Principles of “Values” Investing

The following represents the outline of a speech given to the Acton Institute’s university symposium, held each June in Grand Rapids, Michigan. The symposium features nearly 1,000 people from dozens of countries around the globe who come together to advance their understanding of liberty economics within the context of a Biblical anthropology and worldview. I have been honored to be a faculty member of the university for several years now and focused my talk this year on the controversial subject of “values” investing (note that there is nothing in this piece and was nothing in my talk which remotely constituted “investment advice”; the emphasis here is exclusively on an ethic of investing and the worldview considerations a thoughtful person of faith may want to have in engaging the process)

The assigned topic is to address the moral implications of investing

In Christendom, “moral values” mutual funds have had a certain appeal to them (though that has mostly gone away after a decade of woeful performance)

Outside Christendom, “Socially responsible investing” has become a $3 trillion dollar industry if you believe industry data and market metrics (12% of the $25tn of global investable assets)

* Driven far more by marketers than ideologues

The commitment at the Acton Institute is to a free and virtuous society, and my speech needs to address whether or not our freedom to pursue optimal investment returns in our portfolios is in tension with our desire for a virtuous society.

If it is, where, and what do we do about it?


My Eleven Takeaways on the Subject of ‘Values’ Investing

a – Any form of investing that fails to aspire to the value of profit-making is not investing at all, and certainly not within any kind of Biblical value system. “Growth” is not merely an economic term; it is the story of creation and God’s plan for His creation always and forever

b – Any form of investing that fails to acknowledge man’s dominion over creation is not within the Biblical value system; a better way to say this is that to explicitly deny man’s dominion over creation in our investing approach is highly problematic

c – To pursue something called “socially responsible” investing means that there must be agreement as to what is socially responsible. How could the plethora of “strategies” offering this all be operating within the exact same framework?

* State-subsidized unprofitable “green” investing may be “virtuous” to some; it is antithetical to virtue for others
* If one wants to associate their investments with a certain ethical image or behavior trend I would recommend avoiding BOTH a filter system rooted in Baptistic fundamentalism AND one rooted in secular environmentalism

d – Worry as much about the SYSTEM of investing as the OBJECT of investing. A faulty system rooted in any number of worldview fallacies which ends up owning a company that has a morally defensible platform is worse to me than a system that is solid and coherent and Biblically intelligent which ends up owning a stock that is questionable

* Greater Fool theory
* Momentum scams
* Astrological schemes

(More on legitimate systems below)

e – Any standard or value imposed upon the investment process that requires the companies or people involved in running the companies to be functionally outside of the fallen world is both undesirable and impossible

* If a company happens to make a super Godly widget and has an employee benefits package that investor A thinks is really ethical, how could an investor know what their vendors, banking partners, and counter-parties are doing? One way or the other, EVERY investor in ANY company is touching something that has a policy we may not like
* Tribalism is no virtue, for an investor or otherwise

f – Any approach to investing that gives assent to the pagan idea that everything in life is a series of random and chaotic events with no sense of created order or rational cause and effect is not within any kind of Biblical value system (and is a denial of the Doctrine of Creation)

* God not only created the world but created it to be governed by laws. He created it with a fair amount of chaos but it is a chaos He controls and a chaos that stems from controlled things within the laws of physics, mathematics, logic, and economics. THIS IS NOT TO SAY that investing can EVER be purely predictable and easy; there is chaos and disorder within investing; but our decisions carry consequences and no part of the investment process is immune from the laws of nature
* I also wouldn’t commend any system of investing that presupposes that the future will always look like the past. Investing competence and worldview seriousness would require something beyond fideism, and would fundamentally deal with changes in market environments, technologies, interest rates, efficiencies, and macro circumstances

g – Biblical teachings on freedom of conscience and obligations under Romans 14 to avoid actions done in doubt apply to investing just as they do to other human action. Smoking is a matter of conscience, and so is investing in companies that make cigarettes. This principle means some may buy a tobacco stock, and some may not

h – Where individual companies make a product or service that is outside of the realm of possibility of good faith or Christian conscience, I don’t have an absolute standard to apply to ownership of that stock – just a word of Proverbial wisdom to avoid it. Not owning a particular stock should never make or break a particular investment outcome in a properly diversified portfolio, so just pass on it

i – Any system of investing which seeks to strike risk from the process or claims to be able to do so ought to be shunned as contrary to basic reason and contrary to the intention of Biblical investment, which is the process of profiting from prudent risk-taking

j – The great “value” of investing is in the ability to participate in the growth of profitable enterprises, the same enterprises that innovate, improve the quality of human life, employ thousands upon thousands of people, create legitimately new wealth, and produce competition with other businesses which drives prices down and the quality of product up. The “value” of investing starts with the “value” of markets, and no one who fails to appreciate the intrinsic value of markets (created by a sovereign God) will ever find a worldview of investing which makes sense or captures the beauty of for-profit investing

k – The investor who seeks an optimal return is to be commended, not condemned. The investor who is epistemologically self-conscious of his worldview in investing is to be doubly commended

Worldview recap: God as creator who wants to see growth and profit; humans as image-bearers who have dominion; God as sovereign; laws of logic and nature and economics as God-created; matters of conscience as ethical and Scripture-bound; the merit of Proverbial wisdom in the gray areas; the intrinsic value of markets in the created order – these things are all part of the investment process whether we are aware of them or not, and when we are aware I believe it to be doubly honorable

Closing sentiment:
Various forms of real processes with empirically testable propositions can be considered and decisions can be made on investment merits with which there will be freedom to disagree. But developing a SYSTEM of investing in the FREE and VIRTUOUS society must seek the freedoms and profits of markets and be rooted in the virtues of the Biblical Worldview