Episode 26 - Aligning Faith and Finances: Biblically Responsible Investing
Unlock the secrets of faith-based investing with Deb Meyer in this enlightening episode, "Aligning Faith and Finances: A Guide to Biblically Responsible Investing." Perfect for Christian and Catholic parents, this episode explores how to harmonize your financial goals with spiritual values.
Discover the "avoid, engage, and embrace" framework and the Business 360 approach by Eventide, a leader in ethical investing. Learn about creating faith-based portfolios and explore top-tier companies like Eventide, Ave Maria, and Guidestone. Whether you're a seasoned investor or a newbie, this episode offers insights for values-driven investing.
Episode Highlights
* 0:02:53 - 0:03:54 - Ethical Investing Strategies
* 0:08:29 - 0:09:27 - Sustainable Supply Chain & Environmental Preservation
* 0:12:09 - 0:13:45 - Faith-Based Investing in Financial Advisory Work
Full transcript
Are you a Christian or Catholic parent who wants to bring personal values into investment decisions? Then this is YOUR episode. All right, we talked about building wealth through strategic investments in episode 24 of Beyond Budgets. We talked about the risks of individual stock picking and making emotionally charged decisions. We also covered market capitalization and the importance of diversification. We even talked about changing interest rates.
Well, episode 26 is an extension of that. We're going to build on some of those concepts from episode 24 and expand upon them to talk more specifically about faith-based or biblically responsible investing. So not only are you going to walk away with an idea of what faith-based investing is, but also hear about this avoid, engage, and embrace framework. We'll also discuss the Business 360 framework that Eventide developed and how values-based investing fits into the one-on-one work I do with clients. I'll go deep into how I construct the investment portfolio and really help clients live out their values through the investing decisions they're making.
Okay, so let's get started with the three big drivers of biblically responsible or faith-based investing.
First, integrity. For a lot of us, we want to live moral lives. We want to be people of high moral character, who are honest and full of integrity in our decisions. So one good way to do that is through those investments.
Another focus is impact. Don't you want to create a better world than the one we're currently in? I know we are in the midst of all kinds of havoc with natural disasters and political tensions and war and I mean there's just so many different things that you could look at and get very discouraged in this world. But through biblically responsible or faith-based investing you actually have the power to make a real difference in other people's lives through your direct investment. The other big component or driver of faith-based investing would be performance.
Deb Meyer (02:32.792)
We want to be able to help people make that direct impact, but we also want to make sure we're stewarding those dollars well that are being invested. And for a lot of people, they assume, if it's faith-based investing, it's never going to return quite the amount that a more traditional position would. But that's simply not true. It's a big myth, and I want to bust that for you today.
OK, so let's talk about avoid, engage, and embrace.
Avoid basically means when you're looking at investing in a mutual fund or exchange traded fund and the underlying investments that are in that fund, we're drilling down to the company level. So looking at the company and saying, okay, what percentage of the revenue is derived from an immoral activity like abortion, euthanasia, alcohol, or gaming? Those are just a few examples. That's not an exhaustive list.
If you find that at least 5 % or more of the revenue is directly derived from one of those quote-unquote immoral or sinful activities, the biblically responsible option would avoid that company in their position decisions.
Now with Engage, you're looking at those companies that maybe have a smaller percentage of their revenue attributed to one of those activities. So it's less than 5 % is attributable. In that case, it might be helpful to actually engage the company through a direct petition to the board members or some other avenue where you're trying to help them change their ways.
I have a good timely example here. So I am a long-time Certified Financial PlannerTM. The CFP Board is what regulates or governs our professionals. And recently they launched an ad campaign that quite frankly just left a very bad taste in my mouth and many other CFP professionals. They were trying to recruit people, younger people that are, you know, thinking about career. They were trying to recruit them to be CFP professionals, but the static ads that they, the images of these ads just missed the mark entirely.
Deb Meyer (04:52.15)
So myself and some others of us that were deeply concerned when we saw these ads actually sent emails to the CFP board saying, please remove them. Your images are provoking an impression of laziness and just like.
One guy was taking a bubble bath, falling asleep, and it's like, be a CFP(R). That's not what we do. We don't take bubble baths during the day. We're not falling asleep. We're actually working very hard for our clients, trying to help them make responsible decisions. So again, just a personal example of engaging when I see something that doesn't fit with my moral code and what I want my profession to look like, actually engaging the board on that matter.
Okay, let's shift gears and talk about embrace, the third component. Embracing is having some positive screens around what the company's practices are … looking at the fact that they're paying just wages, they provide safe working conditions rather than unsafe working conditions. They might be a company invested in affordable housing for those who really struggle with making ends meet day to day and need a more affordable solution.
Those are all ways and within that framework, it could expand even into medical technology. If it's a company that's pioneering a drug to cure Alzheimer's disease, you know, so many of us in the world, have loved ones that are aging, that are impacted by this and embracing those companies that are on the forefront of making some of these big medical breakthroughs. And again, these are all under that guise of really trying to embrace positive social change.
