Three Views on Values-Based Investment Screening
by Luke Bolton
Three Views on Values-Based Investment Screening
Few experiences impact your perspective as quickly as living abroad. Life in America was normal for our family, but when we moved to Asia a few years ago everything changed. Our local neighbors saw things quite differently than we did. We quickly learned that everything we did could be seen from multiple perspectives.
Looking at something from multiple perspectives is a valuable practice in many contexts, such as in teamwork and relationship building. By seeking to understand the perspective of others, we can develop empathy, deepen our understanding, and demonstrate respect for others – even if we do not agree.
Joining a Community
Those who participate in the faith-driven investor community come from a variety of backgrounds, united by a desire to integrate Christian faith and investing. To say we are dealing with a debated topic from a wide range of viewpoints is to admit the obvious. But as I see it, diversity of thought can be a sign of health in this movement characterized by creativity and rigorous thinking within a framework of unifying principles.
While there are many ways to honor the Lord and reflect biblical thinking in our investing, one recurring topic in the public market conversation is values-based screening. Since our views on it are diverse, the purpose of this article is to invite greater understanding across a wide spectrum of viewpoints.
One Among Many
Retail investors often associate faith-based investing with just one thing: screening for values alignment. But professionals who follow this topic likely realize faith-based investing is a broader concept than just screening. Faith-based investing has inspired many strategies in the public markets such as applying biblical wisdom to evaluating risk, engaging in corporate advocacy, integrating aspects of impact investing, applying positive moral screening, and applying negative moral screening.
Although faith-based investing entails other strategies, this article focuses on screening as it was first historically and remains well known today. Three perspectives on screening have emerged in the faith-driven investing conversation. Each view seeks to grapple with Scripture and can be heard as part of the larger conversation within this movement.
1. The Moral Obligation View
The first view sees screening as a moral obligation given by God in Scripture. It is often associated with the term Biblically Responsible Investing (BRI) which emphasizes the idea that God holds investors morally responsible for the companies represented in their portfolio. Failure to invest in a morally screened way feels, to them, like sinning against God, violating his will, and aiding and abetting acts of harm against humanity. Those who take this viewpoint usually emphasize the concepts of ownership, source of profits, and association with evil.
A. Ownership – The concept of ownership starts with the textbook definition of “common stock” as the right to a basic ownership claim in a corporation. Stock ownership is equated with company ownership in this view, and company ownership is equated with being morally responsible for what the company does. The application of this idea takes many forms, but it is often expressed in a question like, “Do you know what you own?”
B. Source of Profits – A second point addresses whether it is right to receive profit from evil deeds. This argument builds on verses that deal with money gained by ill-means, such as Prov 10:2 (“Treasures gained by wickedness…”), Prov 15:27 (“…greedy for unjust gain…”), Deut 23:18 (fees for prostitution not received in the temple), and Matt 27:6-7 (temple leaders refuse to take back Judas' “blood money”). This view emphasizes that God cares how people make their money. Therefore, God must also care what companies we invest in since those companies send profit to their investors. Which leads to a question like, “Would you want to profit from someone having an abortion?”
C. Association with Evil – A third emphasis of this view is the desire not to be associated with evil, namely the evils committed by publicly listed companies. Authors from this viewpoint often say they are seeking to invest in a way that allows them to have a clean conscience or profits that are pure. Because they see investing as a significant moral relationship between investors and companies, they are bound by conscience to determine which moral issues to screen out and to screen them to the best of their ability.
Because this view sees screening as a matter of obedience to God, those who hold it often demonstrate a high level of persistence and sincerity in promoting a screened approach to other Christians. However, in the broad scope of all Christian investors, this view represents an articulate but growing minority.
2. The Strategic Opportunity View
The second view sees screening is a strategic opportunity to make an impact for good in a fallen world. It tends to be associated with terms like faith-based investing, stewardship and impact, or values-based investing. Those who hold it see screening as one way to reflect Christian faith and values, to make a difference in the world, and to express better stewardship as investors. Failing to use a moral screen, for them, feels like a missed opportunity rather than a sin. This view emphasizes concepts like creating value, the complexity of public markets, and the pervasive influence of sin and grace.
A. Creating Value – The concept of creating value goes back to the biblical story of creation where God entrusts a fruitful world to the care of his image bearers. People were given the task of cultivating creation, thus adding value by applying their creativity and skill to the world. It also builds on the great command of Jesus to love our neighbor as ourselves. This view seeks to invest in morally uplifting ways, not because the investor-company relationship is morally significant, but because the investor-neighbor relationship is morally significant. It asks the question, “How can my investing bless the world?”
