Category: Resources

Making MegaMoves

Cultivating and Focusing Resources to Sustain Your Mission’s Impact

Introduction

Across the country one sees the need for affordable housing, quality schools, edifying worship spaces and the spiritual and mental grounding that comes from an active faith life. Yet, one also witnesses the declining Catholicity in society as evidenced by young adults declaring no religious preference and internal tensions in the Catholic Church. This is the same Church that created centers of learning (e.g., universities), promoted universal education for all (including disadvantaged immigrants) by building a vast parochial school system, and provides millions of dollars to the needy every year.

How does the Catholic Church begin to address these contrasts and existential issues? Though we are assured by the Lord’s words that the Church will always exist, how many souls will be lost if things continue on the current trajectory? And can your specific parish, diocese, school or religious order maintain its impact under the same configuration?

A first, needed step is to adjust to a missionary or apostolic mindset. Second, one must think through (i.e., plan) how to best deploy or repurpose temporal assets to achieve mission impact. We know most clerical and religious leaders (including paid and volunteer laity) have not been trained in strategic planning or project management, or are not experienced in real estate development or major financings. Yet cumulatively they are in charge of billions of dollars of real estate holdings. This skills gap is daunting and can be paralyzing. But we know that, with God, all things are possible, and these challenges can be methodically and faithfully confronted.

Major Projects for Timeless Missions

This guide – Making MegaMoves: Cultivating and Focusing to Sustain Your Mission’s Impact– offers ideas for securing the future of your Catholic institution by more effectively undertaking strategic initiatives and large projects, to bring corporal and spiritual works of mercy to life. Our friends at VeraCruz provided great insights into how Catholic institutions can best undertake complex initiatives or finance their largest projects while sizing and managing risks.

Such mega moves might include repositioning or repurposing existing properties, constructing new facilities, reconfiguring organizations, adjusting governance or pursuing other strategic initiatives. Such initiatives – even if well-planned and necessary – are at risk of becoming a liability and public flashpoint if they are poorly executed or unsustainably financed.

So then, what are the keys to successfully completing major initiatives? It starts with understanding their common feature: they are big, complex and require expertise, collaboration among various disciplines and the use of data and feedback to guide decision-making. These strategic initiatives – such as reconfiguring a Province (or Diocese), creating a new cathedral, or building a college dormitory – may only take place once in a generation. In other words, they constitute high-impact, low-frequency events.

Mega moves are important to your organization’s future, entail significant risk, and require collaboration with a broad range of stakeholders. Typically, these projects require planning, knowledge and execution skills that few organizations have in-house. In addition, most Catholic institutions and leaders are not accustomed to overseeing these types of infrequent and large projects. Initiative leaders are required to assess and select from a range of viable scenarios, that is, making key decisions. A solution is to complement resident knowledge and skills with external expertise, resources and methods to accomplish these major undertakings.

Maintaining Momentum and Enthusiasm

By preparing thoroughly and engaging the right expertise at the right times, initial enthusiasm for a new project can be sustained, donors and other supporters will feel valued, and any delays, execution errors, cost escalation or financing missteps can be avoided.

In the following pages, we’ll touch on these and other topics:

• Exploring opportunities to drive major positive change for the institution
• Looking at existing assets in new ways, and envisioning exciting large-scale projects
• Building momentum through dialogue and rigorous planning
• Getting the right team together, drawing on internal and external expertise
• Understanding the dynamics of financing and future obligations
• Appointing a “conductor” to orchestrate efforts and keep the tempo of progress

CIS created this resource to help you pursue mega moves with knowledge and confidence, in keeping with the mission of the CIS Institute, with its range of eBook, articles, videos, webcasts and podcasts. In creating this eBook we’re delighted to have collaborated with VeraCruz Advisory, a firm that has helped Catholic and other nonprofit institutions to fulfill their missions by providing strategic, financial and enterprise consulting.

Please enjoy this resource and feel free to share your comments and questions with us at info@catholicinvest.org.