Okay, so one thing I want to mention is the Business 360 framework. This is something I learned about a few years ago when I started taking faith-based investing seriously. It's from Eventide, not myself. Eventide's a bigger mutual fund company. They have several different faith-based investing options and once they showed me this framework it just made sense.
Deb Meyer (07:09.554)
And what they talk about frequently with it, it's looking at companies that are seeking what is right. So they highlight six different areas in which a company can do that. The first is customers. So a focus on always delighting the customer and trying to have those customers eventually become promoters of that business. A good example of a company that...
doesn't necessarily promote a positive experience with customers if they leave you high and dry. Like I had a plumber come not that long ago and left me in a very bad position with an active leak and wouldn't come back until four days later. That was not a good impression. I will never be going back to that same plumber for services. In fact, I will never be recommending any of my friends to go back to that plumber for services. So that's obviously an opposite example of what it would be to delight your customer, but that's the first one that came to mind for me.
All right, let's talk about employees next. So a business 360 company that's focused on human flourishing, they're going to support their employees. And within the company, they're going to probably have a people and culture officer, someone who's really focused on making things favorable for the employees so they want to show up to work each day. They want to feel engaged in their roles. For those employees that don't feel engaged, either their work product is going to suffer where it's more mediocre, or eventually those employees are going to leave. An example of a company that's actually doing really well from a culture standpoint is Movement Mortgage. I first heard about them through the Faith-Driven Investor movement.
Movement Mortgage has an employee fund within the company to help those employees who are negatively impacted by life events. So a good example, if a Movement Mortgage employee has a sudden medical injury and it requires extensive time out, perhaps the disability income isn't enough to cover their normal living expenses and medical bills.
Deb Meyer (09:28.266)
This particular employee resource fund is available and a lot of Movement Mortgage employees take advantage of it through just their normal payroll deduction. So that's a great example of a company that's actually supporting their employees through life's transitions. Then the other option I want to talk about is suppliers. So that's another part of this Business 360 framework.
And with suppliers, they're really trying to cultivate a sustainable, humane supply chain to deliver superior goods and services. So they're not focused on mediocre products or services. They're focused on utilizing the best available, most efficient resources to expedite that and make sure everything's going well from a supply chain perspective.
Environment is another one of these business 360 factors. So for environment, it's really all about caring and preserving the natural resources around them, making sure from a carbon footprint standpoint, it isn't too big, investing in clean technology, perhaps. There's also a lot of the certified B-corps that are evaluated on their carbon footprint and how much natural resources they're using.
If you want to become a certified B Corp, you can't get that designation unless you're following these environmental guidelines. Community is a fifth aspect of the Business 360 framework. And for that, it's really about companies that are respecting and investing in their local communities. Good example there, I used to live in an area called Babcock Ranch in Florida.
Syd Kitson started the Kitson Group and they are the developers for Babcock Ranch. Well, I am thinking of this today because I'm recording it on Wednesday, October 9th and Hurricane Milton is about to hit that same area where I used to live, Babcock Ranch. And I've been on some of these Facebook pages because I have family that still lives there and obviously still a lot of friends in the area.
Deb Meyer (11:46.208)
And what I'm seeing is such an outpouring of love of helping neighbors out. Even one of the companies that the owners live in, Babcock Ranch, they were bringing three different trucks out yesterday, free of charge to help support people getting hurricane shutters up, making sure people in the community were safe. So it's just great examples of companies and individuals for that matter stepping up in a time of need.
All right, the last component is society. So that's really looking at whether they're satisfying an important need. And for a company that is satisfying an important need, there's often more growth potential there. So again, if any of this resonated with you or you want to find out a little bit more about it, you can go to EventideInvestments.com. That's E-V-E-N-T-I-D-E-Investments.com.
I'll also link to it in the show notes. And then I also mentioned the Faith-Driven Investor. That's faith driven investor, all in one word, .org. And I'll link to that in the show notes as well.
All right, let's take a little break. I'm curious if you are intrigued by this and you want to learn a little bit more, I'd love the opportunity to talk with you further.
If you want to explore a faith-based strategy for your family, feel free to go ahead and schedule a one-on-one call with me. Just go to worthynest.com/contact-us. That's Worthy Nest, W-O-R-T-H-Y-N-E-S-T dot com slash contact dash U-S, us. And I will link to that in the show notes as well.
Deb Meyer (14:10.218)
Okay, we're done with our break. I'm going to talk a little bit more about how I actually incorporate faith-based investing in the one-on-one work that I do with clients. Just to give a little bit of backstory on WorthyNest and the evolution, it's a registered investment advisory firm I started back in late 2016. When I first started the firm, I was very focused on passive investing, getting the lowest possible cost investments. So typically those were Vanguard, exchange-traded funds.
