Church funds come from donations and are meant to serve the church’s charitable mission. However, churches also have a fiduciary duty to invest these funds responsibly. This requires balancing moral values with prudent investing principles. Churches must avoid investments that contradict their beliefs while also ensuring good stewardship of funds. Ethical investing challenges arise but can be addressed through thoughtful policies and procedures.
Establish an investment policy statement aligned with church values
A key first step is creating an investment policy statement (IPS) that outlines the church’s investment objectives, constraints and procedures. The IPS should reflect the church’s moral stances on issues like tobacco, gambling, abortion, weapons, etc. It can exclude certain sin sectors or use ESG principles to screen potential investments. The IPS provides guidelines for investment managers to construct a portfolio that aligns with the church’s mission.
Structure oversight and management appropriately
The church leadership and investment committee should represent the interests of members and provide accountability. Committee members should have financial expertise to oversee investment activities. Day-to-day decisions can be delegated to professional managers with a specialized understanding of faith-based investing. However, the committee should actively monitor the portfolio and manager adherence to the IPS.
Diversify investments to balance ethics and returns
Avoiding entire industries can hurt diversification and returns, so churches should examine approaches like negative screening, ESG integration, and shareholder advocacy. Investing in funds like biblically responsible ETFs and mutual funds can provide broad diversification while adhering to Christian values. Churches can engage companies on ethical issues through proxy voting and activism rather than avoidance.
Disclose investment details transparently
As nonprofit institutions, churches should disclose investments, policies, management procedures, and returns regularly to congregation members. This demonstrates ethical management of member contributions. It also provides accountability if morally questionable investments are discovered, allowing leadership to correct course.
Review asset allocation and rebalancing periodically
The IPS should be revisited periodically to ensure it still fits the church’s needs and values. The investment committee should rebalance asset allocation to stay in line with targets and risk tolerance. Performance should be evaluated regularly to determine if managers are meeting return objectives in compliance with the IPS.
Churches have an ethical obligation to align investments with their moral principles while prudently managing member donations. By establishing and upholding policies that balance their values with practical investing requirements, churches can invest successfully in a socially responsible manner.