B. Complexity of the Public Markets – This view sees screening as a strategy, rather than obligation, because of the complex and indirect relationship that exists between investors and companies. The complicated nature of the public markets is well recognized, and rarely understood. Depending on the type of security purchased, many layers of advisors, managers, analysts, bankers, directors, regulators, advocacy groups, financial markets, and governments contribute to its overall social context. In other words, retail investors and public companies don’t sit at a table and decide which goods and services to offer. Many factors outside their control play into those decisions. Given the limitations of knowledge, lack of investor control, and structural distance between them, this view does not to see the investor-company relationship as a significant basis from which to argue for moral responsibility.
C. Pervasive Influence of Sin and Grace – A third emphasis in this view is the comprehensive influence of sin on all human endeavor (Gen 3:17-19). Since the whole world is corrupted by sin (Rom 8:20-23), this view concludes that every company is imperfect, and every investment supports to the employment of sinners. But God’s grace is also pervasively at work so even the worst companies are not as wicked as possible. This leads them to trust that God’s grace is at work through normative investments as well as those that are morally screened. It can lead to screening methods that do not aim for “zero-tolerance” results. It also motivates them to seek other strategies like corporate engagement to compensate for the inevitable expressions of sin in the corporate world.
Since this view takes a moderate position on screening, it tends to be slightly less visible or vocal in the faith-driven investor community. This view is also often held by Christian professionals who work in an investment management context where zero-tolerance approaches are not viable.
3. The Unnecessary Distraction View
A third view sees screening as an unnecessary distraction from the central purpose of investing. It often avoids the term BRI and prefers faith-driven or principles-based instead. This view does not see screening as a moral responsibility, but as a matter of Christian liberty or conscience. They may express their values by engaging in corporate advocacy, but more often focus on how faith impacts the Christian’s overall financial experience (i.e. generosity, integrity, contentment, excellence, etc.). They see the investor-company relationship as insignificant and instead emphasize engagement in the world, the goodness of profitable investing, and character development.
A. Engagement in the World – The idea of engagement in the world goes back to Genesis and God’s call for people to be active managers of his creation. Both Christians and non-Christians are invited to collaborate (as far as possible) in cultivating the earth and developing society. In this view, one of the greatest examples of engaging in relationship with non-Christians is the earthly ministry of Jesus. Since Christ was a friend of sinners and received gifts of monetary value from sinners (Matt 9:10-12), they do not see entanglement with sinners in the markets to be wrong. Instead, it is part of their calling to be a godly presence in the world.
B. Goodness of Profitable Investing – Their second argument is that the purpose of investing is to seek a profit, and that seeking a profit is a morally appropriate goal. The roots of this idea go back to God’s design for human productivity in Genesis. Investing to make a profit is rooted in God’s design and reinforced by Jesus who used profitable investing to depict a “good and faithful servant” (Matt 25:14-29). The productive use of capital (such as, providing liquidity in the markets) is a moral good sufficient to justify investing without the additional layer of moral screening.
C. Character Development – This view also emphasizes the moral and spiritual concerns investors face on a personal level rather than a corporate one. Those who see screening as unnecessary tend to also see it as a distraction from important projects like developing a heart for contentment, generosity, and trust in God’s provision. Since this view rejects the claim that screening is obligated by God, they also tend to see those who promote screening as being legalistic or imposing their conscience on others.
In the broad scope of investing, this view speaks to the majority perspective of Christian investors. But, as their faith-based approach does not involve screening, they often tend to be overlooked in the faith-driven investor community.
Conclusion
This article briefly introduced three views on screening but did not offer critical assessment of each view. Instead we have sought to lay the groundwork for future discussions by identifying several viewpoints held by believers on this matter. Evaluating the pros and cons of each view is an ongoing, collaborative project for the faith-driven investor community.
Since biblical truth can be seen in each view, we can welcome each of them as they wrestle with matters of truth, faith, and doing God’s will in the markets. Given this diversity within the faith, no single viewpoint can fully define what it means to be a faith-driven investor. Perhaps the best strategy in light of this is to honor the faith of those who differ from us and commit to a love that is patient, kind, and “does not insist on its own way” (I Cor 13:5).
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Required Disclosure:
The opinions voiced in this material are for general information only and not intended to provide specific advice or recommendations for any individual. No investment strategy assures financial success or protects against loss. Past performance is no guarantee of future results. Investing in mutual funds involves risk, including possible loss of principal.
Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. WaterRock Financial, LLC is a separate entity from LPL Financial.
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Luke Bolton earned a BA in Theology at Northland International University and an MA in Biblical Studies at Central Baptist Theological Seminary. He brings seven years of experience in the financial services industry and serves as Director of Operations at WaterRock Financial. He and his family are members at Bethlehem Baptist Church in Minneapolis.