7 Pieces of Investing Advice From Pope Francis

NEW YORK (TheStreet) -- Since being elected pope in March 2013, Pope Francis has proven that he is a different kind of pontiff -- even in terms of investing.

He has made major changes at the Catholic church, most recently overhauling policies on abortion and marriage annulment, and has taken big positions on issues like climate change and refugee migration. He established a commission to reform the economic and administrative departments of the Holy See -- the universal government of the Catholic Church -- and established a Secretariat for the Economy to advise him on economic policy.

His biggest maneuver on the financial front has been to revamp the Vatican Bank, bringing in new leadership, increasing transparency and limiting access to the bank to diocese and other Catholic organizations in an effort to eliminate money laundering.

His efforts have been successful. The institution, which oversees more than $6 billion of assets, said its net profit climbed to €69.3 million (about $76 million) in 2014 from €2.9 million ($3.2 million) in 2013.

"People have accused him of being anti-'capitalism,' whatever that means, but he didn't say banks are bad and close it down. He simply pushed to reform it, so that it would operate ethically. I think that is symbolic of what he would hope for more generally from the finance world," said Joseph Kaboski, a professor of economics at the University of Notre Dame.

"What I think a lot of people don't get about Pope Francis is that all of the things, all of the statements, are actually in keeping with standard social teachings. Francis is not the outlier, Benedict was," said James Angel, a professor at Georgetown University's McDonough School of Business. "If you think about the preferential option for the poor, if you think about taking care of the environment, all of this stuff is stuff the church has been saying for years. It's just that Pope Francis is a more public spokesman for these."

The pope isn't a financial analyst, nor is investing among his primary concerns. But he hasn't avoided the topic altogether.

What would a pope-friendly investment portfolio look like? Here are seven pieces of advice -- many from Francis himself -- for putting one together.

1. First, Do No Harm

"It is important that ethics once again play its due part in the world of finance and that markets serve the interests of peoples and the common good of humanity," Pope Francis said in a 2014 discourse during a two-day symposium on investing for the poor.

According to Angel, there are two very basic principles of Catholic socially responsible investing: the first is to do no harm, and the second is to do good.

"Don't invest in companies that do really bad things," he said. "Try to invest in the kind of companies that actually do things that benefit people."

The United States Conference of Catholic Bishops (USCCB), the episcopal conference of the Catholic Church in the U.S., advises investors to refuse to invest in companies whose products or policies are counter to the values of the Catholic church or, alternatively, divest from such companies. Instead, they are encouraged to seek out positive strategies that promote the common good by promoting values of Catholic moral and social teachings or promoting community development.

For example, companies that deal with landmines and weapons manufacturing as well as abortion, contraceptives and stem cell research fall into the nay column. Those that provide affordable housing and banking services and give access to live-saving pharmaceuticals get a yay.

2. Be a Responsible Shareholder

In his 2014 discourse on investing for the poor, Pope Francis emphasized the importance of shareholder stewardship.

"Impact investors are those who are conscious of the existence of serious unjust situations, instances of profound social inequality and unacceptable conditions of poverty affecting communities and entire peoples," he said. "These investors turn to financial institutes which will use their resources to promote the economic and social development of these groups through investment funds aimed at satisfying basic needs associated with agriculture, access to water, adequate housing and reasonable prices, as well as with primary health care and educational services."

The USCCB also emphasizes the importance of socially responsible shareholder stewardship in its investment guidelines.

"Individual Christians who are shareholders and those responsible within church institutions that own stocks in U.S. corporations must see to it that the invested funds are used responsibly," its guidelines read.

3. Protect the Environment

Pope Francis' comments on the environment in a 2015 encyclical (a papal letter sent to all bishops) titled Laudato Si made major waves and was considered by many to be a climate manifesto. It was given the subtitle "On Care for Our Common Home" -- in other words, the earth.

And at the center of his attack was one of the biggest hot-button political issues of the day: climate change.

"Climate change is a global problem with grave implications: environmental, social, economic, political and for the distribution of goods," the pope wrote. "It represents one of the principal challenges facing humanity today."

What does this mean for investing? Be careful where you tread, especially on energy. "We know that technology based on the use of highly polluting fossil fuels -- especially coal, but also oil and, to a lesser degree, gas -- needs to be replaced without delay," Francis wrote.

His comments have forced not only individual Catholic investors to take a look at their holdings but Catholic institutions as well. As Reuters pointed out, many U.S. dioceses have millions of dollars in oil and gas stocks and fossil fuel investments.

4. Be Careful on Consumer Goods

Francis criticized what he called "unbridled consumerism" in a 2013 encyclical, Evangelii Gaudium, and returned to the issue again in Laudato Si, examining the prevalence of "throwaway culture" in the world and an industrial cycle that hasn't figured out what to do with its waste.

"... A sober look at our world shows that the degree of human intervention, often in the service of business interests and consumerism, is actually making our earth less rich and beautiful, even more limited and grey, even as technological advances and consumer goods continue to abound limitlessly," he wrote.

Does that mean to avoid all consumer goods companies? Not exactly, but according to Angel, a pope-friendly portfolio would require some picking and choosing on that front.

"There you get a real mixed bag. One of the areas of Catholic social thought is a long criticism of consumerism as such, the idea that consuming goods is the only thing that makes you happy," he said. "I would think that a Pope Francis portfolio would certainly look down upon prestige brands that sort of feed into that kind of consumerist mentality."

5. Steer Clear of Financials

"Pope Francis has been highly critical of a financial sector that he feels thrives on greed and speculation, values profit above everything else -- like human beings and basic ethics," said Kaboski. "He believes these problems led to the financial crisis, where the poor, especially those in poorer countries suffered, while the finance sector was bailed out because it wields political power."

Francis took aim at the financial realm in a 2012 letter to Australian Prime Minister Tony Abbott ahead of the G20 Leaders' Summit and the transactions leading up to the 2008 financial crisis.

He stressed the need of all countries to protect citizens from forms of aggression that aren't so obvious -- referring specifically "to speculation lacking political or juridical constraints and the mentality that maximization of profits is the final criterion of all economic activity."

6. Tread Lightly in Technology

Pope Francis recognizes that technology has enabled some pretty incredible things.

"Technology has remedied countless evils which used to harm and limit human beings. How can we not feel gratitude and appreciation for this progress, especially in the fields of medicine, engineering and communications? How could we not acknowledge the work of many scientists and engineers who have provided alternatives to make development sustainable?" he wrote in Laudato Si.

But there is a flip side.

In the same document, the pope discusses a "technological paradigm" that dominates economic and political life -- often without discerning the good from the bad. "The economy accepts every advance in technology with a view of profit, without concern for its potentially negative impact on human beings," he wrote.

7. Expand Your Definition of 'Returns'

The ultimate goal of investing, of course, is generating returns -- but they may not always be financial.

Pope Francis acknowledged in the 2014 symposium on investing for the poor that some social responsible investments that have positive social repercussions on communities -- by creating jobs, providing access to energy, or increasing agricultural productivity -- may be less effective on the ROI front. "The financial return for investors tends to be more moderate than in other types of investments," he said.

Kaboski explained that the idea is to consider broader values -- an investment that helps the poor by providing jobs or infrastructure -- even if it doesn't pay off as high as a private financial return. "It is a different way of understanding 'bang for your investment buck.'"

 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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