“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:
- 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.
- 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.
- 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.
- Integral Ecology – illustrates how the environmental crisis is inseparable from the social crises facing people in nations around the world.
- 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.
- 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.