Faith-based investing has become a popular choice for investors who wish to align their financial goals with their religious beliefs. However, some investors worry that religious funds may sacrifice returns in pursuit of ethical investments. We believe that adhering to ethical investments may actually positively impact portfolio performance.
Research¹ conducted over the past two decades consistently demonstrates that ethical investment strategies do not sacrifice returns. One specific subset of faith-based investing, known as biblically responsible investing (BRI), has shown particularly strong performance. According to a study comparing BRI to the S&P 500 between 2000 and 2019, biblically responsible investing earned better returns.
Other studies² also examined the relationship between ethical investments and portfolio performance. A study published in the Journal of Sustainable Finance & Investment found that companies with higher ESG ratings tend to outperform their counterparts in terms of financial performance. This suggests that incorporating ethical considerations into investment decisions can actually enhance returns.
Faith-based investing often adopts a long-term perspective, which can contribute to more stable and sustainable returns. By selecting investments that align with religious values, investors may mitigate risks associated with industries or practices that contradict their beliefs. We believe that this long-term focus and risk mitigation strategy can help investors achieve consistent returns while staying true to their faith.
These studies have consistently shown that faith-based investing and adherence to ethical investments do not result in sacrificed returns. On the contrary, ethical investment strategies have demonstrated positive financial performance. We believe that by combining a long-term perspective, risk mitigation, and the growing availability of faith-based investment options, investors can confidently pursue their financial goals while staying true to their religious values. If you’d like to learn more about Faith-based investing, contact Stonecrop Advisors at info@stonecropadvisors.com.
¹Doll, B. (2021). The Tall Tale of the Trade-off.
https://www.crossmarkglobal.com/wp-content/uploads/Crossmark-The-Tall-Tale-of-the-Trade-Off-white-paper-December-2021-FINAL.pdf
² Moinak Maiti, 2021. “Is ESG the succeeding risk factor?,” Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 11(3), pages 199-213, July.
AUTHOR
Doug MacGray
DATE
June 5, 2023
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