Church leaders today may find themselves overseeing endowments, capital accounts, or even pension funds. Decisions can range from high-level investment policies to more specific choices—such as which funds to include in a 403(b) plan.
But one challenging question often arises:
How do you choose investment funds that align with your congregation’s social or moral values?
Should your church avoid companies that profit from alcohol? Or is the greater concern how companies treat workers in developing countries? Maybe both?
There’s No Perfect Investment
Just like there’s no perfect job or candidate, there’s no perfect investment either. That’s why church leaders need to:
- Prioritize values based on what matters most to their congregation
- Balance those values with risk, return, and cost
- Communicate investment goals clearly to staff and board members
Social Values Don’t Mean Sacrificing Returns
Every investor who cares about social responsibility has different concerns. While risk and return should remain central, moral values can be integrated into investment decisions—without necessarily giving up performance.
In academic finance, what a company does is often ignored; only its risk and return matter. While this may seem out of touch, it offers insights into effective social investing.
For Example:
A fund that excludes tobacco companies might lose performance unless it replaces them with companies that have similar characteristics. Tobacco firms sell branded, addictive consumer goods—but so do:
- Candy manufacturers
- Soft drink companies
- Razor brands
By replacing tobacco stocks with companies that have similar market behavior, a portfolio can stay balanced without compromising values.
Many socially responsible mutual funds perform similarly to their unrestricted peers—largely thanks to smart fund managers.
Don’t expect better performance, but you shouldn’t accept worse, either.
Define What “Socially Responsible” Means
Before making investment decisions, your church needs a clear definition of what counts as “social” or “moral” investing.
- Denominational churches may have official guidelines
- Nondenominational churches will need to reference their own doctrinal beliefs
- If guidelines aren’t clear, your investment committee will need to create them
Examples of Varying Standards:
- Some churches view gambling as a sin while others raise money through bingo nights
This diversity makes it crucial to:
- Set specific exclusions or inclusions
- Avoid relying on a vague sense of what’s “good” or “bad”
Resources for Evaluating Socially Responsible Funds
A helpful starting point is the Social Investment Forum:
🔗 Social Investment Forum – SRI Basics
This guide explains how different mutual funds apply Socially Responsible Investing (SRI) guidelines. It’s a great tool for:
- Defining your church’s investment policy
- Identifying mutual funds that align with your values
Evaluate Performance, Not Just Principles
Once you’ve found funds that align with your values, the next step is to evaluate their performance.
Free Tools to Use:
- Morningstar:
- Compares social and religious funds by investment objective (growth, bonds, etc.)
- Helps you assess performance as an investment, not just as a moral stance
- Yahoo! Finance:
- Offers fund performance data
- Lets you compare funds to stock market indexes and bond returns
- Reveals how funds are really doing, even in difficult market
Note: If a fund consistently underperforms the market—beyond the overall trend—it might be time to look elsewhere.
Be Cautious About Denomination-Branded Funds
Some mutual funds are marketed to specific denominations, but that doesn’t mean they’re the best fit.
Examples:
- MMA-Praxis Funds target Mennonites but appeal to others avoiding alcohol, defense, gambling, and tobacco stocks.
- Amana Mutual Funds follow Islamic finance principles:
- Avoid alcohol, tobacco, gambling
- Also exclude pork producers and traditional banks—principles some Christian investors may also appreciate
However, some denominational funds may be more marketing than substance and marked by:
- High fees
- Poor performance
- Superficial alignment with religious values
Beware: If a fund sounds “perfect” but performs terribly, it may be appealing more to emotion than fiduciary duty.
Recognize the Limits of Social Investing
No investment policy—no matter how values-driven—can create instant change.
- Avoiding MillerCoors won’t put them out of the brewing business.
- Shareholder activism and boycotts can lead to small changes in corporate behavior over time.
That said, if your church invests in stocks directly:
- Always vote the proxies during annual shareholder meetings
- Social proposals often appear on these ballots
- Consider this a service opportunity—perhaps for a young adult group
Final Thought: Stay Balanced
Social investing doesn’t have to mean poor performance—but it can if emotion outweighs analysis.
As traders say:
“The stock doesn’t know you own it.”
Just because you like a company or admire its values doesn’t mean it will succeed in the market.
The original version of this article has been updated for improved readability.