Many Catholic organisations assume that ethical or ESG investing is close enough to their values. In practice, the two frameworks can diverge significantly, and for a Catholic charity or church body, that gap matters. Understanding where Catholic investing and broader ethical investing align, and where they part ways, is essential before committing assets to any strategy.
Epworth Investment Management Ltd (“Epworth”) works with Catholic dioceses, charities, religious orders, and educational institutions across the UK, applying investment frameworks consistent with Catholic Social Teaching. Our approach offers a useful lens for understanding what genuinely faith-aligned investing looks like in practice, versus what a generic ESG label actually delivers.
The core distinction: Catholic investing is rooted in a specific moral theology. Broader ethical investing is rooted in consensus-driven environmental, social, and governance metrics. The two can overlap, but they are not the same thing.
What Is Catholic Investing?
Catholic investing applies the moral teachings of the Catholic Church directly to investment decisions. It is not simply a preference for "good" companies; it is a structured framework grounded in Catholic social teaching, papal encyclicals, and formal institutional guidance.
The most widely referenced framework in this space is the Socially Responsible Investment Guidelines published by the United States Conference of Catholic Bishops (USCCB), most recently updated in November 2021. These guidelines set out three core investment strategies:
- Avoid doing harm: Exclude companies involved in activities contrary to Catholic moral teaching, including abortion, embryonic stem-cell research, contraception, euthanasia, assisted suicide, and human trafficking.
- Actively work for change: Engage with investee companies through shareholder advocacy and proxy voting to promote values-aligned behaviour.
- Promote the common good: Seek investments that actively support human flourishing, environmental stewardship, and social justice.
The Moral Specificity of Catholic Screening
What distinguishes Catholic investing from other faith-based or values-led approaches is its specificity. The exclusion criteria are not negotiable based on shifting cultural consensus. A company may score well on standard ESG metrics while still engaging in activities that Catholic teaching identifies as gravely harmful. For Catholic organisations, that is not a technicality; it is a fundamental misalignment.
Catholic social teaching also places the dignity of the human person at the centre of economic life. This means investment decisions are evaluated not only on environmental or governance metrics, but on whether they support or undermine human dignity, the family, and the sanctity of life.
Epworth's investment approach reflects this directly. On our Catholic organisations page we state: "We understand the importance of ensuring your funds reflect Catholic values and the Church's social teaching, so that every investment decision supports life, human dignity, and the common good." Our process is guided by principles consistent with Mensuram Bonam, the Vatican's framework for Catholic institutional investors, ensuring a theologically grounded rather than market-driven approach to stewardship.
What Is Broader Ethical Investing?
Ethical investing, often used interchangeably with ESG (Environmental, Social, and Governance) investing, is a broad category that incorporates non-financial factors into investment analysis. It has grown substantially over the past decade, with Morningstar tracking thousands of funds globally that carry some form of ESG label.
The three pillars of ESG are:
- Environmental: Carbon emissions, climate risk, resource usage, biodiversity impact.
- Social: Labour practices, supply chain standards, community impact, data privacy.
- Governance: Board composition, executive pay, transparency, anti-corruption policies.
Where ESG Falls Short for Catholic Organisations
The appeal of ESG is its accessibility. Ratings agencies score companies against standardised criteria, making it straightforward to build a screened portfolio. The problem is that standardisation is also ESG's weakness.
ESG ratings vary significantly between agencies, and the criteria are determined by market consensus rather than moral doctrine. A fund labelled "ESG" may hold companies that provide services related to abortion care, contraception, or gender reassignment, all of which are areas where Catholic teaching takes a clear position. As one analysis puts it plainly: investing in an ESG fund is not the same as Catholic investing.
There is also the issue of greenwashing and social-washing. An investment may carry a strong ESG score while still engaging in activities that are morally problematic under Catholic teaching. For organisations with a fiduciary duty to uphold their mission, this ambiguity creates real risk.