Well, after a couple of years, realized, okay, passive investing can be good, but I want to get a little bit more descriptive with the type of investments my clients are going into. So I ended up adding an offering called Dimensional Funds, and those are only available through an advisor.
So if you wanted to go and get a dimensional fund, unless you're working with an advisor who's approved through dimensional funds, you can't go directly to them. I felt that was a good option for quite a bit because they employ very similar to the passive investing, but they also have some additional screens and really very specific parameters upon which positions they want to put in their mutual funds or exchange trade funds.
worked well for a couple of years, but then eventually I just started working more and more with Christian and Catholic clients that wanted to have a better expression of their values through their investment portfolio. So I started doing some due diligence and came across Faith Driven Investor. I also started engaging more with Eventide's Investment Consulting Group and they helped give me a little bit of a framework on
things I could explore doing my own due diligence around these investing options for each asset class. So one of the hangups early on, once I decided on an investment portfolio, a faith-based investment portfolio, one of the, I guess, complications when I started talking to clients about this option, if they were already existing clients, was just, okay, how's the performance? Is this gonna be a real performance drag if we get into this?
Deb Meyer (16:28.009)
particular faith-based portfolio. One of the other concerns was fees for some people. They don't want to be paying a lot in investment fees. They want to keep those investment costs down. And those two things alone were enough to give some people concern, but as I researched it more thoroughly, yes, the fees are higher on faith-based investing options. Most of them might have like a 1 % fee.
separate from the fee that I'm getting paid as an advisor. However, with that 1 % fee also comes the manager doing a very good job on due diligence in deciding which companies stay in that particular position and which ones need to go. So that's more of an active management strategy and active management does cost more money.
even if it's not faith-based. Anytime you have an active mutual fund manager that's looking carefully at these positions, deciding whether to buy, hold, or sell, it's gonna cost more money. So that's one aspect, but keep in mind from a performance perspective, anytime we're looking at performance, we're looking at things on a net basis, which means whatever the return is, it's net of the fees. So.
What I was actually finding early on in this research was most of these faith-based positions were actually doing just as well in some cases, if not better than some of the dimensional positions. And I'm like, hmm. So I understand there's a higher fee, but at the same time, if the performance is similar or even better in some cases, why would I not choose to have some faith-based options?
So the evolution of how that kind of unfolded, I always made it an option for clients to do the faith-based investments. And some of my clients, we have taxable brokerage accounts where it wouldn't make sense to ever make any big changes to the investment strategy, even if this is an offering. But for clients that have IRAs or Roth IRAs, they have more flexibility because there are no tax consequences to sell wallets inside that vehicle.
Deb Meyer (18:42.9)
So in their cases, you know, if they have a greater desire to get some of those values aligned with their investments, it's a pretty easy switch to go from a more traditional portfolio, like dimensional funds, into a different investment portfolio that's specifically geared towards them and their faith. So the long story short, now as it stands, I have two different portfolio options. One is
kind of a hybrid of the faith-based and more traditional positions just based on some performance over the last three and five years. And then the other is purely faith-based. So it's avoiding all kinds of controversies. In more of that hybrid portfolio, it's going to have some controversies, but it's still better than I would say a more traditional portfolio that absolutely employs no screens. So.
Those are the two options we have now with clients and it seems to be a pretty good fit. So even those clients of mine that are not Christian or Catholic, they're able to get a better feel for what kind of investments they want to do and then say, hey, I choose this portfolio or I want to go in this other direction. So it's really up to them as a client. I will say since this, I've done this due diligence process and I've engaged with
Eventide's investment consulting group. I personally put any of my household funds over into the faith-based portfolio and I can sleep much better at night just knowing it's very aligned. One other point I want to make on this, even though I've brought up Eventide several times, they are not a great solution in every single asset class. So for them, I might have a couple of different Eventide positions in the portfolio.
But I also have other faith-based options within the portfolio I've chosen. So I might have a position from Ave Maria, which is a uniquely Catholic company, or CBIS, which is also Catholic. Guidestone is another one that's not Catholic, that's more broadly Christian. The nice part about each of these is we're looking at best in class for each and every asset class in terms of constructing that investment portfolio.
Deb Meyer (21:09.344)
Okay, lastly, if this is something that you want to dive even further into and perhaps you're Catholic and want to do a little bit more on morally responsible investing, there is a good resource on the Catholic Financial Planners website. It's called catholicfinancialplanners.com and there is a morally responsible investment guide if you go scroll all the way down to the bottom.
Put in your name and email and get that downloaded. And then you'll be on the list to also hear about future podcast episodes for Catholic Money Mastermind. So I am part of the Catholic Financial Planners Network. I helped develop the Morally Responsible Investment Guide a few years ago. And we do follow the US Conference of Catholic Bishops or USCCB guidelines in that investment guide. All right, I think that's all I wanted to share today. I hope this was helpful and maybe a little bit intriguing for you, so feel free to contact me with additional questions. Otherwise, I hope to talk to you again soon. Thanks.