Practicing the Art of Advancement

Five Tenets for Building a Culture of Philanthropy in Your Catholic Institution

Introduction

We are pleased to share this guide, which offers ideas for optimizing core fundraising
activities so they can contribute more powerfully to your Catholic institution’s financial
resiliency. We created this guide as a supplement to “The Art of Advancement,” an eBook
that covers essentials such as enhancing financial management practices, creating an
advancement function, making fundraising more strategic and building a strong endowment.

“Practicing the Art of Advancement” centers on 5 tenets for revenue-raising success:

1. Transforming your Annual Fund into a durable foundation for fundraising
2. Ensuring that your Events are driving results (not just wearing out your team)
3. Keeping your Capital Campaigns on track and effective
4. Effectively engaging large donors for Major Gifts
5. Navigating conversations about Planned Giving

More and more, Catholic institutions – from schools to hospitals, dioceses, foundations and
religious orders – are making advancement a priority. The reason: Without a strong
advancement program, some organizations may struggle or fail in the decades ahead due to
shifting demographics and donation practices among Catholics nationally.

CIS created this resource and its companion eBook to help you meet this challenge. In
creating both of these guides, we collaborated with Partners in Mission, a group with
extensive experience in helping Catholic educational institutions to create and strengthen their
advancement programs. These resources are practical and written in plain language, as are the
many other eBooks, videos and webcasts on our CIS Institute website.

For a copy of the full version of Practicing the Art of Advancement, please email:
info@catholicinvest.org.

The Art of Advancement

Creating a Culture of Philanthropy to Secure the Future of Your Catholic Institution

Introduction

We are pleased to present you with this guide – “The Art of Advancement” – which offers ideas for
securing the future of your Catholic institution through advanced financial and fundraising strategies.

Within this guide you will find clear, concise information about:

• Adopting stronger financial management practices
• Creating an effective advancement function
• Emphasizing revenue-generation activities that are designed to yield desired results
• Building an endowment to sustain your institution over the long term

Today’s Catholic institutions – whether they are schools, hospitals, dioceses, foundations or religious
orders – are increasingly placing a priority on advancement, a practice that steps beyond such
traditional activities such as development and fund-raising. When advancement is integrated into the
culture of an “institution” it can enhance not only its financial well-being but also its reputation,
engagement with the community and visibility for its mission and how it brings value to the world.

A comprehensive advancement effort is absolutely critical to the vitality – or sometimes even the
survival – of many Catholic institutions. Most organizations have managed to sustain their missions
for many years against a range of social, cultural and financial headwinds. But the coming decades
may be even more challenging economically due to changing demographics and donation practices
among Catholics across the country.

One telling illustration of this change is the experience of a Catholic high school that has seen a
major decline in financial support from its alumni. A historical analysis found that between 1950 and
1980, about 15% of alumni donated to the school; by contrast, between 1980 and 2020, only 5% of
alumni donated. While this is just one school’s analysis, it reinforces what Catholic institutions all
recognize: that now is the time for bold leadership and concerted action to build a strong
advancement program to sustain our missions.

CIS has created this resource to help you meet this challenge with practical solutions, in keeping with the spirit of the CIS Institute with its range of eBooks, videos and webcasts. In creating this eBook we
were fortunate to have collaborated with Partners in Mission, a group with extensive experience in helping Catholic educational institutions to create, develop and strengthen their advancement
programs. This eBook provides a general overview of advancement principles; a companion eBook offers more in-depth ideas for how to optimize essential advancement programs for success.

For a copy of the full version of The Art of Advancement, please email:
info@catholicinvest.org.

Understanding the Role of Global Equity

Introduction

Leaders of Catholic institutions face unique challenges in ensuring the vitality and durability of their organizations. Dedicated to advancing the faith and serving humanity, they must constantly fund-raise and manage spending to avoid a future financial crisis. Many such organizations create endowments and form investment committees to build a more durable financial platform that can ensure a continuing flow of resources for those who rely on them – students, communities, or disadvantaged people around the world.

Catholic endowments often invest with the goal of achieving a long-term return target of “CPI+5%” – which is the U.S. inflation rate (as measured by the Consumer Price Index, or CPI), plus 5 percent. This target is popular because, over long periods of time, achieving such returns enables institutions to provide essential aid while also growing, in real terms.

