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That's faith5.com/slash shop. ESG investing promises to align your portfolio with your values, but whose values are actually shaping the standards? Hi, I'm Rob West. Environmental, social, and governance ratings are often presented as neutral measures of corporate responsibility, but they can reflect a moral framework that conflicts with biblical convictions. Nick Schmitz joins us today to explain how ESG can differ from faith-based investing and why Christians should pay attention to how their shares are voted.
And then it's on to your calls at 800-525-7000. This is Faith in Finance, biblical wisdom for your financial decisions.
Well, it's a pleasure to welcome Nick Schmitz to the program. Nick's distinguished career has taken him from the Marine Corps and Wall Street to the university classroom. Most recently, he was appointed the inaugural Trey and Nina Treviesa Endowed Chair in Finance at the Catholic University of America and also serves as a board member for the Christian Investing Council. Nick, we're glad to have you with us today. It's great to be with you, Rob.
Nick, ESG stands for, of course, environmental, social and governance.
So what does an ESG rating actually measure? And let's talk about how that approach differs from evaluating investments through a faith-based lens. Sure. ESG evaluates environmental, social, and governance factors, but it's defined by secular ratings agency, and it can ship with political trends. You know, faith-based investing starts with fixed moral truths: human dignity from conception to natural death, justice, stewardship.
and measures companies against those principles. A firm can score quite highly on ESG yet violate face screens, for example, by actively funding abortion services. Yeah, that that's really helpful and an important distinction.
So give us a real world example of a company or shareholder proposal that received favorable ESG treatment but raised significant concerns for faith-based investors. Sure, I can give you many, but just name one or two. In 2023, a shareholder resolution initially co-filed by Planned Parenthood asked Google to label Crisis Pregnancy Centers websites misinformation and buried them in the search results. It was eventually consolidated with another related proposal and then re-filed again in 2024. But the point's still the same.
ESG advisors flagged the proposals as, quote, pro-reproductive rights, and that would be considered anti-ESG.
So, your default proxy services that were ESG aligned probably would have recommended a yes vote on that vote. whereas faith blind investors should be voting No because it weaponized corporate power against the unborn and pro-life ministries. While there may be occasional overlap on some issues, don't fall for that argument. There are a whole slew of issues that are core to our Christian mission of evangelization that secular ESG frameworks would categorize as anti-ESG. This could include fundamental Christian interests such as pro-life proposals, non-discriminatory charitable matching programs, religious discrimination in the workplace, Christian decency and pro-family programming from our largest media companies.
Things most any pastor in America would find abhorrent and antithetical to their ministry work would often be pushed by pro-ESG frameworks. Wow. Yeah, that is really important. And alongside Nick, several colleagues, and even our friend Jerry Boyer, I know you helped to overhaul the proxy voting policy for Catholic investors.
So talk about what prompted that effort and what changes were involved. That's right.
Well, we were asked to at the Catholic University of America, and it resulted by the request of.
Some asset managers and consultants within the industry, when people realized how incongruent or misaligned some of the guidelines were that were purporting to be Catholic guidelines, they asked us at the Catholic University of America to propose new guidelines.
So, for most investors, two giant proxy firms, ISS and Glass Lewis, automatically process their recommendation votes. Asset managers delegate to them, giving these gatekeepers outsized sway over thousands of resolutions a year. For us, the U.S. bishops in 2021 had published a set of guidelines for Catholics to stop outsourcing blindly and instead vote proxies and engage management. Our team were asked to build our own set of policies that mirror the guidelines of the bishops.
We're also on ISS, Glass Lewis, Broadridge, and Egan Jones now.
So essentially everywhere. Incredible. Folks, today we're talking about where ESG and faith-based investing differ. And as our guest Nick Schmidt said, there are big differences. We'll continue to unpack this.
Your call is coming up a little later in the program as well. 800-525-7000. Much more to come. Stick around. Have you ever started a budget only to watch it fall apart a few weeks later?
