What is Faith Based Investing? Understanding the Foundations of Faithful Investing

Faith-based investing is rooted in historical, ethical, and moral principles, and has traversed centuries, evolving alongside the progression of capitalism and the emergence of socially responsible investing (SRI). To comprehend its foundations, we embark on a journey through pivotal historical milestones, tracing the lineage of faith-based investment practices.

XVII Century: Birth of Capitalism

In the 17th century, the dawn of capitalism ushered in a new era of economic principles, shifting from mercantilism to business-oriented economics. It was during this period that publicly traded companies surfaced in Great Britain and the Netherlands, laying the groundwork for modern financial markets.

XVIII Century: John Wesley’s Influence

In 1759, John Wesley, the founder of the Methodist movement, delivered his 50th sermon titled “The Use of Money.” This sermon marked the initiation of Methodist scrutiny over investments, particularly in industries such as alcohol, tobacco, and gambling. Wesley’s teachings sowed the seeds for ethical considerations within investment practices among Methodists.

XIX Century: Quaker Abolitionism

The 19th century witnessed the rise of Quaker abolitionism, epitomized by the “free produce” movement. Quakers advocated for boycotting goods produced by slave labor in Britain and the U.S., aligning their economic actions with their moral stance against slavery.

XX Century: Socially Responsible Investing

The 20th century saw significant strides in socially responsible investing. In 1960, the Mit-Ghamr Islamic Saving Associations mobilized Muslim investors, offering investment opportunities compliant with Shari’ah law. Later, in 1971, the Episcopal Church’s shareholder resolution against General Motors in apartheid South Africa catalyzed the Interfaith Center for Corporate Responsibility, spearheading socially responsible investing movements. Additionally, the creation of the Pax World Fund in 1971 marked the advent of publicly available mutual funds integrating social and environmental criteria.

By 1995, the Social Investment Forum Foundation unveiled the first sustainable investment inventory in the U.S., reflecting a growing awareness of ethical considerations in investment decisions.

XXI Century: Evolution of ESG Guidelines

The 21st century witnessed the evolution of Environmental, Social, and Governance (ESG) guidelines, though not inherently faith-consistent. Initiatives such as the United Nations Global Compact, Principles for Responsible Investment, and the establishment of Sustainable Development Goals underscored the increasing importance of ethical and sustainable investment practices.

Shari’ah Investing and Interfaith Environmental Approach

Shari’ah-compliant investing, concentrated in regions like Iran, Malaysia, and the Gulf Cooperation Council, has seen substantial growth, exemplified by funds like Amana Growth. Additionally, interfaith initiatives like the Alliance of Religions and Conservation and the Zug Guidelines have promoted collaborative environmental stewardship across diverse religious traditions.

Christian, Jewish, and Catholic Values Investing

Christian-values funds, primarily in the U.S., manage significant assets and actively engage in ESG advocacy. Similarly, Jewish-values investing gained prominence with the publication of the “Greenbook” in 2021, guiding investors in aligning investments with Jewish values.

Catholic faith-based investing, rooted in the Compendium of the Social Doctrine of the Church, emphasizes socially responsible stewardship. Initiatives like the Catholic Impact Investing Pledge and Altum Faithful Investing demonstrate a commitment to integrating impact investment with Catholic Social Teachings.

Faith-based investing, woven into the fabric of religious teachings and ethical convictions, continues to evolve amidst the complexities of modern finance. From its historical origins to contemporary practices, faith-based investors strive to harmonize financial goals with moral imperatives, embodying the timeless principle of investing with purpose and conscience.

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