Faith and Morality in the Act of Investing
The thoughts that I am presenting tonight are based upon familiar principles but, having worked with the members of the St. Charles Group to apply these thoughts to investing, I have found that they take on new meaning in this context. I have learned a great deal in this process and I am grateful for the opportunity to do so.
There are many ways to morally evaluate human action, but not all of them are created equal. When most people think about morality, they might think only about one part of the act, like their intention or only of the results that the actions cause. Each of these is certainly important in moral matters. But a good intention or a good result does not necessarily mean that action is good. If a bread winner intends to feed a family, there is a vast moral difference between the means of going about it such as doing an honest day's work on the one hand, or defrauding one's neighbor on the other. Similarly, the reason one acts can make a significant difference in the moral evaluation. If Joe gives a beggar an offering for bread, it is good that the beggar will now have food. But the result is only part of the moral consideration. Suppose Joe's reason for giving alms is not necessarily to help one in need but to influence important observers to think that he is a good and charitable person. The effect for the feeding of the hungry is the same, but the impact upon Joe is dramatically different than if he was acting out of Christian charity.
The fact that one’s acts affects the character of the person who is doing the action is a distinctive feature of Christian ethics. It is not exclusive to Christian ethics but it does stand out for what it means for Catholics. What we do changes us and each part of the act, be it the intention, or the means we choose, or the results we seek are important for one's moral well-being. The Catholic faith firmly holds to a direct relationship between faith and action, between one's salvation and one's moral life. As Pope Benedict recently reminded us in Caritas et Veritate, social responsibility is integral to the moral life. Thus we try to echo in our lives the words of Jesus who says that “not everyone who calls me Lord, Lord, will enter the kingdom of heaven but only those who do the will of my Father.” Moreover, Jesus demands that his followers be perfect, as his heavenly Father is perfect. Morally good action, empowered by the grace of the Holy Spirit, leads to moral perfection. Our actions, then, not only bring about results that can be readily observed, like a hungry person receiving food; our actions and our motives for acting change us, for good or for ill. No one can forget the dramatic scene in the 25th Chapter of Matthew's gospel when the sheep are separated from the goats.
One of the things that I have tried to get my students to understand over the years in teaching Moral Theology in the seminary is that the Church has not charged priests and others who teach with the task of teaching only moral rules when it comes to morality. The Church wants to form morally good people. There is a difference. Knowing the principles of morality and the commandments are fundamental and essential. And teaching principles and commandments is a basic part of moral education. This is only the beginning, however. The bigger challenge is the development of the virtue to apply those principles properly in every circumstance. Learning to live morally can be a life-long task and it takes a firm commitment and vigilance to put vice behind us. Growing in the faith means growing in the way we live it out in every act.
Every time we make a choice to do one thing over another, we exercise the ability that we call freedom and this freedom is a major factor in our moral development and thus in our salvation. Through the exercise of free choice we build our moral character. God wants us to act with love, like Himself, and he wants us to treat the other person as another self. The way we use freedom to treat others has a major impact upon our own life.
A critical point that all of us here need to remember about freedom is that freedom grows with our knowledge. In Catholic morality, this quality of the exercise of freedom is part of all of our choices. The education of the conscience about what is good and true is essential to growth in freedom. And, then, knowing what is good and true, one follows this with a practical (prudential) judgment as to the best means to achieve the good. This, too, is essential to freedom. If one fails to exercise freedom properly, not only is he or she likely to bring about harm to some other, he or she is also personally harmed in a moral way. The Church considers this point so important that she requires that we investigate the effects our actions will have on others if we are to avoid harming ourselves morally, or to put it another way, if I act without acting reasonably to avoid harming someone unjustly, I commit sin. This point cannot be ignored and it is critical in judgments regarding investing.
The Constitution on the Church in the Modern World for the Second Vatican Ecumenical Council, no. 27, speaks of how our good and freedom are connected when it comes to serving our neighbor. It says, “In our times a special obligation binds us to make ourselves the neighbor of every person without exception and of actively helping him when he comes across our path, whether he be an old person abandoned by all, a foreign laborer unjustly looked down upon, a refugee, a child born of an unlawful union and wrongly suffering for a sin he did not commit, or a hungry person who disturbs our conscience by recalling the voice of the Lord, ‘As long as you did it for one of these the least of my brethren, you did it for me’ (Matt. 25:40).”
You have heard it said that knowledge is power. Well, as far as Catholic morality goes, this is certainly the case. Figuring in the fact that the Holy Spirit brings to the believer gifts of knowledge and understanding through his grace, we see the Church's secret to influencing the world for 2000 years. If the faithful act knowingly and intelligently with regard to their own true good, peoples are evangelized, the poor are provided for, the life of the innocent is protected, people are saved. In the recently produced encyclical Caritas in Veritate, Pope Benedict wrote, “Charity does not exclude knowledge, but rather requires, promotes and animates it from within..... Deeds without knowledge are blind, and knowledge without love is sterile.” (2.30) So if I take the counsel of the Holy Spirit and act as I ought to for my own good, I am also acting for the good of others. On the other hand, if I ignore this, I hurt others and myself, as well. To paraphrase the pope, moral evaluation and economic development go hand in hand.