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That's faithfi.com slash preborn. ESG Investing promises to align your portfolio with your values, but the big question is: whose values are actually shaping the standards? We're talking today about where ESG and faith-based investing differ. Delighted to be joined by Nick Schmitz, professor of finance at the Catholic University of America and board member for the Christian Investing Council. And Nick, before the break, you were unpacking really some of these stark differences between ESG and faith-based investing.
I'd love for you to share an example of faith-driven shareholder engagement that influenced a company's decision or perhaps brought greater attention to an important issue. Sure. For example, last year, faith-based investors urged Costco to reconsider stocking the abortion pill Mifipreston or Plan B. There's about 15 million of them distributed a year in America. And these investors presented data on customer backlash, legal risks, and moral costs.
Costco willingly chose not to stock the drug. This is a big pro-life when ESG screens would have ignored or voted against had it gone to a shareholder resolution. Interesting. Yeah. And that's just one of, of course, many examples that could be shared.
You know, the letter E, of course, in ESG is environmental. And I think some people assume that faith-based investing focuses primarily on social or moral concerns and perhaps gives less attention to environmental stewardship. How do you respond to that? You know, I don't think it's quite true. Although Christians may disagree about how specifically scripture commands us to steward creation, waste and pollution matter.
We should back companies reducing real environmental harm without crushing the poor or destroying jobs. How to do this is a very prudential judgment. And disagreements about how and respecting a broad diversity of sincere opinions on that matter are quite healthy. ESG created an unhealthy and intolerant kind of binary system where there was no room for debate among people of good faith over one size fits all solutions. Yes, that's helpful.
Now I've heard you say, Nick, that financial advisers and investment managers should have, quote, skin in the game on these issues. What does that mean in your mind? And why is that alignment important for investors? Yeah, and just full disclosure, I didn't invent that. This happens to be the title of a popular finance text by Nassim Taleb.
I happened to assign it to my students. But people trust costly signals. For example, when I was a fund manager, I used to invest my own capital in the same strategy I was recommending to investors. you know this alignment discourages gimmicks and rewards long-term discipline Faith investors should look for managers who share both their convictions and their downside risk. It's always tempting to avoid sharing downside risk on and off Wall Street.
And we all fall short, but I don't think it's controversial to say that few other virtues were so emphatically demonstrated by Christ. Yeah, that's well said.
Now of course, as we talk about the differences between ESG and faith based investing, they're stark and we've highlighted some of the ways that's the case. But I'd love for you to maybe press into some of the most common misconceptions people have about both ESG and faith based investing. Sure. I mean, a few, you know, the first would probably be that ESG is neutral. In reality, it carries its own moral agenda that is often opposed and antithetical to biblical truth.
You know, two might be that faith-based screens, proxy voting, and engagement are only a negative practice. In practice, Christians can and should do engagement and improve companies. This is not just a list of thou shalt nots. Um you know Three, maybe that faith-based investing is somehow an attempt to establish a theocracy in an otherwise morally neutral entity of a corporation. It's just testifying to the truth and expressing your deeply held convictions through the shares you own in your private property.
If Christians don't do that. uh then other moral or immoral frameworks will fill the vacuum. Democratic capitalism is a wonderful pluralistic system, and Christians shouldn't feel pressured to check their deeply held convictions at the door while others aggressively push theirs. And finally, I'd say that investors have no influence. I suppose you could believe that about political elections as well.
But when we testify the truth in communion, that's powerful. The last decade or so demonstrated that stakeholder interest groups who own little to no shares can influence the system. Imagine what Christians could do as the rightful majority shareholders when they act in communion. Yeah, that's exactly right. And to think about that is pretty stark in that you put both Protestant and Catholics together, and that represents more than half of the public market investments today, which is just massive.
Thought on it.
Now, Nick, for listeners who want to understand whether their investments reflect their convictions, what would you suggest they ask their advisor, perhaps the questions they would ask, or even their employer-sponsored retirement plan or investment manager? Definitely confirm the alignment with your goals, with your advisor or your retirement plan. You know, if you own a 401k plan or you invest in a large secular firm, ask your 401k provider how proxy votes are cast and demand a faith-aligned policy. For those using the large secular asset managers like BlackRock, State Street, Vanguard, demand a choice with an aligned set of guidelines. And don't assume the initial choices they offer you and their labels mean there is Christian alignment.
