Related to the second goal of the Faith for Earth Initiative Strategy, faith-based investing remains a niche within the overall socially responsible investing theme, but involves the idea of using ethics to guide monetary decisions.
Religious investments may be governed by beliefs and religious laws. Islamic financial institutions, for example, ban interest on investment and use the Sharia law of finance including Mudaraba (Profit and loss sharing), Wadiah (safekeeping), Musharaka (joint venture), Murabaha (cost plus), and Ijar (leasing). The Islamic financial system places equal emphasis on the ethical, moral, social and religious dimensions, to enhance equality and fairness for the good of society as a whole. Similarly, Catholic finance system and financial activities are based on moral principles from the interpretation of Christian religious texts and from the doctrine of the Roman Catholic Church (such as Catholic social teaching). While the Society of Friends (Quakers) forbids financing warfare and Jainism strictly uses the principle of “ahimsa” or non-violence to guide investments.
Responsible policies for investments
Some faith-based organizations have also adopted policies to encourage corporate social responsibility practices by those using their investments incorporating environmental and social services and even human-rights based programmes as in the case of Christian investors. Some faith-based organizations use what is known as socially responsible investment (SRI) or faith-consistent investment (FCI). These types of investments aim at making a positive impact on the social welfare of their followers.
Partnership with UN Environment
With the involvement of faith-based organizations, from social and environmental perspectives, UN Environment could partner with faith-based organizations to pioneer modern forms of responsible investment. The UN Environment Finance Initiative, known as UNEP-FI, provides a global partnership platform with the global financial sector. Coupled with its strong focus on policy, the initiative could facilitate the most needed coupling of remodeling investment and the impact of financial reforms needed to achieve the SDGs involving faith-based investments. Moreover, the Economics of Ecosystems and Biodiversity (TEEB) is a global initiative focused on “making nature’s values visible”. Its principal objective is to mainstream the values of biodiversity and ecosystem services into decision-making at all levels. Green economy is yet another programme of UN environment where faith-based organizations could be natural partners where greening of own establishments, or investments could lead to mutual benefits.
Faith-based organizations represent a sizeable opportunity for Socially Responsible Investment (SRI) funds and reasonable case for wider impact investment and ethical businesses. Through UNEP FI’s Positive Impact Initiative a new paradigm for engaging faith-based organizations could be explored. UN Environment will not only encourage the “no harm” approach, but will also push for innovative green and sustainable investments such as promoting investments in large scale renewable energy, sustainable transport, and sustainable cities projects. The positive green responsible investment will be a key corner stone to mobilize faith-based investments.
Finally, to hope to make partnerships with faith-based organizations, the financial credibility of such partners needs to be carefully reviewed or the financial capacity should be strengthened. Thus, a careful review of such faith-based organizations should be done as part of the due diligence check process by developing clear selection criteria.
For more details on the finances, consult the GOAL 2: Green Faith-Based Organizations’ Investments, Operations and Assets in the UN Environment Strategy for Engaging with Faith-Based Organizations document.