There is a hierarchy of values that we have to attend to in moral judgments and this, too, is part of the personal moral dimension that we have spoken about. We are obliged to place moral goods and evils in their proper order.
Again, the Constitution on the Church in the Modern World emphasizes this personal moral dimension in regard to basic human values in addressing this hierarchy. “[W]hatever is opposed to life itself, such as any type of murder, genocide, abortion, euthanasia or wilful self-destruction, [then] whatever violates the integrity of the human person, such as mutilation, torments inflicted on body or mind, attempts to coerce the will itself; [then] whatever insults human dignity, such as subhuman living conditions, arbitrary imprisonment, deportation, slavery, prostitution, the selling of women and children; as well as disgraceful working conditions, where men are treated as mere tools for profit, rather than as free and responsible persons; all these things and others of their like are infamies indeed. They poison human society, but they do more harm to those who practice them than those who suffer from the injury. Moreover, they are supreme dishonor to the Creator.” (no. 27)
It becomes evident then that good stewardship and investing, given that these involve choices and the exercise of freedom, have a grand moral dimension. In the typical case, I would say that most investors act with the intention of gaining a good monetary return. There is nothing wrong with that. In a just order, capital is allowed a return in the processes of production. But there are other things going on when we put our money to work in someone else's hands and one becomes morally responsible for the way we allow others to use our resources. We are morally required to inquire about how others are using our money. One is not simply going to be affected by the amount of return on an investment, morally, an investor is going to be affected by the way he or she exercises the ability to make choices. If, as I said before, my eternal salvation and my moral life are directly related, do I know what I am doing to others whom Jesus has instructed me to treat as my own self, and what the effect is upon my own moral character? If not, why am I not asking the questions and getting some answers.
Of course, now a whole host of questions come to mind. For example, whose values are at work in a portfolio or company or industry? Am I contributing to some serious evil by my holdings without even knowing it? How can I make better choices? How can I become a more morally astute investor? If I know that my investment can contribute to an injustice such as abortion, embryonic stem cell research or unsafe working conditions, how can I find better alternatives and reduce the evil consequences?
This is really very exciting to consider. This is a relatively new area for Catholics and an area where much good can be done for the world and for ourselves. The lay faithful and religious organizations have before them one of the greatest opportunities ever to change the world through the practice of their faith in the choices about investing. The first thing that one has to do is to demand that investments be consistent with the values of the faith. This begins with a decision to not settle for compromise in these matters and begin to do more good than we previously thought possible simply by our choices of investments.
This is where it is important for investors to know how their investment brokers select the companies in their investment portfolio. I want to digress a bit here and refer to one aspect of my work as a moral theologian. I have been involved for a number of years now with Catholic physicians and other health care professionals. I work with them in developing their own knowledge of Catholic moral principles applied to health care and the treatment of persons. In turn, I know where I can send people who are seeking solutions to medical issues that have moral implications. Moreover, these experts help me as a moral theologian to clarify new questions and develop moral means of addressing complex issues. In the end, this is a service to the Church on a number of levels.
With the request of the members of the St. Charles group to assist them in developing methods for proper screening of companies to place in a portfolio that would be consistent with Catholic values, a similar process takes place in the area of investing. Properly formed in the principles of morality that apply to judgments about participation in the evil that some companies are involved in, investment advisors are able to screen out companies that violate Catholic moral values to an unacceptable degree. They also become better prepared to assist investors in making better moral judgments in the stewardship of their own resources. And, in a way similar to the development of the application of moral principles in medical matters, development takes place in the moral area regarding the application of principles to questions about investing. Catholic investors who insist upon the promotion of Catholic values in business can have a significant impact in changing company policies over time when these companies see investment capital going elsewhere to more moral enterprises. As companies receive questions and feedback from investment firms and investors about their business practices, and as their responses begin to influence the degree to which they can garner capital, these same companies will be very concerned to develop new ways of doing business consistent with the values of concerned investors.
Perhaps you have felt that you just did not know the best way to serve God and the Church through your business or investments. I am happy that the St. Charles group have helped to develop a new approach to investing. We need not be passive and simply accept that if we want to invest we have to accept the status quo. Investing can be an exercise of faith, not just a gamble where moral values are concerned. Insist that your capital resources be used in a manner that is consistent with your faith and values. This faith-in-action approach to investing is exactly what is needed in the world of investing in an age of globalization. I believe that the St. Charles Group has succeeded in developing an avenue for investing with a distinctive Catholic character; and we can all learn from it.
In closing, I would like to paraphrase Pope Benedict again. I am operating off of his statements about the power of consumers who group together to achieve moral purposes. Investors have similar rights and duties. [Investment]… “is always a moral act.” Thus the investor “has a specific social responsibility, that goes hand-in-hand with the social responsibility of the enterprise. [Investors]… should be continually educated regarding their daily role, which can be exercised with respect for moral principles without diminishing the economic rationality…” [of the act of investing]. As Catholics working cooperatively we can make a difference and bring about enterprises which are more sensitive to Catholic values.