Biblically Responsible Investors See Comparable Returns—Or Better

Posted: Aug 01, 2018 12:10 PM

When it comes to obeying the Lord in every aspect of their lives, tens of thousands of Christians around the country ensure that their finances also honor God. For those who are committed to Biblically Responsible Investing (BRI), it is of upmost importance to honor God by aligning their investments with their values.

But does this mean sacrificing their return on investment? Certainly not. In fact, a considerable body of research indicates that investors do not have to compromise their bottom lines while engaging in BRI and may even reap higher returns in some cases.

A 2016 study at the University of Pennsylvania’s Wharton School of Business found that screened investments performed favorably against unscreened investment funds:

“Impact funds in the sample that seek market-rate-returns demonstrate that they can achieve results comparable to market indices, while still reporting mission preservation in the vast majority of their exited investments.”

The study, “Great Expectations: Mission Preservation and Financial Performance in Impact Investing,” posited that,

“Market-rate-seeking impact investments in the sample, therefore, may be financially competitive on a gross basis with other equity investing investment opportunities. This financial performance may be why impact fund managers often assert that there is little inherent tension between profits and purpose.”

A 2014 meta-analysis of 85 studies and 190 experiments reported in Business Ethics: A European Review, found that “consideration of corporate social responsibility in stock market portfolios is neither a weakness nor a strength compared with conventional investments.”

However, an Oxford University 18-year study of screened funds comprising 180 U.S. companies for “sustainability” and other factors, such as excluding firms that employed child labor, showed better returns, including lower cost of capital and “stock price performance.” The authors compiled evidence “that High Sustainability companies significantly outperform their counterparts over the long term, both in terms of stock market as well as accounting.”

In 2015, a Christian Investment Forum study noted that previous studies had established that Socially Responsible Investing, of which BRI is a subcategory, performed as well or better than unscreened funds. 

In an effort to determine whether the smaller universe of BRI funds matched the overall SRI finding, the authors concluded that,

“Based on the analysis of historical performance data from the funds managed by members of the Christian Investment Forum [of which Timothy Plan is a participant], the results did in fact corroborate the expectation that return performance was not reduced due to incorporating BRI, and in fact there was a general outperformance compared to the industry averages.

“Over the last five years, a composite of the returns from all of the equity mutual funds within the Christian Investment Forum outperformed the industry average by 77 basis points on an annualized basis,” the study found. The author cautioned that “the results of this analysis are not meant to suggest that BRI funds will result in outperformance. The most important reason to incorporate BRI funds into an overall investment portfolio is to better align investments with an investor’s values. But investors and advisors can have peace of mind that “considering funds that can align with their Christian faith need not be a choice between values and performance.”

In short, investors who want to honor God with their God-given resources should not fear the unknown when it comes to comparable returns. After all, as the Bible tells God’s followers in I Samuel 2:30,

“Those who honor me I will honor, but those who despise me will be disdained” (NIV).

Robert Knight is an author and Communications Adviser for Timothy Partners, Ltd., distributor of Timothy Plan funds. Since 1994, Timothy Plan has been a beacon for Godly stewardship in the financial community. The first of its kind, Timothy Plan is a family of mutual funds that screens Funds to ensure that no money is invested in companies that are supportive of ideals that are contrary to their biblical, moral imperative. 

Mutual funds are available through a prospectus by contacting the fund or your financial professional. If you are considering a mutual fund you should always carefully read the prospectus before investing to analyze the investment objectives, risks, charges and expenses.