Religious organisations face an investment challenge that most institutional investors do not: every financial decision must be reconcilable with a set of deeply held values. Whether a church is managing a modest endowment or a denomination is overseeing hundreds of millions in long-term assets, the question is the same. How do you generate the returns needed to sustain your mission without compromising the principles that define it?

The answer lies in a structured, step-by-step approach to portfolio construction, one that places governance, ethical clarity, and financial discipline in equal measure. Across the UK, church investors collectively hold over £26 billion in investment assets, according to the Church Investors Group, yet many individual organisations still lack a formal framework for managing them.

This guide sets out how religious organisations typically approach the process, from establishing governance to selecting an investment manager, and what to consider at each stage.

Key steps covered in this guide:

• Establishing a governance structure and investment policy
• Defining your ethical framework and exclusions
• Setting investment objectives and risk tolerance
• Choosing the right asset allocation
• Selecting a specialist investment manager
• Ongoing monitoring and review

Step 1: Establish a Governance Structure

Before any investment decision is made, a religious organisation needs to establish who is responsible for making it. Good governance is not a bureaucratic formality; it is the foundation on which every subsequent decision rests.

Who holds responsibility?

In most churches and religious charities, investment authority sits with the board of trustees. In practice, day-to-day oversight is typically delegated to a finance committee or investment sub-committee, which meets regularly to review portfolio performance, risk, and strategy. The full trustee board retains responsibility for approving the overarching investment policy and any significant changes to it.

This structure matters for two reasons. First, it creates accountability. Second, it ensures decisions are not made in isolation by a single individual, which is both a governance best practice and a requirement under charity law in England and Wales.

The Investment Policy Statement

The central governance document for any religious investor is the Investment Policy Statement (IPS). This sets out:

• The organisation's investment objectives (income, capital growth, or both)
• The acceptable level of risk
• Ethical restrictions and exclusions
• The asset classes permitted
• Liquidity requirements (how much cash must be accessible at short notice)
• How performance will be measured and against what benchmarks
• The review cycle for the policy itself

Churches Together in England, for example, maintains a formal IPS that delegates investment management to Epworth Investment Management Ltd (“Epworth”) on a discretionary basis, with quarterly reporting and at least biannual reviews. This kind of documented, accountable structure is the standard that all religious organisations should aim for, regardless of the size of their portfolio.

Trustee note: Under the Charities Act 2011, charity trustees have a legal duty to act in the best interests of their charity. Taking professional investment advice and documenting decisions is not optional; it is part of meeting that duty.

Step 2: Define Your Ethical Framework

This is where religious investment diverges most sharply from conventional portfolio management. The ethical framework is not a constraint layered on top of the investment strategy; it is integral to it. Getting this right early saves significant difficulty later.

Exclusions: what you will not invest in

Most religious organisations begin by defining a set of exclusionary criteria: sectors, activities, or companies that are incompatible with their values. Common exclusions across Christian investors include:

• Tobacco production and distribution
• Armaments and defence manufacturing
• Gambling
• Pornography and adult entertainment
• High-interest lending (payday lending)
• Fossil fuel extraction (increasingly common, particularly among denominations with net-zero commitments)

The specific list will vary by denomination and tradition. Catholic investors, for instance, apply additional exclusions around contraception and sanctioned life-related activities. The Church Investors Group's 2024 guidance recognises that "there is no one way to be a church investor" and that each organisation will have different ethical priorities.

Positive screening: what you want to invest in

Beyond exclusions, many religious investors now apply positive screening, actively seeking companies that contribute to outcomes aligned with their values. This might include:

• Businesses with strong environmental credentials
• Companies demonstrating fair employment practices
• Healthcare and social care providers
• Renewable energy and clean technology

Stewardship and engagement

A third dimension of the ethical framework is stewardship: using the rights and influence that come with being a shareholder to encourage better corporate behaviour. This means voting at company AGMs, engaging directly with company management on issues such as executive pay, climate risk, or supply chain ethics, and supporting shareholder resolutions where appropriate.