Remember you pay them fees, they work for you, and you can shop around. That would be number one, I think. Also, consider Christian or Catholic mutual funds and ETFs that are transparent and publish their results and methods on screening and proxy. Finally, I'd just say join shareholder coalitions to co-file resolutions or support engagement efforts wherever you can. There's a whole list of ways to get involved.
Yeah. I mentioned Nick serves on the board of the Christian Investing Council. I'm on that board and many others. And if you'd like to check out the work of the CIC, go to ChristianInvestingCouncil.org. Coming this fall, the CIC will actually help you be able to uncover exactly what investments that are marketed to Christians actually stand for and what practices they're employing as they build their portfolios, hopefully, to serve the needs of Christians.
Nick, I know your career has taken you from serving as a Marine officer to studying as a Rhodes Scholar and managing a hedge fund.
So I'd love for you as we begin to wrap up here today to share some guidance to young believers who want to pursue excellence in finance without allowing ambition or success to become an idol. What would you share? Yeah, and I try to tell my students this or communicate it or convey this at least. You know, character compounds much faster than credentials. Work ethic, integrity, and courage open doors in the long term.
I just say, keep Christ at the center of your ambition so you remain grounded and that doesn't become an idol. And finally, I'd say be willing to suffer for the truth. Markets and heaven both reward conviction. You know, on Wall Street, there's horizon arbitrage, is a phrase that investors that are more patient are usually rewarded. It's a smart play on Wall Street.
So keep your investment horizons long, not just long term, but eternal. Wow, that is well said. And let me just finish with this, Nick, and got just twenty seconds. Are you encouraged about where we're headed with faith based investing and the opportunity for Christians to bring their values into their capital? Definitely, I think there's a sea of change and awareness being raised, particularly in the last four to five years.
You know, faith-based investing, it used to be pretty opaque and it was hard to decipher. And I think people are more aware of what's at stake these days, and there's a lot of ability to collaborate and move the needle. Yeah, I couldn't agree more. Nick, so appreciate you, my friend. Thanks for your time today.
Thanks for having me, Rob. Absolutely. That's Nick Schmitz, professor of finance at the Catholic University of America and board member at the Christian Investing Council. If you want to learn more about the CIC, go to ChristianInvestingCouncil.org. Back with your questions after this: 800-525-7000.
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I'm Rob West. Looks like we have one line open today: 800-525-7,000. You can call right now. Let's go to Illinois. Catherine, how can I help?
Hi, Rob. Thank you for taking my call. I have been working as an elementary teacher and I'm trying to supplement my salary.
So someone introduced me to selling insurance. And so I went ahead and I started and got a license in life and health. And I'm asking you whether Hi, I could go with the company that my friend invited me, which is WFG. Or what would be the best way to use this license on a part-time basis? Yeah, it's a great question, Catherine.
And, you know, I think being licensed to sell life and health insurance can be rewarding. If you like helping people, if you're inclined to just the way God has wired you to networking and talking to a lot of people and then really serving them well and trying to help them in a really important area, and that is to protect their families and offset a significant risk that exists. I would carefully evaluate the company you're going with, also how you're compensated, and whether the business model aligns with your values and personality type as well. I mean, the benefits to just selling life and health insurance is, you know, you've got flexible work hours and supplemental or full-time income. You can help people with important protection.
You know, it can be a Pathway into the broader financial services industry. And I think if you can build a strong client and referral base, you can see compensation that grows. But it's commission-based, which means it's unpredictable. And, you know, especially early on, and it can take time and persistence. And then I think you need to look carefully at the company you're working with because a lot of times, and I'm not surprised that you were invited into this by a friend, because that's really the business model of the company you've mentioned, and many other like them.
They're not doing anything wrong, but it's more of a multi-level marketing structure, which just means you not only earn from selling products, but also from recruiting and developing other agents. And it's important to understand that where is the emphasis for the company? Is the emphasis on recruiting more representatives or is the emphasis on serving clients well? both in terms of the quality of the product and the pricing. And I think if you want to go into selling insurance, that's great.
