NB Financial Innovation

Monday
April 17
2017

James Militzer

Embrace Your Liberalism, Impact Investing: A Q&A with a ‘Biblically Responsible Investor’

 

Back in 2015, I wrote a rather snarky post about the launch of a conservative-themed SRI/impact investing fund called Freedom Capital. Rather than screening out investments in industries like fossil fuels and firearms, as many traditional SRI funds do, Freedom Capital made a point of screening them in – based on the belief that “liberal” SRI was starving them of funds. I wasn’t sure whether to view this as an early sign that the sector was edging toward politicization, or just a novelty act intended to annoy liberals. In the following year, I began leaning toward the latter – in part because of the wildly provocative statements of Freedom Capital CEO Jeffrey McClure (traditional SRI is “nothing short of economic jihad, and it needs to be stopped”), but more importantly because other conservative-friendly funds, to my knowledge, had failed to emerge.

However, after my post was published, I had an illuminating exchange with a fairly prominent conservative activist on Twitter who defended the fund based on the argument that coal workers were suffering and Freedom Capital could mobilize much-needed investment that would save their jobs. To him, this concept of social impact was more compelling than the “liberal” SRI thesis of using investment to steer the energy sector toward renewables and away from fossil fuels. And I found his points about lost coal worker jobs hard to dispute without seeming callous. About a year later, a similar argument proved sufficiently compelling to enough voters to help propel Donald Trump into the White House.

Since then, we’ve all tried to parse the election’s meaning, to understand the anger among conservatives and the economic insecurity among newly Republican swing voters that took so many of us off guard. But two things are clear: Many Trump voters feel deeply estranged from the “mainstream” political and economic system and media culture. And those who hope to see impact investing join this mainstream are going to have to reckon with that estrangement.

The success of a new conservative investment firm could bring this political reckoning one step closer for the SRI movement. The firm is Inspire Investing, and it’s part of what its founder, Robert Netzly, calls the “Biblically Responsible Investing” movement. As Netzly described it in our recent interview, he founded the company after having the sort of epiphany that would likely resonate with any SRI fund manager: “Here I was, the president of our local pro-life pregnancy center at the time, and I also owned three or four stocks in companies that were manufacturing abortion drugs. And this hit me between the eyes – this just does not compute. These deeply held values I have don’t line up with how I’m investing my money, and I’m actually profiting from things that are very contrary to my beliefs and my values.”

But according to Netzly, the market provided no outlet for investors like him to affordably align their investments with Christian values, so Inspire launched two index-based, exchange-traded funds (ETFs) last month to fill the gap. The funds screen out investments in companies that have “any degree of participation” in abortion, gambling, alcohol, pornography or “the LGBT lifestyle,” and they seem to have struck a nerve. “We knew there was a huge interest in the market for low-cost, impact-focused ETFs, but this blew us away,” he said. “There were over 200 articles published about us in the first week of our launch, all over the world. We attracted $42 million in assets in just the first two weeks … and we’ve got a lot more interest coming in every day.” Meanwhile, he said, the broader Biblically Responsible Investing movement is seeing “massive growth and massive adoption” across the country.

For a sector with growing mainstream aspirations, SRI/impact investing is understandably eager to sidestep the culture war morass, and to insist that its goals transcend partisan politics. But when asked about this stance, Netzly chuckled. “I don’t think there’s any doubt … that the overwhelming majority of SRI investments are managed according to a politically liberal agenda,” he said. “That’s just who they are. Some funds out there, going back to the LGBT issue – the same issues we’re looking at as exclusionary criteria, they’re using as inclusionary criteria – which is totally their prerogative. If those are their values, that’s what they should be doing. But it is a left of center way to manage the portfolio, and it does alienate investors in this country and around the world who don’t line up with those views. … Christian investors, traditionally conservative investors, even regardless of their faith, have really been underserved and ignored, largely, by the SRI community.”

If you take issue with that remark, listen to Netzly explain why Inspire doesn’t screen out weapons/firearms manufacturers, in spite of Jesus’ teachings about nonviolence (beginning at the 12:23 mark). Agree or disagree with his interpretation of Christian scripture, his sincerity is palpable and his stance unlikely to change. And if you think there’s room for both sides of the political spectrum in other traditional SRI priorities, listen to his explanation of Inspire’s approach to protecting the environment, and why climate change doesn’t fit into that picture (starting at the 18:11 mark). The chasm between right-leaning investors and the SRI/impact investing movement couldn’t be clearer.

How can traditional SRI bridge that gap? In a divided country, with intractable disagreements lurking behind every letter in the “ESG” acronym and right wing arguments resonating with many key constituencies, it’s hard to argue with Netzly’s advice: Don’t even try. “It’s a losing proposition to invest according to conservative and liberal values at the same time. Just be who you are … there’s room for all of us in this movement.”

 

 

James Militzer is NextBillion’s senior editor.

Photo  courtesy of DonkeyHotey via Flickr

 


 

 

Categories
Investing, NextBillion Originals
Tags
ESG investing, impact investing, investing, investment fund, Podcasts, politics, religion, social impact, SRI