Techniques of Ethical Stewardship

Catholic organizations utilize institutional investing as a means to protect and generate the resources that will enable them to fulfill their missions. But adopting the practices of a Catholic fiduciary also opens the door to the additional benefits of ethical stewardship.

While progressing toward fiscal goals and objectives, an institution can simultaneously help forward Catholic teachings and guiding principles. There are four primary techniques for implementing the ethical stewardship of institutional assets.

1. Stock Screens (also known as Principled Purchasing)
For the Catholic institutional investor, the decision to purchase an ownership interest in a particular company should include an evaluation of whether it is appropriate for a Church organization to make money from such activities. An effective screening policy requires the judicious balancing of the teachings of our faith with our legal obligation as fiduciaries to prudently invest capital in a diversified portfolio. There are no definitive rules for screening criteria, but there are ample guidelines available that can help fiduciaries create an appropriate set of parameters.
2. Shareholder Advocacy (also known as Active Ownership)
In addition to screening out companies, Catholic fiduciaries leverage their role as owners to take proactive measures to foster positive change in the way a company does business. This is the primary Catholic contribution to ethical stewardship—shareholder advocacy or active ownership.

The goal of active ownership is to use our influence as shareholders so that the company conducts its business in ways that reflect our values. Catholic social teaching reminds us that the corporation has two purposes: to enhance the wealth of its shareholders and to contribute to the well-being of workers, consumers and society.

Through active participation in corporate governance we exercise not only our rights as owners of a corporation, but also our responsibilities as moral agents in economic life. We engage company executives in discussions about the ethical implications of their activities, and we encourage them to balance short-term financial gains with the resultant longer-term impact on society as a whole. As fiduciaries, this strategy allows us to act as good stewards and to respond to the call of the Church to integrate our faith with our daily activities.
3. Community Investing
The third primary technique for ethical stewardship is community investing. This involves directing resources to communities that have a difficult time accessing capital through mainstream financial institutions. Community investment programs vary and can include supporting low-income housing developments, supplying capital to fair-trade businesses in developing nations, funding educational and vocational training programs for the economically disadvantaged, and numerous other sponsorships of economic development.
4. Internal Corporate Responsibility
Tenets of Catholic social teaching should not only impact the external relationships of an institution but should inform internal decisions as well. From environmental stewardship to vendor standards, Catholic institutions can integrate their values into every aspect of their daily operations.