In recent years, the strategy for achieving the CPI+5% has evolved for Catholic institutions. In decades past, fiduciaries were able to rely on positive returns from the fixed income (e.g., bond) portion of their investment portfolios, which comprised roughly 40% of their overall endowment funds. The remaining 60% of these portfolios was comprised of equities (typically U.S. stocks), private equity, venture capital or other instruments. This 60/40 ratio was favored by fiduciaries because the 40% fixed income portion not only produced reasonable returns, but also helped to lend “ballast” to the portfolio to allow the 60% equity allocation to pursue higher returns, albeit with commensurately higher volatility. These two engines, taken together, often helped fiduciaries achieve the CPI+5% goal.

For a copy of the full version of Understanding the Role of Global Equity, please email: info@catholicinvest.org

Exploring the Potential of Hedge Funds

Introduction

For many investors, the investment universe in recent years has largely been divided into two categories of asset classes: Equities and Fixed Income. The first category, which entails buying shares in companies, is typically seen as the “risky” allocation of an investment portfolio, characterized by sometimes sharp leaps and drops, but historically delivering positive returns over time. Equity investments in public companies, which are traded on public exchanges, get the most attention, but a large private-company universe also plays a role in institutional equity allocations (Request our eBook on this topic).

The second broad category of asset classes is Fixed Income, which comprises mainly government and corporate bonds. Traditionally, these investments have been viewed as a portfolio’s “ballast”, reducing risk while delivering returns that are more predictable and less correlated with equities. But fixed income investments’ effectiveness in this role has come under increasing scrutiny in recent years. This is because interest rates have reached a level where low yields have lessened the ballast effect also making it more difficult for organizations to generate the returns they depend on.

As illustrated in the chart below, the yield on 10-Year U.S. Treasury Bonds has fallen dramatically since 1990, reaching historic lows this year. These yields disappoint investors even more when we consider that they approach a net zero or even negative return when examined in the context of an inflation rate that’s currently near the 1.5% range.

Leaders of Catholic organizations frequently ask us for the basic facts about hedge funds, and how they might potentially benefit them and their missions. Here are some of those basics, which we’ve tried to explain as clearly as possible. We hope you find this guide useful.

For a copy of the full version of Exploring the Potential of Private Equity, please email: info@catholicinvest.org

Many investors – institutional and retail alike – deal with the complexities of investing the same way: by sticking to the most familiar or comfortable path. On the surface, that seems like a wise decision, one that avoids taking unnecessary risks with scarce financial resources. But, when we look deeper, we realize that every investment option – regardless of how “safe” or “risky” it may first appear – possesses certain qualities that could make it attractive under the right set of circumstances.

Among the investment options available to institutions, private equity might be the least understood. Thanks to the media, private equity firms have an aura of mystery and glamour that makes many investors keep their distance. This reaction is particularly true for Catholic institutional investors. Over the years we have visited with hundreds of Catholic organizations regarding their investment strategies and, with the exception of large dioceses and higher education, very few have significant portfolio dollars allocated to private equity. Some have investigated the asset class but have not had the investment committee expertise or market access to take the next steps.

At Catholic Investment Services, we strive to fill that gap in expertise and access by seeking out partnerships and networks that can bring private equity opportunities to our clients. We are proud of this “frontier work,” which we pursue with the intent of building our clients’ financial resiliency while ensuring that their investments stay aligned with their Catholic beliefs.

Leaders of Catholic organizations frequently ask us for the basic facts about private equity, and how it might potentially benefit them and their missions. Here are some of those basics, which we’ve tried to explain as clearly as possible. We hope you find this guide useful.

For a copy of the full version of Exploring the Potential of Private Equity, please email: info@catholicinvest.org

We are very pleased to present you with this guide – “Securing the future of your Catholic institution” ­which provides ideas and best practices for envisioning, creating and sustaining a successful investment strategy for your Catholic organization. Within these pages you will find easy-to-understand information about:

• Forming a diverse and dynamic investment committee,
• Establishing sound committee practices and procedures,
• Creating an effective investment policy statement, and
• Forging strong partnerships with investment advisors and fund managers

Although there are thousands of articles that offer general advice on these topics, we believe that this is the first guide to address the needs and challenges specific to Catholic institutions. Our Catholic institutional clients have contributed their own invaluable insights, examples, innovations ­– and important questions – as they’ve worked with us to create or refine their investment processes.

