Archive for category: July

Whether you are an employee with superannuation contributions or a private or corporate shareholder, you probably have heard of ethical investment, along with considerations of environmental sustainability, social benefit, integrity and good governance. But what does it mean to be an ethical investor and is it an imperative for Christians? We asked Nick Schwarz to explain.

In 1992 the Australian government decided that working Australians needed to better prepare financially for their retirement so they would be less reliant on the aged pension. While payments into superannuation funds had been voluntary for workers before that time, from that year employers became required by law to take out a percentage of their employees’ pay and put it into a fund.

The job of superannuation fund managers is to invest workers’ money in assets they believe will deliver a return on that investment. These may include company shares, property, infrastructure and cash. Because ‘super’ is intended to provide income during retirement, access to it is usually blocked until then.

Superannuation and investment firms compete to grow their clients’ wealth quickly but without taking foolish risks or doing anything illegal. They offer funds with different mixes of investments and risk profiles, such as ‘balanced funds’, ‘high-growth funds’, ‘socially-aware funds’, ‘diversified funds’ and ‘conservative funds’. These cater for people who are more or less risk-averse, and those who have special interests or ethical concerns about the activities their money is supporting.

Interest in ‘responsible’ or ‘ethical’ investing has grown rapidly in recent years as investors have become more aware of the human and environmental costs of business. Christians have been among the keenest to embrace the concept because of their concern for the wellbeing of others and for the world God gave us to care for.

Many turn to specialist investment firms to do the difficult, time-consuming work of investigating companies’ ethical track records.

Funds that use ethical criteria to guide their purchase of company shares typically investigate three aspects of company operations:

1. Their Environmental responsibility: Does the company use natural resources sustainably and minimise harmful wastes and emissions?
2. Their Social responsibility: Do the company’s activities benefit employees, local people and society more broadly?
3. Their Governance: Is the company law-abiding, honest and accountable? Does it treat workers fairly? Is its management transparent?

Funds that select investments based on these ethical criteria are given names such as ‘ESG funds’, ‘ethical funds’ and ‘socially responsible funds’. At the bottom of this story is an example of one ethical investment firm’s company selection guidelines.

Some investors draw up their own ethical criteria and research company products and practices. This is far from easy. Questions such as the following need to be considered:

• Do you and the companies you are thinking of investing in agree on what it means to be ‘ethical’?
• Can you distinguish between ‘genuine corporate responsibility’ and ‘corporate image-washing’?
• How trustworthy are companies’ social and environmental impact reports? Are they written by independent assessors or company employees?
• What is the right policy to take towards companies that have a mixed track record, e.g. which are well-run and benefit local and regional communities, but which raise environmental concerns?
• Where a company has divisions doing business in more than one country, does its level of corporate responsibility vary between countries, e.g. does it take advantage of permissive labour and environmental standards in poor or corrupt countries? Is it good enough for a company merely to satisfy minimum legal requirements or should we expect it to aim higher?

The higher the standard of corporate responsibility that investors demand, the fewer investment options they will have. If you look very thoroughly into all aspects of a company’s operations, you will almost certainly find something to criticise.

Some investment funds use faith-based ethical criteria. For example, Muslims can invest in Sharia-compliant funds, which invest only in halal companies, i.e. those acceptable under Islamic law. Catholic funds tend to avoid companies that are involved either directly or indirectly in contraception and abortion, the endorsement of homosexuality and ‘anti-family’ activities. But generally, faith-based funds and non-faith-based ethical funds have much in common, such as commitment to fair trade, poverty reduction and environmental sustainability.

Studies comparing the performance of ESG/responsible/ethical investment funds and conventional funds show that ethical funds can grow in value at the same rate as conventional funds. Investors who choose a well-managed, strongly performing ethical fund need not worry that they are ‘sacrificing’ by investing ethically.

The other side to investment is divestment or disinvestment – that is withdrawing financial support from a company. Advocates for greater corporate responsibility often appeal to investors to divest from companies that engage in unethical practices.

But divesting of shares we regard as morally tainted means selling them and this means potentially making a capital gain. But isn’t the aim of ethical investment to profit from virtue? If we consider such a capital gain to be morally contaminated, what should we do with the money? Can we purify it by putting it to good use?

