. High employee and manager turnover, organization upheaval due to a merger, and negative asset flow can impact the future success of an investment manager.
   

4. Screen out securities that are antithetical to our faith. A manager for a Christian portfolio should screen out companies that are involved in industries such as abortion, pornography, or those that exploit child or slave labor (yes, it’s worse today than ever). We recommend developing an Investment Policy Statement to outline the areas that should be screened. Managers should be expected to screen them out using tools widely available for institutional  managers. If they cannot or will not do the screening, go in a different direction. If they are considering a mutual fund or ETF, review their process to make sure there will be no violations. We also recommend that the advisor screens the portfolios to double-check manager screens. We are convinced that screening out these securities will not lead to diminished performance over time.
   
   Case in point. We were performing due diligence on an investment manager with Christian in its name. We discovered that the portfolio contained a Chinese Hospital that likely performed abortions. When this was brought up to the manager, they pointed out in the fine print in their documents that the portfolio was “substantially” Christian. The manager was terminated when we brought this to our client’s attention.
   

5. Evaluate the values of your managers. There are hundreds of billions of dollars being managed for faith-based organizations by firms, especially Wall Street firms, who have values that are not only misaligned but are guilty of pure anti-Christian bigotry. Many of these big banks are telling their employees to take any religious art, crosses, or crucifixes off their walls and leave faith at home or Church because of Diversity, Equity, and Inclusion (DEI) policies. Others are happy to manage assets for Christian organizations and take their fees but sponsor and support organizations that are anti-Christian as well.
   
   We recommend asking asset managers, as well as your advisor, some pointed questions such as:
   - Do you have a statement on religious expression in the workplace? If so, please provide.
   - Does your benefits plan pay for abortions or abortion travel?
   - What are the organizations your firm or foundation supports? Please provide a list.
   - Does your benefit plan pay for transgender services? Are these services also provided to children?
   These are just a few questions. We provide a values report to our clients each quarter.
   
   Case in point. We were diligencing a manager who manages billions of dollars for Christian organizations, and they disclosed that they are a large supporter of some organizations that were anti-Christian. We asked them why they continue to manage money for Christians. Their answer was, “Christians are backwards, and we want to influence them.”  Outrageous!
   

6. Proxy voting cannot be ignored. Most firms allow their managers to vote proxies, and if the managers are secular, you can bet they will vote in an anti-Christian way. In 2024, hundreds of shareholder resolutions and corporate practices could be challenged through proxies. There are some quality Christian proxy voting firms that can inexpensively vote on your behalf and in accordance with your values. In addition, there are opportunities for shareholders’ engagement. Alliance Defending Freedom (ADF) has created a streamlined process that makes it easy for Christian organizations to stand up to Christian bigotry and evil practices.
   
   Case in point. The largest proxy voting firm to which most managers delegate (60% market share) claims to have Christian guidelines but is neutral on transgenderism and euthanasia, along with treating a transgender woman identically to a biological woman. In addition, many proxy voters will not consider any Christian proxy guidelines.

Conclusion

Over 3,000 investment managers have signed on to Environmental Social Governance (ESG) principles, which have many conflicts for Christians. It is reported that over $30 trillion are invested with an ESG mandate. Today, under $1 trillion are invested with a Christian mandate. However, if Christians and Christian organizations became more thoughtful and deliberate about their investing, it is estimated that nearly $30 trillion could be invested with Christian values in mind.

American culture is changing to the detriment of Christians, with corporate America driving much of that change. It’s taking place under our nose. Now is the time for Christian institutions to be courageous and take a stand!