Many Catholic institutions begin their investment journey by creating an endowment, a fund designed to support long-term objectives while creating a financial bulwark against tomorrow’s economic uncertainties. In doing so, they face several challenges. First, they must incorporate Catholic principles into their investment approach, while also striving for strong portfolio performance in line with their fiduciary responsibility. Second, they must create an effective oversight model, one that can be sustained over many decades. Finally, they must engage investment professionals who not only understand market values but also the higher values that all Catholics embrace.

For a copy of the full version of the eBook: Securing the future of your Catholic institution, please email:info@catholicinvest.org

“As announced, my encyclical letter on caring for creation will be published this coming Thursday. I invite all to a renewed attention to environmental degradation to accompany this event, but also to repair it in your own lands. This encyclical is addressed to all. Let us pray that all may receive its message and grow in responsibility toward the common home that God has entrusted to all of us.”

Speaking these words from the papal balcony in June 2015, Pope Francis set the stage for the release of one of the most anticipated and consequential encyclical letters ever produced by The Vatican. The “Laudato Si’ Of The Holy Father Francis On Care For Our Common Home” is a thoughtful, compelling argument for urgent global action to address the damage being done to the earth and, relatedly, to restore human dignity through acknowledgement of God’s blessings:

“The urgent challenge to protect our com¬mon home includes a concern to bring the whole human family together to seek a sustainable and integral development, for we know that things can change. The Creator does not abandon us; he never forsakes his loving plan or repents of having created us. Humanity still has the ability to work together in building our common home.” (13)

Even close observers of the process that led to the Laudato Si’s release – including leaders of our firm, Catholic Investment Services (CIS) – were astonished at its scope and merging of canonical, scientific and spiritually resonant themes. The Encyclical, as Pope Francis declared, was a call to action for “every living person on the planet”(3) – from politicians to scientists, activists to economists, wealthy to impoverished, and the faithful to the steadfastly secular. As Boston Cardinal Sean O’Malley commented in a letter of praise when the encyclical was released, “The letter is the voice of a pastor and teacher who leads a universal church across regions, cultures and nations.”

One indication of Pope Francis’ efforts to extend the encyclical’s reach was that – for the first time – an Arabic version of the document was ready on release day. What’s more, unlike many past encyclicals, this one took care to employ language that most people could understand, which has made it an important document for climate activists and concerned youth of all faiths around the world. In fact, early in the encyclical, Pope Francis illuminates the chasm between self-preserving rhetoric and selfless action on the global stage:

“The alliance between the economy and technology ends up sidelining anything unrelated to its immediate interests. Consequently the most one can expect is super¬ficial rhetoric, sporadic acts of philanthropy and perfunctory expressions of concern for the envi¬ronment, whereas any genuine attempt by groups within society to introduce change is viewed as a nuisance based on romantic illusions or an obsta¬cle to be circumvented.” (54)

The encyclical’s 180-plus pages are organized into six distinct chapters, each of which demand close reading. Clearly, any effort to briefly summarize a document of such scope and depth must fall short, but here is a 30,000 foot view, chapter by chapter:

1. What Is Happening to Our Common Home – presents the wide-ranging evidence that our environment is being degraded, and how this is creating catastrophic effects for humans, particularly our most vulnerable.
2. The Gospel of Creation – provides a biblical context for preserving all of God’s creations, and why humans have inherited – and must act upon – a responsibility to care for the Earth.
3. The Human Roots Of The Ecological Crisis – describes how materialism, self-centeredness, profit-seeking and other factors are spawning widespread disregard for environmental health and ultimately devaluing human life.
4. Integral Ecology – illustrates how the environmental crisis is inseparable from the social crises facing people in nations around the world.
5. Lines of Approach and Action – calls for collaboration across nations and communities, and among diverse political and economic interests, to activate a global response to the crises we face.
6. Ecological education and spirituality – brings the topic home for everyone, highlighting their need to adopt new attitudes, adjust their way of life and demonstrate caring and love toward others and toward the planet.

