Can you make money by morally responsible investing?

I just read Good Returns by George Schwartz, President & CEO of Schwartz Investment Counsel, a registered investment advisory firm for endowment funds, foundations, and mutual funds (Ave Maria Funds).  Faith-based investing has been my passion for years so I was really excited to dive in and see George’s perspective.

In Good Returns, George lays out in great detail the methodology to produce excellent investment results without supporting companies that oppose your values.  One of the great distinctions that George makes is the difference between socially and morally responsible investing.  Many faith-based investors confuse these two forms of investing.  Many end up investing in a socially responsible fund when in reality they really wanted a morally responsible fund.

George wonderfully describes these differences:

“Socially Responsible Investment” funds tend to focus on the issues of the politically liberal lobby—screening out companies believed to be environmentally harmful, defense contractors, producers of alcohol, tobacco, and firearms, etc., and screening in companies that provide low-cost housing, promote gender equity and gay rights, etc. These designations are very broad and loosely defined.

“Morally Responsible Investing,” on the other hand, is a very specific approach to religiously based investing—one that is motivated by faith and is guided by a particular set of ethical precepts. It focuses specifically on making investment decisions that embrace key areas of human concern. Just because an investment plan has a religious flavor or touts a church connection, you shouldn’t assume that it is markedly different from the general run of “socially responsible” offerings. For the morally responsible investor, overshadowing every other consideration is the sanctity of life. This means screening out companies that make abortion-related drugs, publicly traded hospitals that perform abortions, companies involved in embryonic stem cell research, and companies that contribute to Planned Parenthood. The next consideration beyond the sanctity of life is the inviolability of marriage. Morally responsible investors screen out companies involved in the production and distribution of pornography. This includes most Hollywood studios and entertainment media and several publishers.”

Money & Morality

The book starts out with a discussion on money and morality with a scriptural foundation on why faith is so important in our finances. God knows what we view as most important in our lives.  His Word says, “For where your treasure is, there your heart will be also.” (Matthew 6:21).  Our money: bank accounts, investments, retirement accounts, etc is where many of us place our treasure.  Yet, only select few, examine where their “treasure” is being invested.  Do we as the Body of Christ want to be profiting from companies involved in abortion, pornography, gambling, tobacco, alcohol, embryonic stem cell research, homosexual activism, and entertainment that mocks Christian values to name a few?

George lays out his background and how he got started in the area of morally responsible investing (MRI).  Once a critic of MRI, he quickly became one of the strongest advocates of this method of investing, after a business meeting with Tom Monaghan, at the headquarters of Ave Maria Funds.  Tom, in case you weren’t aware, is an entrepreneur and conservative Catholic philanthropist and activist who founded Domino’s Pizza in 1960.  After this meeting, George was convinced that as a Catholic, investing in a morally responsible manner was not only what he desired to accomplish, he also felt an obligation to positively impact corporate America.  If he could get companies to stop funding and supporting abortion, how much of an impact could like-minded investors have?

Over the course of the next several chapters George depicts the history and accomplishments of the Ave Maria funds.  This includes background on his life as well as those around him which helped grow the organization to where it is today – with over 25,000 shareholders! There is also much discussion on how he selects investments, using a very similar approach to what we use at Faith-Based Investor.  When you look for companies that are morally and financially sound and trading at a discount to book value, it truly is a winning formula!

Throughout Good Returns, George strikes up a good balance of practical investment advice, scriptural references, political discussions (for example comparing Reagan and Obama), and how to build a solid portfolio.  Overall, I highly recommend this book.  It is a good read and offers a unique and refreshing look at investing.  It also brings in a much needed discussion of how we measure investment success: not only should we care about the amount of profit, we should equally care about the source of the profit! As we have seen with the performance of Schwartz’s track record, you can have BOTH morally sound investments and Good Returns!