Divestment campaigns are usually more about shaming companies than shutting them down and many shareholders overlook unethical practices if the value of their investment is increasing. Greed has a habit of winning over ethics. Even if a divestment campaign convinces many shareholders to sell their shares and the share price goes down, bargain hunters usually buy them up, sending the price up.

Another consideration is that if a divestment campaign was very successful, and the offending company collapsed, its employees, their families, and other people and entities that relied financially on that company would be harmed. The campaigners and divestors would seem to bear responsibility for the plight of the ordinary people employed by that company – people who in the course of earning their living were probably not trying to foster evil in the world. Do the campaigners and divestors then have a duty to help people who have lost their livelihoods to transition into another more ethically acceptable livelihood? How might they do that?

You are more likely to make God-pleasing decisions about how you use your money if you think of your money as God’s gift to you, and that God wants you to be a good steward of that gift. Being a good steward of money means budgeting, setting aside portions for essential and non-essential expenses, giving away and saving or investing.

If you decide that ethical investing is for you, will you set your own ethical criteria and choose your investments based on them, or will you delegate the task of managing your money to an ethical investment company?

Remember, not all ethical investment companies are equally ethical or equally well-performing, so it’s a good idea to investigate them before choosing one. Some ways you can review an ethical investment decision include reading reports provided to you by your ethical investment firm; reading company reports that deal with matters such as governance, social impact and environmental impact, and independent reports (if available) that address the same matters.

Nick Schwarz is the LCANZ’s Assistant to the Bishop – Public Theology and a consultant to the church’s Commission on Social and Bioethical Questions (CSBQ). His Christian ethical decision-making guides are available at www.lca.org.au/csbq

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EXAMPLE ETHICAL INVESTMENT COMPANY SELECTION GUIDELINES

WE ENGAGE WITH COMPANIES THAT PROVIDE FOR AND SUPPORT:

• the development of workers’ participation in the ownership and control of their work organisations and places
• the production of high-quality and properly presented products and services
• the development of locally based ventures
• the development of appropriate technological systems, e.g. renewable energy
• the amelioration of wasteful or polluting practices
• the development of sustainable land use and food production
• the preservation of endangered ecosystems
• activities that contribute to human happiness, dignity and education
• the dignity and wellbeing of animals
• the efficient use of human waste
• the alleviation of poverty
• the development and preservation of appropriate human buildings and landscapes.

WE AVOID COMPANIES THAT UNNECESSARILY:

• pollute land, air or water
• destroy or waste non-recurring resources
• extract, create, manufacture or market materials, products or services which harm humans, animals or the environment
• market, promote or advertise products or services in a misleading or deceitful manner
• create markets by the promotion or advertising of unwanted products or services
• acquire land or commodities primarily for speculative gain
• create, encourage or perpetuate militarism or engage in the manufacture of armaments
• entice people into financial over-commitment
• exploit people through the payment of low wages or poor working conditions
• discriminate by way of race, religion or sex in employment, marketing or advertising practices
• contribute to the inhibition of human rights generally.

SOME ADDITIONAL RESOURCES

Paul Mills, ‘Investing as a Christian: Reaping where you have not sown?’, Cambridge Papers, June 1996, vol. 5, no. 2.

Choice Ethical Investing Guide, https://www.choice.com.au/money/financial-planning-and-investing/stock-market-investing/articles/ethical-investing-guide

Church of England Ethical Investment Advisory Group policies: www.churchofengland.org/eiag/policies

Catholic Super approach to responsible investment: https://csf.com.au/investments/responsible-investing#our-approach

by Lisa McIntosh

The standard current definition of ‘ethical investment’ involves investing in companies that meet certain standards in the environmental, social and governance (ESG) aspects of their operations.

But investing ethically can mean far more than this – especially when we consider the wide-ranging opportunities available to use for good the money with which God has entrusted us. For many people of faith, matching what they invest in with their values is an important aim.

Indeed, investing funds to ‘contribute to meaningful outcomes’ and having social responsibility at the heart of financial decisions are among the core values of LLL Australia’s operations, says Chief Executive Officer Ross Smith.

‘All that we have is a gift from God – including our wealth’, Ross says. ‘If we are to be good stewards of that wealth, we need to be thoughtful about where we invest.

‘As companies become more transparent about their ESG operations, each of us is able to make more informed decisions about how we can be good stewards with our wealth – investing to bring blessings to God’s world and God’s people.

