Co-author: Siddharth Chatterjee
4 minutes read
Faith-aligned investing is an emerging practice in Asia, and while it continues to evolve and mature, it is important to explore some of the complexities within the practice. Beyond being a socially responsible investment approach, rooted in ‘doing good’, faith-aligned investing, as the name suggests, involves placing specific faith values at the forefront of investment strategy. This means expressedly, aligning financial decisions with religious beliefs and values. These may vary widely depending on the specific religion and its interpretation.
At the AVPN Faith and Giving Learning Circle held on 13 August 2024, a targeted group of social investment actors in Asia examined the nuances of the faith-aligned investing approach and the challenges that the ecosystem faces in growing the practice. Here are three key takeaways from the conversation.
- Translating faith principles into investment impact goals is both crucial and challenging
While faith values influence many individual and institutional giving decisions across the region, systematically integrating these principles within investment strategies is not entirely straightforward. FaithInvest’s review of governance documents from faith-aligned asset owners identified that only 55% of the examined investment theses, policy guidelines, and targeted outcomes aligned with faith values[1]. The challenge arises because, for many, faith principles mostly serve as an inspirational ‘north star’ for doing good, or for high-level investment decisions rather than providing a clear set of guidelines to achieve tangible impact goals. Consequently, reconciling financial aspects of investments with theological or mission priorities is a key challenge faced by many faith-aligned asset owners. In addressing this challenge, a helpful starting point for investors is prioritising just three or four faith-aligned values that they can meaningfully integrate into their investment theses. By taking time to reflect on and clarify their values, investors can begin the journey to ensure that their impact goals align with their faith’s aspirations and intended outcomes.
- Faith-aligned organisations have the opportunity to reconcile their grantmaking and investment portfolios
Many faith-aligned organisations with both philanthropic and investment arms often approach these portfolios with distinct lenses. Predictably, investment strategies tend to be more risk-averse, focusing on generating high financial returns and avoiding harmful investments, while grantmaking strategies more directly reflect faith principles, focusing on values and impact. This difference is often rooted in the misconception that achieving financial returns necessitates separating investment activities from impact goals, and therefore faith values. Faith-aligned investors can address this issue by clearly defining the impact goals they seek to achieve, and ensuring their alignment with their faith values, regardless of the social investment approach—be it grants, investing, or other methods. This total impact approach[2] is emerging among impact investors in Asia and is expected to continue growing: in 2024, nearly 80% of faith-aligned organisations managing close to £600 billion indicated their intention to explore alternative financing in addition to providing grants within the next three years[3].
- Faith-aligned investee organisations require support to address financing gaps in funding availability and impact management
Despite their deep engagement with local communities, faith-aligned investees often encounter difficulties in securing funding and maintaining their operations. This is partly due to the limited number of investors who align with their specific faith-based values. Faith-based organisations from minority religions operating in challenging regions are particularly susceptible to resource constraints. A related issue is the challenge of meaningfully quantifying their impact. The reality is that their work although incredibly impactful, often involving transformative and life-saving outcomes, is also equally difficult to measure in financial terms. To address these challenges, investors can adopt a nuanced perspective on impact management, that incorporates the structural and contextual factors affecting faith-aligned impact organisations. Embracing such an approach can foster a deeper understanding of these organisations’ unique needs and opportunities, potentially leading to increased investment flows.
Realising the potential of faith-aligned investing in Asia
Faith-aligned investing in Asia is an emerging practice with tremendous potential to create changes on the ground. Realising impact through faith-aligned investing, however, requires a clear integration of faith values into investment practices and a commitment to supporting investees’ growth. By aligning their financial goals with the impact outcomes informed by their faith, faith-aligned investors can sustainably drive meaningful change in the communities they serve, fulfilling their faith mandate.
This article reports the key takeaways from AVPN’s Faith and Giving Learning Circle organised in August 2024, “Navigating Uncharted Territories: Aligning Your Faith Values to Elevate Your Impact Strategy”. We thank Catherine Devitt, Programme Manager at FaithInvest, and her team for their generous participation as the session’s featured practitioner.
Sign up for our future Learning Circles and learn more about AVPN Faith and Giving Initiative here.
[1] FaithInvest. 2024. Faith-based Investment Governance
[2] Total impact refers to an investment approach where all investors’ assets are managed with an intention to generate a positive impact across a broad range of asset classes and grants. (Impact Investing Institute. 2022. Investing with impact in the endowment: Why do it and how to get started)
[3] FaithInvest. 2024. From Aid to Investment
