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Marianne Scordel

Faith and investment


Marianne Scordel (pictured) of Bougeville Consulting investigates how religious communities and their members manage their assets.

At first sight, in the faith investment world, it seems Christians are operating more at the level of principles, compared to Muslims, whose Sharia’a-compliant investment practice goes as far as guiding believers towards the buying of certain (specific) products or structures. 

This is partly because the Christian approach to the topic is relatively recent. Various materials about the Catholic approach to investment refer to Caritas in veritate – the social Encyclical which Pope Benedict XVI signed in 2009. Those involved in thinking about this are also keen to point to Pope Francis’s recent discourse on climate change. 

By contrast, Muslims have, over time, developed ways of looking at specific products which are now well known in the market for Islamic finance, a market now estimated at over USD2 trillion. Financial products and structures are examined by clerics, who are free to issue seals of approval, on a case-by-case basis, to help orientate the investment decisions of Muslims. The process is well understood and the principles are clear. 

The fact that Catholics are currently operating more at the level of principles is in keeping with the root of their faith, which has to do with the spirit more than the letter. However, the purpose of these principles is very much to provide a guide for action, and a few experimental projects have been set up, such as the Proclero fund, which the Saint-Martin Community of priests started in 2012 with a view to generating returns for the training of new priests. Unlike other Catholic initiatives, this product is open to the general public, and all investors share in the proceeds resulting from financial performance. 

Don Pascal-André Dumont, who is priest and chair of Proclero’s steering committee, explains that finance has been diverted from being an instrument to the economy to become an end in itself. “Those who choose to invest in Proclero can give meaning to the investment of their savings”, said Don Pascal-André, whose fund management enterprise comprises both a group of financial experts and a committee that advises on ethics, understood in a way that is compatible with the Catholic faith. 

Conversely, Islamic finance is not necessarily as prescriptive as one might think, with no single interpretation prevailing and decisions being left to individual clerics rather than to some uniform “rulebook” that would apply precisely. Here as well, faith is the overriding starting point in a process which ends in practical decisions about products and structures – a ‘top-down’ approach of sorts. As a friend who heads an Islamic bank once said to me: “When I have to make an important [professional] decision, I pray first.”

It is well known that Muslims consider equity to be fairer to society than, for instance, bonds, because shareholders share in the profit and losses of the businesses into which they invest. 

As Professor Mahmood Faruqui, Senior advisor to the Bank of London and The Middle East, says: “Islamic finance, neither permits interest, nor financial transactions without an identifiable linked underlying trade transaction. [In those transactions,] the return to the financier is fixed ex ante independent of the success or failure of the project to be financed. The financier is less interested in adding value to the real economy, and more in extracting rent of money which in itself is sterile and should not be treated as commodity.”

The Catholics have not made these decisions on specific products, however Pierre de Lauzun, CEO of the French Financial Markets Association, author of several books on religious questions and adviser to the Proclero fund, agrees when he writes: “Shares are not financial instruments like others. They are central not only for the economy, but for society at large. Shares are not claims on the company, but a part of it, solidarity with it. Owning a share is taking an extremely useful risk – and at the same time accepting a responsibility.” 

Preferring equity over other types of financial products, of course, does not mean buying into any company. Beyond sustainability, Pierre de Lauzun, who notes that “an economy relying on slavery may be sustainable”, thinks that the definition of what ethical investment might mean to a Christian should be looked at in an ambitious way, to include fund managers’ responsibility beyond their fiduciary duty, the redefinition of the 2006 Principles for Responsible Investment, and the importance of shareholders relative to other human actors. 

Professor Faruqui agrees and sums it up thus: “The purpose of financial economy is to serve the real economy, not the other way round.” He adds that the rules “largely protected Islamic Financial Institutions in the first round of the 2008 financial crisis. But in the second round, when financial crises tainted the real economy, IFI’s were hit.

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