Epworth takes an active stewardship approach across all its portfolios, engaging with companies on environmental, social, and governance (ESG) issues as part of its mandate. This reflects a broader principle: ethical investment is not just about what you avoid, but about the positive influence you can exercise as an investor.

Step 3: Set Investment Objectives and Risk Tolerance

With governance in place and an ethical framework defined, the next step is to be precise about what the portfolio is actually trying to achieve financially. Vague objectives lead to poor decisions. The clearer the mandate, the easier it is to evaluate whether the portfolio is performing as intended.

What does the portfolio need to do?

Religious organisations typically invest for one or more of the following purposes:

Objective	Description	Typical time horizon
Income generation	Producing regular distributions to support operational costs	Short to medium term
Capital preservation	Protecting the real value of assets against inflation	Long term
Capital growth	Growing the portfolio to support future mission	Long term
Mixed	Balancing income and growth, often for endowments	Medium to long term

Most faith-based organisations invest with a long time horizon. Many churches and denominations are, in principle, permanent institutions. This is a genuine investment advantage: it allows them to tolerate short-term volatility in exchange for better long-term returns, and to invest in less liquid assets where appropriate.

Defining risk tolerance

Risk tolerance for a religious organisation is shaped by several factors:

• Liquidity needs: How much cash must be available at short notice to cover operational commitments? Funds needed within 12 months should not be invested in volatile assets.
• Beneficiary expectations: Trustees must balance the needs of current beneficiaries with the interests of future ones. Excessive caution today can damage the organisation's long-term capacity.
• Reputational risk: For a religious organisation, the reputational damage of a high-profile investment failure can be as significant as the financial loss.

The Charity Commission's guidance on investment is clear that trustees must consider both financial risk and the potential for reputational harm when setting investment policy. These two dimensions of risk must be assessed together, not in isolation.

Step 4: Determine Asset Allocation

Asset allocation is the single most important determinant of long-term portfolio performance. It refers to how the portfolio is divided across different asset classes, and it should flow directly from the objectives and risk tolerance established in the previous step.

Common asset classes for religious investors

Religious organisations in the UK typically invest across a combination of the following:

• Equities (shares): Higher risk, higher potential return. Suitable for the long-term, growth-oriented portion of a portfolio. Ethical screening is applied to exclude incompatible sectors.
• Fixed income (bonds): Lower volatility than equities, providing income and stability. Government bonds and investment-grade corporate bonds are most common.
• Cash and cash equivalents: Essential for meeting short-term liquidity needs. Products such as Epworth's Cash Plus Fund for Charities allow organisations to earn a return on cash while maintaining ethical alignment.
• Property: Can provide income and inflation protection over the long term, though liquidity is lower.
• Alternative investments: Some larger religious investors allocate a portion to private equity, infrastructure, or impact investments that deliver both financial returns and measurable social or environmental outcomes.

Pooled funds vs. segregated mandates

For smaller organisations, investing through pooled funds (where multiple investors pool their assets into a single fund) is the most practical approach. It provides immediate diversification, lower costs, and access to professional management without requiring a large minimum investment.

Larger organisations may opt for a segregated or bespoke mandate, where the portfolio is managed specifically for them. This allows for a higher degree of customisation in ethical screening and asset allocation, but typically requires a larger asset base to be cost-effective.

Epworth offers both approaches: multi-asset pooled funds designed specifically for churches and charities, as well as discretionary portfolio management for organisations with more substantial assets. This flexibility means organisations at different stages of growth can access specialist management appropriate to their size.

Step 5: Select a Specialist Investment Manager

Choosing the right investment manager is one of the most consequential decisions a religious organisation will make. The manager will be responsible for implementing the ethical framework, managing risk, and delivering returns. Not all investment managers are equally equipped to serve faith-based clients.