Epworth addresses this gap through published, revenue-based exclusion thresholds rather than relying on third-party ESG scores. Our zero-tolerance list includes controversial weapons, fossil-fuel extraction, tobacco manufacture, and predatory lending, with further tiered thresholds at 5% and 10% revenue exposure for sectors such as gambling, recreational cannabis, and alcohol. This level of specificity is rarely found in standard ESG funds, where criteria are determined by ratings agencies rather than moral doctrine.
Catholic vs Ethical Investing: Key Differences at a Glance
| Catholic Investing | Broader Ethical (ESG) Investing | |
| Foundation | Catholic moral theology and Church teaching | Market consensus; environmental and social metrics |
| Screening criteria | Fixed by doctrine (e.g. sanctity of life, human dignity) | Variable by fund; set by ratings agencies |
| Exclusions | Abortion, contraception, embryonic stem-cell research, euthanasia, human trafficking | Typically tobacco, weapons, fossil fuels, severe labour violations |
| Shareholder engagement | Integral to the framework | Common but not universal |
| Common ground | Climate stewardship, labour rights, anti-corruption | Climate stewardship, labour rights, anti-corruption |
| Risk for faith bodies | Low, when properly implemented | Mission drift if Catholic-specific screens are absent |
The overlap is real: both approaches typically exclude tobacco, cluster munitions, and companies with severe governance failures. Where they diverge is on bioethical issues, where Catholic teaching is explicit and ESG frameworks are often silent or inconsistent.
Does Faith-Based Investing Affect Financial Returns?
A common concern among trustees and finance committees is whether applying Catholic screens will reduce returns. The evidence does not support this fear. Research comparing Catholic-screened funds against standard large-cap benchmarks consistently shows negligible performance differences over ten-year periods. Excluding a sector does not automatically reduce diversification enough to hurt long-term performance, particularly when the excluded companies represent a small proportion of the investable universe.
The stewardship argument is also financial: organisations that invest in alignment with their mission reduce the reputational and legal risk of being associated with activities that contradict their stated values. For a Catholic charity, the cost of that misalignment, if it becomes public, is rarely worth the marginal investment universe it preserves.
Epworth's range of options reflects this reality. Smaller organisations can access the WS Epworth Multi Asset Fund from as little as £1,000, while larger bodies can work with Epworth's Discretionary Portfolio Service to build a bespoke, fully screened portfolio aligned with their specific risk tolerance and mission. There is also a practical charitable dimension: through the Multi Asset Fund, 50% of the WS Multi Asset Fund management fee is donated directly to Christian Aid's In Their Lifetime programme, allowing Catholic organisations to combine responsible investment with tangible charitable impact.
Which Approach Is Right for a Catholic Organisation?
For Catholic bodies, the answer is rarely "ESG alone is sufficient." The more useful question is how to find an investment manager who understands the specific requirements of faith-based stewardship and can implement them rigorously.
When evaluating investment managers, Catholic organisations should ask:
- What bioethical screens are applied? Exclusions for abortion, contraception, and embryonic stem-cell research should be explicit, not left to interpretation.
- How are screens enforced? Is there ongoing monitoring, or a one-time filter at portfolio construction?
- What is the engagement policy? Does the manager actively vote proxies and engage company management in line with Catholic values?
- Is there transparency on holdings? Organisations should be able to verify that their portfolio is free from investments that contradict their mission.
Broader ethical investment options remain a legitimate choice for many organisations, particularly those whose values align well with mainstream ESG criteria. But for Catholic bodies, a generic ESG label is not a guarantee of alignment. The specificity of Catholic moral teaching demands investment frameworks that are equally specific.
Mother Nikola of St. Mildred's Abbey, Minster, an Epworth client, puts it simply: "From the Christian faith-based perspective, I think it is the best there is."
If you are a Catholic organisation reviewing your investment approach, speak to Epworth's Head of Business Development, Simon Woolnough, to discuss how our screening methodology and service range can be tailored to your organisation.
Disclaimer: This article is intended for general informational purposes only and does not constitute financial advice. The information provided should not be relied upon as the basis for any investment decision. Religious organisations and their trustees should seek independent financial and legal advice appropriate to their specific circumstances before making any investment decisions. Epworth Investment Management Limited is authorised and regulated by the Financial Conduct Authority.