‘Further, investing our funds to contribute to meaningful outcomes can create greater connection, community and purpose. LLL has social responsibility at its core. We aim to support the Lutheran Church by meeting the capital needs of organisations that proclaim Christ as Lord and Saviour and seek to show his love to all people. We do this by providing missional grants, sponsorships and financial allocations to Lutheran organisations.’

Thoughtfully considering and selecting where and how to invest is ‘both a privilege and a humble response to God’s abundant provision for us’, Ross says. ‘Each of us needs to do our research and be mindful that we are selecting an investment that is secure, viable and will serve your individual vision’, he says.

While what each person considers ‘ethical’ can vary according to their values and beliefs, Lutheran Super CEO Stella Thredgold says Australians are ‘increasingly considering’ ESG factors in their investment decisions ‘to ensure alignment with the issues most important to them’.

‘There’s a variety of ways this can be achieved, based on what’s most important to you’, she says.

‘When assessing your super, considering how your money is invested by the super fund will help you assess whether it aligns to your values and views on ethical and sustainable investing.’

Stella says Lutheran Super’s investment manager Mercer Australia has long put sustainability at the forefront of its investment philosophy, with the organisation’s sustainable and ethical super policy stating that ‘taking a holistic approach to investing is paramount’.

• To learn more about supporting mission and ministries through LLL Australia, go to lll.org.au/giving or www.lll.org.au/savings
• For more information about Lutheran Super’s responsible investment options, see: https://secure.superfacts.com/web/IWfiles/attachments/Form/LCASF_Member_Information_Booklet.pdf

*The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

With the support of LCA members, the LLL backs Lutheran ‘organisations that proclaim Christ … and seek to show his love to all people’, says CEO Ross Smith. These entities include ALWS, which invests in people through aid and development projects, such as that pictured above.

by Neil Bergmann

Through baptism into Jesus’ death and resurrection, we are adopted into the kingdom of heaven. During his earthly ministry, Jesus teaches about what it means to live, here and now, in that new kingdom. And a lot of that teaching is about money.

Our congregations are full of generous people. We gladly give of our time, talents and possessions towards God’s mission through his church. But we also like to think that what is left is ours to do with as we wish. Jesus will have none of that. Jesus is Lord of all that we have.

In Matthew’s gospel (19:21), Jesus knows that money is an obstacle to the rich young man’s life in the new kingdom: ‘If you wish to be perfect, go, sell your possessions, and give the money to the poor, and you will have treasure in heaven; then come, follow me.’ Then in Luke, using the parable of the dishonest steward, Jesus teaches: ‘You cannot serve both God and money’ (16:13).

Elsewhere in this edition, the notion of ethical Investing is explained. As we are called to care for God’s good creation, we can make financial choices that are better for the environment, by promoting moves to renewable energy and sustainable farming, fishing and forestry.

Three areas in which our everyday financial decisions can support more sustainable communities are superannuation, banking and insurance.

Many of us have funds invested in superannuation, often in default investment plans. We generally can choose our super provider and different investment plans. Almost every provider has socially responsible investment choices, but these are rarely the default fund. It takes just a few minutes to change from the default fund to the equivalent socially responsible fund.

We make choices about which banks we use, both as individuals and as congregations, but care for creation is rarely part of the decision. We could choose a bank that, for example, doesn’t lend to new fossil fuel projects. Similarly, most of us have insurance policies, and we could choose providers that are not insuring new fossil fuel projects. Climate advocacy group marketforces.org.au has asked different insurance and banking providers about their climate credentials, so you don’t need to do the difficult research yourself. If you are reluctant to change your provider, then you could write to your bank or insurer requesting that their business policies promote socially responsible and environmentally sustainable practices.

In the recent Australian federal election, an important issue for many voters and candidates was action on climate change. Climate change most severely affects those who are least able to adapt to a changing climate – the poor and vulnerable in developing countries. These are exactly the ones Jesus asks us to care for in his new kingdom, and our everyday financial decisions can be part of that care.

Neil Bergmann is chair of Lutheran Earth Care, Australia and New Zealand (LECANZ).

Learn more about LECANZ, which reports to the LCANZ’s Commission on Social and Bioethical Questions, and access resources and information on its website at www.lutheranearthcare.lca.org.au