Taken together, these chapters step readers through a clear, methodical and well-supported argument for moving beyond rhetoric to advance real change in how we live, relate and treat our planet.

Inspiration for Catholic Investors

Back in 2015, among the most eager to receive the Pope’s guidance on environmental destruction and its remedies were the leaders of Catholic institutions across the U.S. – specifically those clergy, laypeople, board members and investment counselors who are responsible for the financial wellbeing of their organizations and the sustenance of the vital work they pursue.

Some, such as colleges and universities, must oversee investments of significant endowment funds, while others are charged with preserving financial cushions to keep their operations and programs steaming ahead amidst unpredictable economic crosswinds. Still others, such as K-12 schools, invest so that they have resources to continue investing in talent and technologies to cultivate the next generation of Catholic-faith professionals. Many such organizations turn to CIS for help as they explore complex investment questions.

Beyond their fiduciary obligations, these institutional investors all have faced the challenge of seeking attractive investment returns in a distinctly Catholic way. They are obligated to direct their investments toward companies or sectors that align with Catholic beliefs. In short, they have had to reconcile the temporal quest for optimal investment results with the eternal mission of advancing the dignity, health, security and spiritual growth of all the people of the earth.

Before the release of the Laudato Si, the primary guidance for these investors in the U.S. came from the Socially Responsible Investment Guidelines created by the U.S. Conference of Catholic Bishops (USCCB). These Guidelines, published in 2003, comprises a set of strategies that the church employs to invest its assets based on Catholic principles and acting as a guiding light for CIS’s own investment philosophy.

At a high level, the guidelines provide investors with strategies for avoiding evil, doing good and pursuing varying degrees of corporate activism to effect change. No doubt, some of its points are very prescriptive, such as “absolute exclusion of investment in companies whose activities include direct participation in or support of abortion.” But they are not intended to be a checklist, but rather a rubric for thinking about the investment implications of critical topics: protecting human life, promoting human dignity, reducing arms production, pursuing economic justice, protecting the environment and encouraging social responsibility.

It’s worth noting that these topics generally reflect those considered by today’s Socially Responsible Investing (SRI) adherents. Recently, SRI investments in the U.S. reached $12 trillion – a stunning rise from the estimated $2 trillion of 2003, when the USCCB guidelines came out.

What About Fossil Fuels?

In recent years, scientific consensus has coalesced about fossil fuels’ role in driving changes to Earth’s climate, and investors of all types have thus been analyzing the energy sector with greater scrutiny. Political, social and economic forces are creating pressure to reduce investments in fossil fuels while increasing investments in energy alternatives. Many Catholic investors have sought CIS’s guidance on how to approach energy investments in their portfolios, especially considering the lack of specific direction within the USCCB Guidelines.

Investors were encouraged to promote shareholder resolutions that relate to pursuing and reporting on ecological preservation efforts. In fairness, however, we must remember that when the Guidelines were released in 2003, the climate change (or global warming) debate was just heating up, and even the term “fossil fuels” was not yet in the public vernacular.

Thus, in the months leading up to the Laudato Si’s release in 2015, many environmental action groups were keen to see strong anti-fossil-fuel messages from Pope Francis. What they got instead was a wise and pragmatic approach to the issue, one that balances the absolute need to reduce carbon emissions from fossil fuels while resolutely investing in alternatives. For example, the encyclical states:

“There is an urgent need to develop policies so that, in the next few years, the emission of carbon dioxide and other highly polluting gases can be drastically reduced, for example, substituting for fossil fuels and developing sources of renewable energy. (26)

Later, the encyclical provides more detail about the fossil-fuel conundrum, in light of differences in the development stages of countries around the world:

“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 progressively replaced without delay. Until greater progress is made in developing widely accessible sources of renewable energy, it is legitimate to choose the less harmful alternative or to find short-term solutions. But the international community has still not reached adequate agreements about the responsibility for paying the costs of this energy transition.” (165)

The phrase “widely accessible sources of renewable energy” is important, because there are unbridgeable gaps between this ideal and the day-to-day energy options for most people on the planet. Catholics who are devoted to global programs and missions are well acquainted with the plight of people in developing countries, where homes are heated by burning wood and medical facilities lights and equipment are run by gas-powered generators. It’s difficult to hold these fossil-fuel users to the same standard as those whose historical use of the same resources has enabled undreamed-of quality of life.

