Socially Responsible Investing (SRI) has grown in popularity over the past several years. The idea of picking your investments based on personal values and morals resonates with millions of everyday investors.
But up until relatively recently, Christians, as a whole, didn’t really have a straightforward, turnkey way to align their investments with scriptural principles.
Well, friends, here’s some good news: Biblically Responsible Investing (BRI), or faith-based investing, is one of the fastest-growing subsets of socially responsible investing today. If you’re looking to align long-term financial goals with your biblical beliefs, there has never been a better (and easier) time to do it.
While socially responsible investing and biblical investing are very similar in concept, there are a few big differences worth noting.
Let’s take a quick look at both investing approaches and figure out which type is the best fit for you.
Socially Responsible Investing vs Biblically Responsible Investing At a Glance
SRI characteristics
Aims to invest in companies considered “socially responsible”
Common SRI themes include environmental sustainability, social justice/diversity, peace, health, and morality
SRI investing typically uses exclusionary screens to filter out companies that aren’t consistent with the investor’s values, and inclusionary screens that include companies that align with the values of the investor.
BRI characteristics
Aims to invest in companies that align specifically with scriptural beliefs
Common companies avoided are those that promote anti-Christian lifestyles (such as abortion and pornography) and addictive behaviors (such as alcohol, tobacco, and gambling)
BRI investing also uses both exclusionary screens and inclusionary screens in portfolio building. Biblically-based screens revolve around ethical values that many Christians hold dear.
What is Socially Responsible Investing?
The goal of socially responsible investing is straightforward: to align an investor’s values with those of the companies in their portfolio.
What are those values, you ask? Well, the answer can vary widely. But generally speaking, SRI funds look to invest in businesses that are deemed “socially responsible.”
Due to that broad definition, to better understand SRI, it may be easier to drill into some subsets of socially responsible investing. One primary focus is on the environment, with investments that involve low carbon footprints and the exclusion of companies with heavy carbon footprints. Furthermore, corporate governance with investments into companies with a diverse board or a diverse workforce.
What is Biblically Responsible Investing?
The general concept of biblically responsible investing is similar to that of socially responsible investing: to make investment decisions that are guided by personal values.
But biblically responsible investing gets precise about those values.
BRI is a biblical approach to asset allocation that aligns investment decisions with Christian beliefs. So while there might a lot of overlap with socially responsible investing, biblically responsible investing aims to specifically put investment dollars into the hands of biblically aligned companies.
BRI investment companies typically do this through both positive screens and negative screens. Positive screens actively “seek out” biblically-aligned companies while negative screens avoid businesses with exposure to areas like pornography and gambling.
Ultimately, the goal of BRI is to glorify God with our investment-making decisions.
Why is that important? And why is BRI growing so rapidly in popularity?
Simple: because for far too long, Christians haven’t put much thought into what their investments are supporting.
The simplicity of owning ETFs that track broad indexes like the S&P 500 and Dow Jones Industrial Average is a great thing for individual investors. But it has also made it too easy for Christian investors to support companies that promote addictive behaviors and unbiblical lifestyles.
One of the Bible’s core truths is that God is owner of all things -- money included. So if we, as Christians, invest in businesses that promote things like alcohol and abortion, we’re being bad stewards of God’s capital.
The high growth of biblically responsible investing suggests that investors around the globe are starting to take Christian stewardship seriously.
How to invest?
Investors always have the option to buy individual stocks of both socially and biblically responsible companies. But the easiest and most popular way to jump into the space is through the use of ETFs.
With roughly 140 ETFs traded on major U.S. exchanges, socially responsible ETFs represent a whopping $91 billion in total assets under management. And while the market for biblically responsible ETFs still pales in comparison, it’s growing rapidly
The demand for actively managed BRI private funds is also rising. Case in point: Harvest Investment Services (HIS), our registered investment advisory firm headquartered in Illinois, has launched several faith-based private funds – utilizing different investing styles -- over just the past couple of years.
For instance, the HIS Envoys Faith-Based Growth Fund seeks long-term growth by investing in faith-based companies with high relative strength. Meanwhile, the HIS Envoys Faith-Based Equity Income Fund prioritizes biblically-aligned companies with a high dividend yield.
But will my returns suffer?
Most people would agree that choosing ethical companies to invest in is a generally good thing. But will being a responsible investor have a negative impact on your returns?
It’s a fair question. After all, investing is still a money-making endeavor.
Well, the good news is that values-based investing doesn’t have to hurt your overall portfolio returns at all -- and that goes for both socially responsible investing and biblically responsible investing.
For example, a 2019 Morgan Stanley study -- which analyzed over 10,720 funds -- concluded that there’s no financial tradeoff in the returns of sustainable funds and traditional funds. Even better: the study suggested that sustainable funds may offer lower risk, as well.
While there hasn’t been an extensive look at the returns of BRI funds -- they still represent a very small portion of the fund universe -- the few studies out there show promise. In fact, recent data suggests that actively managed, screened portfolios tend to perform similarly or even better than unscreened portfolios over time.
At the time of writing (May 2021), one Biblically Responsible ETF -- which tracks one hundred of the most biblically aligned large companies in the U.S. (as measured by its company’s impact score) -- is up more than 50% over the past year. Meanwhile, the SPDR Dow Jones Industrial Average ETF Trust (DIA) is up 43% over the same time frame.*
The HIS Envoys Faith-Based 2040 Retirement Fund -- which caters to Christian investors who plan to retire on or near the year 2040 -- is up an impressive 27.5% since its January 2020 inception.** Over the same period, the Vanguard Target Date 2040 has returned just 16%.
Aligning your investment dollars with your personal values doesn’t have to mean you have to sacrifice returns. In many instances, responsible investing can translate into higher returns than normal.
A true win-win.
It’s in your hands
Socially responsible investing and biblically responsible investing are both guided by values and ethics. That said, those values and priorities are often quite different.
The investment approach you decide to take is ultimately a personal decision. And there’s nothing that says you can’t invest in both SRI and BRI funds.
But there’s a good reason that biblically responsible investing, in particular, is exploding at the moment. It is allowing millions of Christians worldwide to finally (and easily) invest with a core fundamental belief: all money is God’s money -- we’re merely stewards of it.
To learn more about Envoy Financial’s Biblically Responsible Funds, reach out to one of our licensed advisors. We are here every weekday. Reach out to us over the phone, email, or by video conference. We cannot wait to help you make the most of our Biblically Responsible Investment options.
* Past performance may not be indicative of future results. Investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this article, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for your portfolio. There are risks involved with investing, including possible loss of principal. Principal values and investments returns are neither guaranteed nor issued by, guaranteed by, or obligations of a bank, savings and loan, or credit union; and are not insured or guaranteed by the FDIC, SIPC, NCUSIF or any other agency.
** The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.