Investing in good faith – what is a faith-based fund?

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Written by Katie Braid

20 Dec 2021

It’s estimated that 84% of the global population identifies with a religious group. So it should come as no surprise that faith-based investment funds are gaining rapid momentum, a with a slew of new funds in the marketplace each year.

What is faith-based investing?

One of the earliest examples of ethical or socially responsible investing, faith-based investing is an investment strategy that aligns a person’s investments with their religious values.

The methods used to do this don’t differ from those used in responsible investing generally – with the most common ways being: avoiding sectors not deemed morally acceptable; advocating for positive change using shareholder rights in the companies they hold shares; and committing capital specifically to companies or sectors seemed to be doing good in the world.

The difference is seen when considering the diverse beliefs of different faiths, and which sectors are ‘out’ versus those that are ‘in’.

Investing according to Islamic beliefs

One of the unique aspects of investing in line with Islamic principles (also known as Halal investing) is that generating interest violates Shariah law, and so interest-bearing investments like financial institutions are considered “haram”, or forbidden. Many Muslim funds invest in a Shariah-compliant alternative to bonds called sukuk, which provide regular payments that are considered profit-sharing rather than interest.

Haven Wealth Partners’ Ethical Absolute Return Fund is RIAA certified as well as Shariah certified. It excludes companies that are non-compliant with Shariah principles, such as those that engage in unnecessary harm to animals, restrict human rights, operate detention centres, discriminate against Indigenous peoples, operate in occupied or disputed territories, or produce pork products, alcohol, pornography, nuclear power, fossil fuels, armaments or tobacco. It only includes companies that have a low debt ratio, or less than 33%.

Investing according to Christian beliefs

Often referred to as biblically responsible investing, investing in line with Christian beliefs also commonly avoids certain activities, including adult entertainment, gambling, tobacco, weapons, predatory lending, human rights abuses, and abortion and contraception products and services.

Christian Super is one of only three super funds to be certified under RIAA’s ‘Superannuation fund whole-of-fund’ category, meaning all its super products are certified. It screens out companies that receive more than a small amount (the amount varies) of their revenue from alcohol, cannabis, fossil fuels, gambling, weapons, tobacco and adult entertainment. It fully excludes companies involved in producing abortifacients and contraceptives, as well as those involved in stem cell research that involves the destruction of human embryos.

Christian Super is also a leader in ‘impact investing’, investments that have a specific intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Christian Super has $150 million in impact investments, such as in the Resolve Social Benefit Bond, which funds work being done by Flourish Australia, who provide a recovery-orientated mental health community support program.

Other faiths

With the rise in new faith-based funds, there’s a good chance that there is a super fund, investment fund or banking option for your belief system. If you’ve searched and cannot find a suitable option, keep in mind there may be a socially responsible investment option that checks off the factors that are important to you, even though it is not labelled as such.

If animals are sacred to you, you may want to search for products that avoid animal cruelty. If preserving the natural environment is one of the most important things to you, what role is your existing fund playing in protecting or destroying nature?

Using the search themes on Responsible Returns, you can seek out investments that avoid activities you don’t agree with, and include investments that are having a positive impact in areas you deem important.

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About Katie Braid

Katie is the Communications and Media Coordinator for the Responsible Investment Association Australasia where she is responsible for helping build awareness of and participation in responsible, ethical and impact investing through creative communications and media campaigns.