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Good Returns – A Primer on Ethical Investing

Saturday, 1 February 2014  | Jai Sharma


Almost three years ago to the day, as I was wrapping up an exhausting two year project setting up a traditional charitable project in India’s north, I received an invitation to visit the factory of a wealthy local businessman. He thought little about social impact and nothing of Jesus, but as I walked the factory floor I could not avoid an intriguing but worrying question: had this man done more good accidentally in providing jobs and social infrastructure for his 3,000 economically disadvantaged staff than I had after years deliberate action? I’m still not sure what the answer is, but it did open my eyes to the potential of business to generate social and spiritual good; and ultimately it led me to spend the next few years of my career working with a Christian ethical investment fund investing in for-profit projects which generate positive social and spiritual impact.

There is over $1.7 trillion dollars sitting in Australian super fund accounts as I write this—though I must admit the use of the term ‘sitting’ is not entirely accurate. In truth it’s ‘zipping’ around the world. It is being put to use in businesses, loaned to governments, and perhaps most importantly it’s generating a BIG social impact. The average Super fund account of $30,000 dwarfs the average annual donation to charity of $291 both in size and social/spiritual effect. However, the question must be asked: is that impact positive or negative?

For a moment think about the causes that you support—maybe a sponsor child, or your church’s overseas missionary partners, or perhaps even services for the homeless.  Now consider whether your investments are aligned with these causes. Are you invested in clothing companies employing exploitative child labour? Are you invested in government bonds to central Asian countries which are actively persecuting your missionary partners? And are you invested in Woolworths, Australia’s largest poker machine owner contributing to the growing number of homeless in Australia? In my experience, a standard superannuation fund would be invested in at least two of these areas with many ticking all three boxes.

When we have our investments pulling in the opposite direction to our giving, some benefits of generosity can be cancelled out. However, when they are aligned, the synergies can be nothing short of beautiful. It’s hard to understand this beauty without looking at a couple of real world examples so I’ve chosen a few of my favourites collected over my time working in the field.

The first is the recent social benefit bond facilitated by the NSW government. Described simply, investors put money into the establishment of centres, run by UnitingCare, which reunite families with children in foster care.  For each reunited family, the government pays the investor a return. The project looks set to be a win for all involved. The government saves money by keeping children out of foster care, UnitingCare gets funding, the investors get a healthy return, and most importantly families are reunited.

Another is a company in South-Asia in which our fund recently invested. The company trains locals from backgrounds of poverty in basic data entry and IT skills. It then sources data entry work from the developed world and employs the locals to carry out the work with fair pay and conditions. As well as being very profitable, the company now employs thousands of people who otherwise may not have work. Perhaps my favourite element of this business is that it is run by Christian entrepreneurs who view their work as their mission. The company employs chaplains to support the mostly non-Christian staff spiritually, runs weekly training around biblical principles and has seen many people come to faith.

The third is the microfinance investments I‘ve seen working to make fairer financial services available to the poor around the world. I will never forget a conversation I had with a friend and pastor in India. This man lived very humbly and so when there were complications with his wife’s health, he borrowed $500 to cover the expenses from a local money lender. Smelling something fishy, I asked him what the interest rates were. When I was told 10% I was surprised and asked to see the numbers. To my disgust the 10% figure was monthly, and it turned out that this poor man, completely financially illiterate, was paying almost all of his monthly income to the lender at rates of 120% per annum. Though by no means a silver bullet to ending poverty, I have seen much benefit come from microfinance institutions which are slowly breaking the exploitative practices of local money lenders. Interestingly, on my last visit I spoke with this pastor again, he had just taken out a small loan to by a motorbike; I asked where from with a look of caution. He smiled, understanding my concern, and gave me the name of the local microfinance institution.

So what can be done to align our investment portfolio with our Christian ethics? My advice would be to take a few simple first steps. Ask your Super fund what their ethical investing approach. Look at the annual reports of some Christian ethical superannuation funds and see if they align with your values. I would also suggest having a read over the Responsible Investment Association of Australasia (RIAA) benchmark report to allay fears of underperformance. As a spoiler, the report found that “core responsible investment funds are delivering better returns than both the benchmark and the average of all mainstream funds in all but one category across time periods (1, 3, 5 & 10 years)”. 

The perception of investing must shift in the eyes of the Church from that of being a ‘necessary evil’ to an opportunity to honour God with our wealth. Our investments can be an expression of our love for God and neighbour, generating social and spiritual change with ripples into eternity. And so whether eating or drinking, bond trading or Super-fund choosing, whatever you do, do it all for the glory of God.

 


Comments

Ian Hore-Lacy
February 12, 2014, 7:54PM
Amen! Why is this not more obvious and widely discussed?

There are so many opportunities for entrepreneurs and for the rest of us, outfits like Opportunity International. An Ethos article on David Bussau and what has arisen from his vision would be timely.

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