Biblically Responsible Investing

Posted by Kathryn Whitbourne on May 4th, 2010 in Career & Money | No Comments

By Robin Cheriakalath John, co-founder of the Eventide Gilead Fund

What is it?
It’s been called by many names, including “Socially Responsible Investing” (SRI), Biblically Responsible Investing (BRI), and Values-based Investing, the concept being as simple as the Golden Rule. While there are many interpretations, at its core it’s about investing in companies with a social, moral and ethical compass. It’s finding well-run companies that “do good unto others.”

What kinds of companies are included or excluded?
The core values and investments of each socially responsible and biblically responsible fund is as different as the values and beliefs held by the managers of these funds.  For example, a socially responsible fund may value family planning and abortion, while a biblically responsible fund will see the same activities as unethical. Biblically responsible investing can even be split along church denominational lines or political lines. Some believe that environmental stewardship is a biblical mandate, while others view the environment in a strictly utilitarian way. Each investor should carefully select funds having philosophies consistent with their values. Working with a financial advisor who shares your values makes this process much simpler.

At Eventide, our values lead us to look for—and screen for—companies that operate with integrity, act with transparency, and value their customers and employees.  A healthcare company that creates beneficial drugs and solutions, a business that treats its employees with dignity by offering fair pay, child care options and career enhancement opportunities or a food manufacturer that promotes positive nutrition options are good examples. Our values also lead us to avoid investing in companies that participate in activities related to alcohol, tobacco, abortion, gambling, pornography, violent video-gaming, weaponry, and environmental irresponsibility.

The Eventide Gilead Fund, for instance, has made investments in a healthcare company that creates products designed to provide pregnancy health and support and to combat infertility, a cell phone service provider that makes economical non-contractual plans available to lower-income individuals, and an agricultural products supplier that serves global markets with environmentally sensitive fertilizers that help boost sustainable higher crop yields.

Do these types of funds do better than “regular” funds?
A study by Fred Reicheld of Bain Consulting concluded that ethically admirable companies have more sustained growth and are, therefore, better long-term investments. His findings demonstrated the relationship of business ethics to business success: companies that seek first to create value for their customers rather than seeking profits at all costs are more profitable in the long run. [F. Reicheld, The Ultimate Question. Harvard Business School Press, 2006.]

Evidence of how ethics translate into positive financial performance can also be found in the Domini 400 socially-responsible index, which has outperformed the S&P 500 by 0.73% annually over approximately 19 years (7.74% return compared to 7.01%). The Domini 400 is the first benchmark index constructed using environmental, social and corporate governance factors.

Another example can be found in the Credit Suisse Most Admired Portfolio, which examines the positive return-generating characteristics of an investing strategy based on Fortune magazine’s yearly Most Admired Companies list. According to a Credit Suisse report from January 2010, in dollar terms, the most admired companies strategy produced over twice the return of the S&P 100 from 1983 to 2009. An investment of $100 in the portfolio would have grown to $2,544 versus $1,153 in the S&P 100. Finally, our fund, the Eventide Gilead Fund, has used values-based investing in sustaining market outperformance since inception.

Robin Cheriakalath John is the co-founder of the Eventide Gilead Fund (Nasdaq:ETGLX). More information on the fund, investing practices and financial performance can be found at eventidefunds.com.