So, what does this mean for Catholic investors? Although the encyclical doesn’t call for immediate divestment of fossil fuel stocks, it implies that we should move in that direction. One strategy is to steadily shift energy investments toward companies or private funds that are advancing alternatives, which is something CIS is doing. Another strategy is to focus fossil fuel divestment on companies exhibiting substandard business practices relating to environmental, social, governance, fair labor factors. The remaining strategy, of course, is to fully divest of fossil fuel holdings, which CIS plans to do in the near future.

Shining a Light on Human Life

As noted, since 2003, Catholic investors have benefited from unequivocal USCCB guidance about protecting life: Do not invest in companies that whose activities involve abortion or contraception, embryonic stem cell or fetal tissue research, or human cloning. However, over subsequent years, we’ve seen variances in how closely this guideline has been followed.

For example, some investors will apply a revenue test to determine whether a health industry conglomerate or institution is still worthy of investment if only a small part of its operation involves USCCB-prohibited activities. Other Catholic investors draw a firm line: They will not invest in a company even if a mere 0.001 percent of its revenues flow from, say, research using fetal tissue. CIS itself falls into this zero-tolerance category.

Although the Laudato Si does not try to resolve such dilemmas, it reinforces the critical importance of preserving human life and dignity and establishes its centrality the environmental challenge:

“A sense of deep communion with the rest of nature cannot be real if our hearts lack tenderness, compassion and concern for our fellow human beings. It is clearly inconsistent to combat trafficking in endangered species while remaining completely indifferent to human trafficking, unconcerned about the poor, or undertaking to destroy another human being deemed unwanted. This compromises the very meaning of our struggle for the sake of the environment. (91)

Later, Pope Francis draws an even more direct line between protecting the unborn and protecting all other vulnerable people of the world:

“Since everything is interrelated, concern for the protection of nature is also incompatible with the justification of abortion. How can we genuinely teach the importance of concern for other vulnerable beings, however troublesome or inconvenient they may be, if we fail to protect a human embryo, even when its presence is uncomfortable and creates difficulties?”(120)

The Road Ahead

Throughout the 180-page encyclical, clear investment guidance surfaces only a few times. But, this light touch makes each reference more precious for Catholic investors and the investment specialists like us who inform their decision-making. For example, the Laudato Si’ speaks here with profound simplicity:

“Efforts to promote a sustainable use of natural resources are not a waste of money, but rather an investment capable of providing other economic benefits in the medium term. If we look at the larger picture, we can see that more diversified and innovative forms of production which impact less on the environment can prove very profitable. It is a matter of openness to different possibilities which do not involve stifling human creativity and its ideals of progress, but rather directing that energy along new channels.” (191)

Relatedly, this point about adopting a long-term view is extremely relevant to Catholic investors who must assure the financial durability of their institutions for time periods measured in decades, even centuries, rather than merely the upcoming quarter year:

Caring for ecosystems demands far-sightedness, since no one looking for quick and easy profit is truly interested in their preservation. But the cost of the damage caused by such selfish lack of concern is much greater than the economic benefits to be obtained. Where certain species are destroyed or seriously harmed, the values involved are incalculable. We can be silent witnesses to terrible injustices if we think that we can obtain significant benefits by making the rest of humanity, present and future, pay the extremely high costs of environmental deterioration.(36)

All who strive to align their investing strategies with their Catholic beliefs are blessed to have the inspired and rigorous gifts embodied in the Laudato Si’ and USCCB Guidelines. CIS will continue to rely on these important documents as we pursue our mission of achieving investment excellence while advancing Catholic principles.

Catholic Investment Services, Inc. (“CIS”) is a Boston-based non-profit SEC registered investment advisor that seeks to deliver strong investment returns aligned with Catholic principles so Catholic organizations can make a bigger impact in their communities.

Additional Resources

Pope Francis’ Encyclical Letter in PDF format

Resources from the United States Conference of Catholic Bishops

Statement Of Cardinal Sean O’Malley On “Laudato Si”

Laudato Si’ Week 2020 Resources