What to look for in a manager

The Church Investors Group's guidance on working with investment managers identifies several key criteria for assessing whether a manager is genuinely suited to faith-consistent investing:

• Ethical alignment: Does the manager have a genuine, documented approach to ethical screening, or is it a peripheral add-on to a conventional strategy?
• Stewardship credentials: How does the manager vote on shareholder resolutions? Do they engage with companies on ESG issues, and can they evidence it?
• Specialist experience: Has the manager worked with religious organisations before? Do they understand the specific governance requirements of charities and the nuances of faith-consistent investing?
• Transparency: Are ethical criteria clearly documented? Is reporting comprehensive enough for trustees to discharge their oversight responsibilities?
• Track record: What is the long-term performance record, and how has the portfolio held up during periods of market stress?

Why specialist managers matter

A general-purpose investment manager can apply negative screening, but that is not the same as genuinely faith-consistent investment management. The difference lies in depth: how robustly the screening is applied, whether the manager proactively engages with companies on issues of concern, and whether the organisation's values are embedded in the investment process or simply bolted on.

Epworth was established specifically to serve the Methodist Church and the wider Christian community. As part of the Methodist Church's Central Finance Board, Epworth manages approximately £1.3 billion in assets with ethical screening, active stewardship, and a long-standing commitment to values-driven investing. For churches and charities seeking a manager with genuine faith-based credentials, this institutional heritage is a meaningful differentiator.

"Church investors should not have to make do with investment solutions which are not designed with Christian faith in mind." — Stephen Beer, Chair of Trustees, Church Investors Group

Step 6: Monitor, Report, and Review

Structuring a portfolio is not a one-time exercise. Markets change, organisational needs evolve, and ethical standards develop over time. A robust monitoring and review process ensures the portfolio continues to serve the organisation's mission effectively.

Ongoing monitoring: what good practice looks like

Activity	Frequency	Responsibility
Portfolio valuation and performance report	Quarterly	Investment manager
Finance/investment committee review	Quarterly	Finance committee
Manager meeting (strategy, risk, allocation)	At least biannually	Finance committee + manager
Full trustee board report	Following each quarterly review	Finance committee
Investment Policy Statement review	Annually	Trustees

This structure, used by organisations such as Churches Together in England in their partnership with Epworth, ensures that trustees remain properly informed without becoming bogged down in day-to-day portfolio management.

Benchmarking performance

Performance should always be measured against agreed benchmarks, set out in the Investment Policy Statement. For a multi-asset portfolio, this typically involves a blended benchmark reflecting the target asset allocation. For ethical portfolios, it is also worth tracking how the ethical screening affects performance relative to unscreened equivalents, since this helps trustees understand the cost (if any) of their values-based constraints.

When to review the strategy

Several triggers should prompt a formal review of the investment strategy, beyond the regular annual cycle:

• A significant change in the organisation's financial position (large gift, major expenditure, change in income)
• A material shift in market conditions or the interest rate environment
• Changes to charity law or regulatory guidance affecting trustees' duties
• A change in the organisation's ethical priorities or denominational guidance
• Underperformance by the investment manager against agreed benchmarks over a sustained period

The key principle is that the investment strategy should remain a living document, not a policy written once and filed away. Trustees who treat it as such are better placed to act quickly when circumstances change.

Putting It All Together

Structuring an investment portfolio as a religious organisation is not fundamentally different from institutional investment management, but it does require an additional layer of intentionality. Every decision, from governance structure to asset allocation to manager selection, must be tested against the organisation's values as well as its financial objectives.

The organisations that do this well share a few characteristics. They have clear, documented investment policies. They work with managers who genuinely understand faith-consistent investing. They maintain regular oversight without micromanaging. And they treat the portfolio as a stewardship responsibility, not just a financial one.

Epworth exists specifically to support churches and charities through this process. With approximately £1.3 billion under management and a heritage rooted in the Methodist Church, Epworth brings specialist expertise in ethical screening, active stewardship, and multi-asset portfolio management for faith-based organisations. Whether your organisation is taking its first steps in formalising its investment approach or reviewing an existing strategy, speaking to a specialist manager is the most important step you can take.

Get in touch with Epworth Investment Management to discuss how we can support your organisation's investment needs.

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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.