Again, it can be rewarding and flexible, and you can make some money if you stick at it for a while. But I would make sure that you're partnering with that company that really wants to serve people well with a competitive product. And perhaps you ought to look at an independent insurance agency that doesn't have a model built on you recruiting more representatives and perhaps is more of what's called a captive insurance agent that you feel aligned with in terms of your values.
So that would be my advice. Again, nothing wrong with this industry, but I might look around in terms of making sure you find the right fit before you commit to one particular company. Thanks for calling, Catherine. I hope that helps. Let's go to West Palm Beach.
Cynthia, how can I help? Hi. I have a quick question, and I don't want to take up too much of the time. About four months ago, I received an invitation from a what we call or what I thought was a trusted online banking institution, an invitation to open a new savings account with them and earn a cash bonus If I left the funds there, Yeah.
Okay? Fast forward. Four months now. I left it in there for more than 90 days just to make certain that I qualified. I'm being told now that I didn't do something.
I was supposed to enroll in the promotion.
Well, the invitation I only said make the deposit by a given date and leave it there for ninety days. There were no other instructions in my invitation.
So, I don't understand why they're refusing. Can I call the name of the institution or you don't want me to do that? Yeah, you know, it doesn't matter. I mean, I think that the key idea is that, you know, they made a promise that you thought you complied with, and they're not making good on it.
So, regardless of who it is, first of all, let me just say I know this can be frustrating. And so, I'm sorry you're going through this, Cynthia. I'm glad you called, though. You know, this isn't rocket science in terms of what I'm about to tell you, but I do think the next step is for you to call and ask for a supervisor or somebody on the escalation team where perhaps they have a little bit more ability to resolve the problem if you can show that you met the promotional requirements.
So, you're going to want to review those terms and conditions carefully. You know, many bank bonuses do require entering a specific promo code, or you have to enroll with a designated link, or certainly you have to maintain a minimum balance or, you know, keep it open. For a certain period of time, you just need them to explain to you if you didn't meet that, why? What was it that you missed? And if you believe that was not communicated clearly, then you can make that case to the supervisor or the escalations department.
Because if they didn't honor their advertised offer, you certainly can file a written complaint with the bank.
So there's a record of the dispute. And then if they don't resolve it, your next step would be to go to the CFPB, the Consumer Financial Protection Bureau, and they take those complaints seriously and are required to respond actually.
So if you just go to your search engine and type in Consumer Financial Protection Bureau, that really is the purpose of that government entity is to protect consumers, specifically in the area of financial accounts and financial products.
So I would say that's probably your next process. You know, I wouldn't close the account until you've exhausted. The appeal process because keeping it open is perhaps one of the promotion's requirements. Does that make sense? It all makes sense, and I want you to know that I did everything that you just mentioned.
I called in. I got it escalated and escalated and escalated. And it seems as though they're all coming back with the same excuse. That I needed to, and you know, they apologize that they can't do anything about it.
Well, what I'm thinking is: why can't you do anything about it? You still have my money sitting on deposit there, and it's been there for the required amount of time. Let's say I did miss a step. I followed your instructions according to your invitation to me to open this account, and I did that. I moved my money from where it was.
Making money and brought it here to lose my money.
So I think the consumer What is it? Consumer financial protection bureau? That would be a good question. I think it is. And they do take those seriously, and they are required to respond, and perhaps that would get their attention.
In the future, I would save screenshots of the offer. And the confirmation page because those records can make all the difference if there's ever a dispute over whether you qualified.
So let's make this a learning opportunity that we can all benefit from, Cynthia. But I appreciate you checking with us. Hopefully, this will be resolved successfully. Thanks for being on the program today. Big thanks to Adam, Taylor, Patty, and everybody here at FaithFi that makes this possible.
If you'd like to support the ministry, go to faithfi.com/slash give. Have a great weekend, and we'll talk to you next week. Bye-bye. Faith in Finance is provided by FaithFy and listeners like you.
