Many Christians in Ireland, either individually or as members of organisations, have long been campaigning for greater justice and transparency in economic and financial activity. During the ‘boom’ times they may well have felt like the biblical voice crying out in the wilderness; today, however, in the wake of successive financial scandals, discussion of ‘ethical finance’ has gained new momentum and immediacy.
Prior to the global financial crisis, if you were to ask people in Ireland what they understood by ethical finance, it is likely that most responses would have made reference to the need to protect vulnerable communities in the developing world. Now the devastating consequences of unethical financial practices have been experienced in a very real way much closer to home. As a result, we have seen rising public demand for radical reform aimed at ensuring that the financial sector serves the interests of society, and not the other way round.
The Christian churches have a particular responsibility to show leadership in the debate on the future of the financial sector. Through their ministry, faith leaders are experiencing first-hand the impact of the financial crisis on individuals and families. Many have spoken in the media of the fear in their communities when a factory or plant which is a major employer in the area announces the closure of some or all of its local operations. In June 2010, the leaders of the four largest Christian churches in Ireland challenged the banks on their treatment of businesses in Northern Ireland: the leaders highlighted the economic, social and personal consequences of lending practices they considered unfair and damaging to the local economy.1
Of course, it needs to be remembered that churches are also investors and in this capacity they are participants in that same financial system which has failed to serve the common good of society. Taken all together, the financial reserves of the Irish churches represent a substantial body of investments. Collective demands for change from church leaders consequently have the potential to have a significant influence on key decision-makers.
Current Practice in the Irish Churches
In 2011, the Church in Society Forum of the Irish Inter-Church Meeting initiated a study to assess the extent to which member churches, at an official level, are engaging with the issue of ethical finance, and whether the global financial crisis has had any impact in this regard.2 (The Church in Society Forum is a body made up of church representatives with expertise in social issues and public policy who are appointed from across the fifteen Christian churches of the Irish Inter-Church Meeting.3)
The Forum surveyed current practice in our churches through a series of meetings with trustees and senior finance personnel. This article will provide an overview of the main findings of that research, before going on to highlight some of the key areas for further reflection arising out of the Forum’s report.
Unsurprisingly, we found that all participating churches have been adversely affected by the financial crisis. The adverse consequences ranged from decreasing share value to losses against property investments. In some cases, this experience resulted in immediate re-examination and modification of investment practices, as churches realised that they had been exposed to excessive risk.
We also found a growing realisation that churches will have to plan carefully for the future. Although incomes remain high in some areas, others are seeing an increasing deficit as the financial situation of parishioners and congregation members has changed. Looking to the future, the rising age profile of both church members and clergy presents a further financial challenge.
It was reassuring to learn that, despite the pressing need to secure sustainable sources of income, all participating churches had some form of framework in place which established ethical guidelines for investment. All those interviewed clearly stated that ethical considerations could not be sacrificed to maximise returns, no matter how important the work to be funded.
Ethical Investment Challenges for Churches
Although easily agreed in principle, ethical investment poses considerable challenges in practice – for churches as institutions and for individual church members.
The first challenge is one of definition. The Oxford English Dictionary defines ‘ethical’ as ‘morally good or correct’ and ‘avoiding activities or organisations that do harm to people or the environment’. Attempting to define what is ‘morally good or correct’ or what constitutes ‘harm’ makes for an interesting discussion.
Investing in companies which produce alcohol, for example, is acceptable to some churches, while explicitly excluded by others. All churches consulted had a policy of not investing in arms production, but some participants wondered whether there was not a contradiction in relation to this, since their church did not oppose the right of states to establish armies and arm them for defence, within the limits of the law.
Even a seemingly straightforward ethical stance can have a significant limiting impact on investment options. Not investing in pornography, for example, means that a large number of major retail outlets are excluded, because they stock magazines with unacceptable content. The complex structures of the large corporate entities which tend to dominate today’s investment market make it very difficult to obtain accurate information about all the activities of component parts. This presents real problems for churches who have limited personnel and expertise at their disposal. In the management of their finances, churches are forced to rely, to varying degrees, on external fund managers. Often this means they have to be both vigilant and assertive in order to ensure adherence to agreed ethical criteria.
Positive or Negative Screening?
The question of whether churches should favour positive or negative screening practices prompted considerable debate in the course of our research. Essentially, negative screening implies a refusal to invest in funds or companies that do not meet specified ethical criteria, while positive screening involves investors actively seeking out opportunities to invest in sectors they wish to promote for ethical reasons. To date, reasonable progress has been made on the former, but those campaigning on ethical finance issues argue for much more attention to be given to the latter, on the basis that positive screening offers an even greater opportunity to transform cultures and change attitudes. Often, positive screening is seen as a way to support worthy initiatives that would otherwise lack the funding to get off the ground.
