ESG investing emerged as an attempt to incorporate environmental, social, and governance factors into portfolio decisions. Many investors embraced ESG as a way to engage in socially responsible investing or faith-based investing, bridging the gap between profit and purpose. Some Catholic organisations even attempted to adopt ESG frameworks with the hope that they would align with Catholic investment principles.
A Faith-Based Concern
Catholic investing is gaining traction among individuals and institutions seeking to align their portfolios with Christian values. Yet, many find that the popular framework of Environmental, Social, and Governance (ESG) investing does not deliver what faith-based investors truly need. In this article, we explore why ESG fails Catholic investors and outline a path forward grounded in the principles of faith-based investing, ethical investing and Catholic values in investing.
Why ESG falls Short for Catholic Investors
- Lack of alignment with Catholic moral doctrine
Though ESG addresses broad societal concerns, it often fails to align with the specific moral and theological criteria that Catholic investors require. For instance, Catholic institutions may screen for issues such as abortion, embryonic stem-cell research, or promotion of contraception — issues that fall outside many standard ESG frameworks. - Ambiguity, inconsistent data, and green-/social-washing
A major challenge for ESG is the lack of standardisation, transparency, and reliability of ESG ratings and criteria. For Catholic investors, this ambiguity creates real risk: an investment might appear ESG-friendly but still engage in activities contrary to Catholic teaching. As one analysis puts it, ESG investing as a movement is “failing Christian investors”. Moreover, when ESG becomes a branding exercise rather than a rigorous moral screening, Catholic investors may unknowingly participate in “compromised” investments. - Prioritising external metrics rather than the human person
Catholic social teaching emphasises the human person at the centre of economic life. However, many ESG frameworks focus on headline metrics (carbon footprint, board diversity, social sentiment) rather than the dignity of work, the family, or the care and protection of creation. Faith-based investors need more than ESG; they need a “faithful investing” alternative rooted in Catholic social thought. Thus, while ESG may optimise for “doing no harm” or “reducing risk”, faith-based investing go beyond traditional ESG filters excluding companies involved in abortion or embryonic stem cell research, but we also actively seek those that create value in line with human dignity — for example, healthcare firms using induced pluripotent stem cells instead of human embryonic stem cells or businesses fostering fair employment and community development. - The risk of mission drift When Catholic organisations rely solely on third-party ESG funds or apply generic ESG screening, they risk diluting or drifting from their mission. The broader ESG universe is vast and not always consistent with the narrower demands of Catholic responsible investing or faith-based investing. For example, a fund may be labelled “ESG” but still invest in companies that assist or supply entities involved in morally problematic areas, such as pornography or abortion care services. Catholic investors need to ensure coherence with Catholic values in investing, not merely alignment with an ESG label.
What Catholic Investors Should Do Instead
1. Adopt a Faith-based investing framework rooted in Catholic values
Rather than relying on generic ESG filters, Catholic investors should adopt a framework of faith-based investing that begins with Catholic values: human dignity, promotion of family, respect for human life, and stewardship of creation. Professional investing tools or stock screening tools custom-designed for Catholic investing, such as Altum Explorer, help implement that vision.
2. Use tools with Catholic-specific screening criteria
When evaluating investments, adopt a tool that allows exclusion of morally incompatible sectors (e.g., abortion, contraception, embryonic stem-cell research, pornography, human trafficking) and inclusion of companies that affirm life and family, responsible governance, and social purpose.
3. Engage proactively rather than passively
Faithful investing involves not only excluding bad actors but also engaging good companies to improve their practices. Catholic investors should act as stewardship agents, voting proxies, and engaging management in line with values. This distinguishes faithful investing from passive ESG indexation.
4. Focus on long-term stewardship, not just short-term metrics
Catholic investing is about a horizon beyond quarterly earnings. It is about sustainable human flourishing through investments aligned with Catholic values in investing. Thus, portfolio decisions must account for the long horizon, the dignity of the person, and the welfare of future generations.
5. Partner with investment advisors experienced in Catholic investing
Seek professional investment advisors who understand not just markets, but also the moral landscape of Catholic investment. Advisors who specialise in Catholic responsible investing or Christian investing tools will better serve your mission-driven portfolio
Why this matters for Catholic Institutions and Individuals
Catholic institutions (dioceses, religious orders, foundations) and individual Catholic investors have a deeper mission than simply maximising returns. They aim to steward resources faithfully, to invest not only wisely but morally, to protect and promote the common good. When generic ESG fails to deliver on these fronts, Catholic investing — and by extension, faithful investing — provides a stronger, values-consistent alternative.
In our increasingly complex financial universe, trusting generic labels is not enough. Catholic investors must insist on coherence between the investment portfolio and Catholic values in investing. That’s why ethical investing and socially responsible investing must be anchored in faith, not just financial fashion.
Catholic investing begins with the person, not just performance. While ESG investing has brought welcome attention to environmental, social, and governance issues, it falls short for Catholic investors because of misalignment with Catholic moral doctrine, ambiguous data, mission drift, and a lack of person-centred focus.
By adopting a faith-based investing approach, using proper screening tools, engaging proactively, and choosing advisors aligned with Catholic investment principles, Catholic investors can build portfolios that are not only financially competent but morally coherent.
For investors seeking more than the ESG label, the path of faith-based investing offers a clear, principled, value-driven alternative.
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