BRI and Equity Portfolio Screening

BIBLICALLY-RESPONSIBLE INVESTING (BRI) AND THE INTEGRAL ROLE OF POSITIVE (AND NEGATIVE) SCREENING WHEN BUILDING AN EQUITY PORTFOLIO

A prominent Christian foundation recently encountered a moral quandary upon realizing that a notable Wall Street firm they engaged for Biblically Responsible Investing (BRI) had started funding client abortions. Despite their belief in having selected a dependable partner, they were now immersed in the ethical repercussions of their choice. Furthermore, the foundation systematically manages its portfolio according to the United States Conference of Catholic Bishops (USCCB) guidelines, which dictate investing principles but allow for interpretation. Upon reviewing the portfolio, they discovered suboptimal performance, and several holdings didn’t align with the essence of the USCCB guidelines, receiving a seemingly generic solution contrary to promises of customization.

Essential Elements for Wider BRI Adoption:

  1. A thoughtful portfolio strategy and asset allocation (Performance)
  2. An overlay incorporating both negative and positive screenings (Integrity)

Current State of Biblically Responsible Investing (BRI)

Understanding the prevailing BRI landscape is crucial before delving into constructing a BRI-focused portfolio, specifically with positive screens aiming to surpass respective benchmarks. The Christian Investment Forum (CIF) report reveals that, as of 2022, Christians globally have invested approximately $3.4 trillion in public equities, with only 5% allocated toward BRI strategies, reflecting a growing trend and awareness towards values-based investing within the Christian community.

Research on Christian-themed investment strategies reveals a diversity of BRI strategies and themes, underlining a need for universally accepted standards for portfolio construction, clear data interpretations, and less ambiguity in the implementation of USCCB and church-provided standards.

Performance

In deciding to implement BRI, investors are often concerned about whether it’s financially sound. Research by the Biblically Responsible Investing Institute shows BRI-aligned portfolios to have comparable performance to the S&P500 over two decades, proving it’s plausible to align investments with biblical guidelines without compromising returns.

Biblically Responsible Investing Standards

Investors usually refer to the Socially Responsible Investment Guidelines from the USCCB to determine whether a company’s practices align with biblical standards, although explicit identifications of compliant and non-compliant securities are yet to be made by the Catholic Church and other Christian organizations.

Positive and Negative Screening

A well-considered portfolio strategy that incorporates both negative and positive screenings is crucial. Negative screening excludes companies engaged in harmful practices, while positive screening focuses on companies with beneficial performances aligned with biblical values, promoting a more proactive and wholesome BRI approach.

The Impact of Focusing on the Positive

Emphasizing positive screening can potentially revolutionize the investment landscape while maintaining adherence to faith-based beliefs, promoting goodness, and contributing to a more ethical world.

Benefits of Positive Screening in BRI

Financial Benefits:

Positive screening has the potential to offer significant financial gains by investing in companies with strong corporate governance, ethical business practices, and a commitment to social and environmental responsibility. A faith-based investing composite has outperformed the industry average annually over the last five years.

Social and Environmental Benefits:

BRI screening under biblical teachings offers more than financial gains, emphasizing human dignity, social justice, and environmental stewardship, allowing investors to align their faith, values, and investments.

Challenges and Limitations of Implementing Positive Screening

The implementation of positive screening necessitates in-depth research, engagement, and continuous reassessment due to the dynamic nature of industries and evolving technologies. Direct indexing offers customization but also presents challenges in balancing social objectives, tax management, and performance.

Educating Investors about BRI

Educating clients about the principles, benefits, and workings of BRI is crucial. Personalizing BRI strategies and offering ongoing support and guidance can help maintain solid relationships with clients and encourage commitment to faith-based investment objectives.

The Role of Collaboration and Partnerships

The rising demand for innovative investment strategies aligning with faith-based values signals a promising future for positive screening in BRI. Progress in this domain necessitates collaboration, engagement with companies, strategic alliances, and utilization of technological advancements, ensuring faith-based portfolios deliver competitive financial returns while adhering to Kingdom values.

Conclusion

Successfully implementing BRI involves adopting a comprehensive portfolio strategy, leveraging direct indexing for customization, aligning with investors’ faith-based values, maintaining performance, and diversification. Educating clients on BRI benefits and guiding them in tailoring personalized strategies that fulfill their financial goals and faith commitments are crucial.

Enhanced collaboration and partnerships among stakeholders are vital for meaningful changes in the investment landscape, ushering in a more ethical and sustainable financial future reflecting shared values. Let’s unite in effecting enduring impact through faith-aligned investing, transforming the world for the better, one investment at a time.

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