The Impact of Faith-Aligned Investing, Even in Private Markets

Written By: Marisa Joseph and Luke Hollister

Although efficient, low-cost screening services have been integral in helping countless Christians steward their resources in a way that better aligns with Christian values, faith-aligned investing only begins with a screened equity or bond portfolio. At Innovest, we believe that many investors can benefit from the diversification and risk/return benefits of alternative and private investments. However, these investment strategies can be more difficult to screen. While several Christian firms have launched successful strategies in these asset classes, the opportunity set remains limited and has room to mature. Nevertheless, we are convinced that a Christian investor does not need to sacrifice high returns or strong diversification to invest in alignment with Christian values.

A recent example from a due diligence exercise with a globally recognized, large private asset manager demonstrates the impact that Christian-values investing can have on the business world. Following outreach from Innovest’s Due Diligence Team, the manager decided to sell a non-aligned investment and adjust their internal evaluation protocols. This article will take a holistic approach to reviewing the success of Christian-values investing, first by looking at research on the performance of screened equity portfolios, and then by evaluating an example of the additional diligence required by alternative investment strategies.

For many investors, the adage about having your cake and eating it too may come to mind when thinking about Christan-values investing. Is it possible to screen a portfolio of public equities while still achieving index returns? The research responds with an emphatic “Yes!” First Trust, a $200+ billion asset manager that has been investing since 1991, recently published the white paper “An Empirical Study of Catholic Screening on Index Performance.” This study found that screens following the United States Conference of Catholic Bishops (USCCB) investment guidelines did not have a material effect on total returns for indexes such as the S&P 500 or the MSCI World Index. The study’s conclusion reported the following:

“Regardless of approach, Catholic investors may follow the USCCB screen guidelines and still earn returns not materially different from the respective unscreened index. We conclude that equity investment performance is not harmed by adherence to the Catholic faith.” (Hammond & Nikkel, 2025, p. 15)

In other words, the data shows that faith-aligned, public equity investing does not require an investor to sacrifice performance. However, alternative investments are not so simple. Alternative index funds do not exist, nor do screened alternative direct indexing advisors. This does not mean that investors must forgo the risk/return and diversification benefits that alternative investments can offer. Rather, investing in faith-aligned alternative strategies requires a thoughtful, thorough approach that may include additional screening overlays beyond what the manager provides. Innovest’s due diligence process takes the steps necessary to ensure that our clients steward their resources in a way that can produce superior investment results and maintain unwavering adherence to Christian values. Below is an example of this due diligence process in action.

Example: Large Private Asset Manager Adjusts to Maintain Compliance with Christian Values

During our standard quarterly due diligence process, Innovest found that a private asset manager [MJ1.1]with whom we work closely had invested in a national healthcare company that distributes Plan B One-Step[MJ2.1]. Prior to this investment, Innovest’s research had shown that no other holding in the portfolio violated the USCCB investment guidelines, partially because the fund’s internal filters sought to avoid controversial investments. However, the manager made this small co-investment alongside one of their sub-advisors, which put them in conflict with the USCCB investment guidelines. We immediately reached out to the manager following this discovery. After multiple conversations with senior members of our Due Diligence Team and Investment Committee, the manager agreed to sell the holding, mentioning our strong partnership and understanding of the impact that this investment would have for clients with faith-aligned investment policies. The disquiet caused by this investment among Innovest clients and a few of the manager’s other clients led the manager to add contraceptives to their internal filtering system. After confirming the manager sold the conflicting investment in a timely fashion, Innovest’s Due Diligence Team has continued to conduct quarterly assessments to ensure that this alternative investment strategy remains a faith-aligned option for our Christian clients.

This asset manager has more than twenty years of private markets investment experience and $100+ billion in committed assets. From an investment standpoint, we had high conviction that this manager would achieve differentiated, outstanding returns over the long term for our clients. However, Innovest and our clients are unwilling to sacrifice our mission of Christian stewardship for the sake of those investment merits. In this case, Innovest’s clients accounted for only a small fraction of the investment strategy in question. Even so, those assets were instrumental in the sale of this security. We are grateful to partner with clients who want high-quality managers and who are also unyielding in their dedication to Christian values. Innovest will continue to promote and defend those Christian values while partnering with distinctive managers in the market, both in public markets, where screening is mature and efficient, and in alternative investments, where Christian-values stewardship requires higher levels of due diligence.

References

Hammond, D., & Nikkel, L. (2025). Empirical Study of Catholic Screening on Index Performance (pp. 15). FirstTrust. https://www.ftsma.com/contentreferencecode/empirical-study-of-catholic-screening-on-index-performance