Case Studies

How 3 Catholic Organizations Embraced Faith-Based Investing

Catholic values
January 14, 2020

Faith-based investors have been incorporating their values into their investing decisions as far back as 1758, when Quakers committed to avoid profiting from the slave trade. Still, for some faith-based organizations with a history of philanthropy, adopting a faith-based investing strategy may be uncomfortable at first. Stakeholders may be concerned that profiting from investments is inconsistent with a mission of helping people, or they may simply be unsure how to proceed with impact investing even if it appeals to them.

But increasingly, faith-based organizations are discovering the potential of impact investments in aligning their portfolios with their values. Because impact investing is highly customizable, organizations can use their finances to promote their members’ unique priorities.

Here is a look at how three Catholic organizations made the transition to impact investing.

Catholic Relief Services

Catholic Relief Services (CRS) was founded in 1943 to aid World War II refugees and survivors; today it is a humanitarian organization that promotes integral human development around the world. In 2013, CRS began to explore how impact investing could complement its philanthropic activities, and in 2014, it announced an impact strategy: to devote 5% of its reserves to impact funds and use additional capital for impact investments that support its humanitarian initiatives.

The organization uses a combination of grants and faith-based investing to spur development. Disaster relief, training, and initial investments in technology may take the form of grants, while impact investments can help a local economy become self-sustaining. For example, CRS collaborated with USAID and other organizations to provide a loan to LAFAZA, a sustainable vanilla supplier in Madagascar. The funding allowed LAFAZA to purchase vanilla from 2,000 smallholder farmers, who had previously benefited from Catholic Relief Services’ grant-based philanthropy. This investment provided income to farmers and injected $4 million into their community.

Thanks to this impact investing approach, resources can be used repeatedly to help people in need. As CRS explains, “[C]apital preservation at the portfolio level is really our priority and any returns we receive will be re-invested to support future investment opportunities and other programming focused on serving the poor and vulnerable around the world.”

The Catherine Donnelly Foundation

The Sisters of Service founded the Catherine Donnelly Foundation (CDF) in 2003 to promote values such as human dignity and respect for creation. It strives for a “decolonized” approach to grantmaking in which local communities make decisions and direct how resources are used, rather than a top-down system that imposes grantors’ perspectives.

As its philanthropic work continues, the CDF has also adopted an impact investing philosophy to integrate its investments with its mission. The CDF is working to devote 10% of its assets to impact investing by 2020.

Because impact investing is highly customizable, organizations can use their finances to promote their members’ unique priorities.

The shift toward impact investing required extra research and networking to implement, but the CDF says the process has been beneficial: “Though daunting at first, developing the capacity for extra analysis and rigor has in the CDF’s case led to better overall performance and portfolio management.”

The CDF employs socially responsible investing screens to rule out investments that conflict with its values, while pursuing direct investments in businesses that create positive social or environmental change. The CDF requires ventures’ impact to result from their core functions and to produce measurable results, as the foundation believes this strategy ensures that investments are meaningful and add significant value. The CDF also expects steady financial returns, claiming to earn 5% to 7%.

The Franciscan Sisters of Mary

The Franciscan Sisters of Mary (FSM) formed in 1985 when two congregations joined together to support a mission of compassionately caring for creation, especially the poor and marginalized.

Although the FSM had long screened investments according to socially responsible investing criteria, a review of the organization’s investment policy concluded that its investments did not achieve adequate impact and fell short of its goals for positive change. After researching methods other organizations were using to align their investments with their missions, the FSM adopted an impact investing strategy in 2012.

In building its impact portfolio, the organization directed $10 million to private investments such as credit, private equity, and real assets; $8.3 million was dedicated to moderate-risk impact investments, while $1.7 million went to potentially high-impact initiatives for which the organization was willing to accept higher levels of risk.

CEO and CFO John O’Shaughnessy, who oversaw the FSM’s move to impact investing, says the organization’s faith-based character made it open to innovation with its finances. “Women religious are far and away the early leaders in the space because they are generally open to the ‘new’ and willing to let go of the old and empty,” he told ImpactAlpha.

Want to learn more about Catholic impact investing? Read:

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