Faith-based ETFs have continued to attract attention as investors increasingly look to align their investment dollars with their moral principles.
In 2015, the Knights of Columbus, a global fraternal organization of the Catholic Church, launched an investment management firm called Knights of Columbus Asset Advisors (KoCAA) to give Catholics the ability to invest their income with a socially responsible investing strategy.
Earlier this week, KoCCA partnered with new ETF issuer Faith Investor Services to launch its first ETF, the FIS Knights of Columbus Global Belief ETF (KOCG).
I sat down with Michael Skillman, CEO of Faith Investor Services, to ask him a few questions about the new fund.
Tom Lydon, CEO, ETF Trends: What prompted the launch of KOCG?
Michael Skillman, CEO, Faith Investor Services: There are approximately 70.4 million Catholics in the United States. Over 2 million of them are part of the Knights of Columbus, which is led by Supreme Knight Patrick E. Kelly. The organization was founded in 1882 by Priest Michael J. McGivney as a benefit society for immigrants in the United States. The Knights of Columbus is dedicated to principles of charity, unity, fraternity, and patriotism.
We believe that people committed to living a life of faith and service are looking for a fund managed by the Knights of Columbus. Many Catholics and like-minded individuals want to invest in companies on stock markets. They want to diversify their hard-earned money and build strong portfolios for themselves and their families.
Looking over the landscape for investment opportunities, we found few viable options for people of faith to maximize their portfolios while remaining true to their beliefs. That is why we created Faith Investor Services and partnered with the Knights of Columbus to launch the KOCG. KOCG was built to empower individuals with the opportunity to invest in global companies that align with their values.
Lydon: What is faith-based investing?
Skillman: Faith-based investing is exactly what it says it is. It is a way to invest money that takes into consideration people’s religious values. Faith-based investing enables investors to align their integrity with how they allocate their capital. We omit and select stocks based on how the companies align with Catholic values.
For example, our fund is right to life. Therefore, we will not add a company to KOCG that derives any of its revenue from abortion. This is not just found in pharma-related companies but also companies like Amazon (AMZN). Amazon owns PillPack, which distributes Plan B; thus, we won’t own Amazon. Similarly, we look for companies that promote practices that align with religious beliefs like just banking practices, etc.
Lydon: What makes this product stand out from other faith-based investing funds?
Skillman: An active approach is crucial for ensuring that all investments in the fund are consistently aligned with Catholic values and generating returns. Unlike other ETFs on the market, this fund is actively managed and adheres to the strict guidelines set forth by the United States Conference of Catholic Bishops (USCCB).
To ensure we meet this criterion, the Knights of Columbus Asset Advisors (KoCAA) sub-advises the fund on an ongoing basis and provides direction around security selection. Additionally, KoCAA has a full-time theologian on staff to help interpret USCCB principles for the investment team.
Lydon: How does the fund decide what to invest in?
Skillman: As mentioned, KOCG seeks to invest in companies that meet the socially responsible investment guidelines provided by the United States Conference of Catholic Bishops. The fund primarily screens for three core themes and removes businesses that derive revenue from contraceptives and abortifacients, pornography, embryonic stem cell research/human cloning, discrimination based on race or gender, unfair treatment of employees, nuclear weapons and other weapons of mass destruction, and other practices that conflict with the USCCB Guidelines.
The main core themes we look for are as follows:
- Respect for life
Example: Our fund screens out pharmaceutical companies that derive revenue from abortifacients.
- The Catholic Church’s stance on war and peace
Example: We may own a company that makes rifles and ammo, but we will not own Lockheed Martin for its involvement in nuclear weapons.
- Respect for human dignity
Example: Nike has been a top-performing stock; however, we do not own Nike because of its poor workplace environment.
Lydon: Does this fund include ESG components?
Skillman: While KoCAA has long practiced exclusionary Catholic screening on its investment strategies, the inclusion of ESG criteria in the investment process has taken center stage over the past couple of years. They created the Responsible Investing Steering Committee (RISC) to ensure these principles are fully integrated into the investment process.
We believe that understanding ESG risks provides deeper insight into portfolio companies. The identification and analysis of financially material factors can mitigate risk over the long term, potentially enhancing portfolio returns. ESG analysis contributes to a holistic understanding of a company, consistent with our hybrid investment approach. Put simply, including ESG factors in our analysis helps us make better investments.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.