All churches participating in our research, however, placed greater emphasis on negative screening, for several reasons. For a start, investment options that would be considered acceptable according to positive screening principles (in areas such as renewable energy, for example) are frequently untested. As trustees, churches are legally obliged to avoid excessive risk and therefore find it difficult to justify such investments. Church representatives in our study also made the case that negative screening has an equally important role to play in changing behaviours and can, at times, be more urgent. The withdrawal of investments can force companies to cease harmful practices. Some of the churches we consulted had direct experience of using their position as shareholders to hold companies to account on practices such as child labour.
Opportunities for Change
One of the most surprising findings arising from the study was that, in the area of ethical investment, church leaders have done a considerable amount of work – reflecting, engaging, establishing policy frameworks – yet appear to have given little thought to communicating this message to the congregations they bring together for worship. During the boom times there may well have been little appetite for these kinds of discussions, but people are much more receptive today. Outside of the churches it is often difficult to escape discussion of money and banks; church leaders have the opportunity to inject some consideration of Christian values into these discussions.
Churches need to be actively engaged in promoting an alternative to the unjust and unsustainable model of economic growth that is responsible for the current crisis. It is the task of political leaders to implement the necessary changes in policy and legislation, but these changes will only be introduced if there is sufficient public demand.
As we live through yet another year dominated by economic and social crises, a desire for stability and sustainability is beginning to take precedence over the individualistic materialism of the pre-crisis period. Churches need to be courageous in challenging behaviours and attitudes, but this will only be accepted to the extent that churches themselves are willing to lead by example in engaging in a process of critical self-reflection which considers their role as participants in the current economic system.
The findings of the Church in Society Forum study point to a number of challenges the churches need to address in order to make an effective contribution to the process of creating a more ethical financial system.
Churches need to be more vocal and active in relation to issues of ethical finance. They also need to explore together opportunities for collaboration and sharing of resources in order to maximise their effectiveness in this area.
Churches need to ask challenging questions. Obviously, churches do not have all the answers to the current economic crisis (especially given the complexity of the issues involved) but this should not inhibit their asking searching questions about the underlying forces at work in our economic and financial systems. Many elements of current practice in the financial sector are fundamentally unchristian and the churches can make an important contribution to reform by highlighting the responsibilities that arise from the application of the principles of solidarity and the common good. Viewed in this light, it becomes clear that the market cannot be allowed to operate as though it were somehow separate from the rest of society.
Churches need to encourage their members to become more active participants in matters of the economy – by, for example, educating themselves and taking the time to ask questions such as: ‘What do the banks do with the money we invest in them?’.
Churches need to press for greater transparency in the financial system. There are many parallels between the difficulties experienced by the churches as organisations and those facing the individual person or household in attempting to secure ethical investment opportunities. The range of such investment options currently available in Ireland is extremely limited, and the terms and conditions are often restrictive – for instance, the minimum level of investment required and conditions of access to savings. The individual saver faces similar challenges in terms of assessing the extent to which options presented as ethical align with his or her values. This problem can only be addressed through concerted action by governments to place an obligation on companies to provide full and transparent disclosure, on a country-by-country basis, of all aspects of their activity. In the wake of the financial crisis, it should be clear that addressing these issues is in the best interests of society, now and for the generations to come.
The 2010 public statement on banking practice from the leaders of the four largest Christian Churches attracted significant media attention. Business owners gave statements to illustrate the points made with examples from personal experience; banks issued press releases in response; church representatives were invited to a meeting with representatives of the Northern Ireland Assembly. This experience demonstrates that churches have the potential to set the tone of the debate. We need regular, public dialogue on these issues to ensure that the Christian approach to financial management is continually articulated.
The question of ethical investment goes to the heart of this debate because banks and financial institutions have a vital role in our society. The current economic environment makes saving difficult if not impossible for great numbers of people, yet around 30 per cent of the population in the Republic report that they are regular savers.4 Banks and financial institutions are conscious that there has been a serious breakdown in trust, and that much more remains to be done if that trust is to be restored. Churches need to encourage their members to highlight the importance of ethical considerations in their dealings with financial institutions. But churches must also lead by example in their own approach to financial management.
- ‘Church leaders unite to slam banks over Northern Ireland economy’, Belfast Telegraph, Thursday, 17 June 2010.
- The Church in Society Forum Report, ‘Ethical Finance’, is available on request from [email protected]. It will be available on the website of the Irish Council of Churches from mid-2013.
- The Inter-Church Meeting (IICM) is a forum where churches in Ireland meet together to explore, discuss and act on issues and concerns of mutual interest. It is comprised of the Roman Catholic Church and the member churches of the Irish Council of Churches (ICC); in all, fifteen churches on the island of Ireland are represented in IICM.
- Nationwide (UK) Ireland Savings Index, Report for December 2012, issued 14 January 2013. ()
Nicola Rooney is Research Coordinator, Council for Justice and Peace of the Irish Catholic Bishops’ Conference.