It's a question we hear from church treasurers and trustees more than almost any other: if we invest ethically, will we have to accept lower returns?
It's an understandable concern. Fiduciary duty is real. The people in your congregation depend on your church's finances being managed responsibly, and the idea that doing the right thing might cost you financially is genuinely troubling.
The short answer is no — and the evidence backs that up.
Faith-based investing, done with rigour and expertise, does not require you to sacrifice performance. The perceived trade-off between values and returns is one of the most persistent myths in charity investment. At Epworth Investment Management Ltd (“Epworth”), we've been disproving it since 1996.
Where the "Performance Penalty" Myth Comes From
The assumption goes something like this: ethical screening removes a portion of the investable universe, and a smaller universe means fewer opportunities, which must mean lower returns. It sounds logical. It's also wrong.
The flaw is that it treats exclusions as purely restrictive, when in practice they often eliminate companies that carry significant long-term financial risk. Tobacco companies face declining markets and mounting litigation. Fossil fuel extractors carry stranded asset risk as the energy transition accelerates. High-interest lenders face tightening regulation. Excluding these sectors isn't just the ethical choice — it's frequently the prudent one.
The real question isn't "can we afford to invest ethically?" It's "can we afford not to?"
Research from FaithInvest and others consistently shows that faith organisations which align their investments with their values face lower reputational risk, stronger governance, and better long-term stewardship outcomes. The financial and the faithful are not in conflict.
What Epworth Excludes — and Why It Matters
Ethical screening at Epworth is not a marketing exercise. It is a rigorous, continuously maintained process grounded in Christian theology and governed by our Joint Advisory Committee on the Ethics of Investment (JACEI), alongside our internal Ethical Advisory Committee.
We apply clear exclusions to companies whose activities are incompatible with Christian values. These include:
- Fossil fuel extraction and thermal coal
- Tobacco (companies deriving more than 5% of revenue from tobacco are excluded)
- Gambling
- Adult entertainment and pornography
- Weapons, particularly indiscriminate or nuclear systems
- High-interest and predatory lending (including payday loans)
- Severe human rights violations and exploitative supply chains
Approximately 13% of the UK market by value is excluded through our in-house screening process. That is a meaningful constraint — and yet our funds are designed to meet or beat their respective benchmarks even with those constraints in place.
Beyond negative screens, we also apply positive and cautionary filters. We look actively for companies with strong environmental performance, fair labour practices, responsible executive pay, and transparent supply chains. The goal is not simply to avoid harm — it is to direct capital towards companies that reflect the values our clients hold.
Stewardship as a Performance Tool
One of the most important things that separates Epworth from a generic ethical fund is our approach to stewardship. We don't simply screen companies and walk away. We engage.
Where we identify concerns in a portfolio holding — whether that's a governance failure, an environmental controversy, or a human rights issue — we engage directly with company management. We vote at shareholder meetings. We escalate through investor coalitions. Where change is not forthcoming, we divest.
This active stewardship approach matters for performance as well as ethics. Companies that respond well to engagement tend to be better managed, more resilient to regulatory change, and better positioned for long-term growth. Stewardship is not a soft add-on to our investment process; it is part of how we manage risk.
The Integration Advantage
At Epworth, our fund management team is responsible for both financial analysis and ethical assessment. We do not operate a separate ethics team that hands down a list of approved stocks. Instead, ethics and investment analysis are conducted simultaneously, by the same people.
This integration matters. It means ethical considerations are not a constraint imposed on top of investment decisions — they are woven into the investment thesis from the start. A company that fails our ethical standards is, in our view, a company that carries risk the market may not yet have priced.
What This Means for Your Fiduciary Duty
Trustees sometimes worry that choosing an ethical investment manager could expose them to criticism if returns underperform. This concern, while genuine, rests on an outdated understanding of fiduciary duty.
The Charity Commission is clear that trustees are entitled to take ethical considerations into account when making investment decisions, particularly where those decisions are consistent with the charity's purposes. For a church or religious charity, investing in tobacco, weapons, or predatory lenders would be difficult to justify on mission grounds — and the Charity Commission recognises that.
More broadly, fiduciary duty requires trustees to act in the long-term interests of their beneficiaries. Given the financial risks associated with many excluded sectors, a well-constructed ethical portfolio is entirely consistent with that duty — and in many cases, arguably more aligned with it than an unconstrained one.
You are not choosing between your values and your responsibilities. With the right investment manager, you are fulfilling both.
Why Specialist Expertise Makes the Difference
Not all ethical funds are equal. A generic ESG fund and a specialist faith-based investment manager are very different propositions — and the difference matters when it comes to both values alignment and performance.
Generic ESG funds apply broad environmental, social and governance criteria, but they are rarely designed with Christian theology in mind. "Whose ethics?" is a question worth asking. An ESG fund might hold a company we would exclude on human rights grounds, or include one we would flag for predatory lending, simply because it passes a standardised ESG score.
At Epworth, our ethical framework is shaped by decades of engagement with the Methodist Church, the Church Investors Group, and partner denominations across the UK. Our policies are detailed, publicly available, and reviewed continuously. When you invest with us, you know exactly what you hold and why.
A Track Record Built on Both Counts
We manage around £1.3 billion in assets for churches, charities, religious orders, and mission agencies across the UK. Our funds span UK equities, global equities, corporate bonds, sovereign bonds, multi-asset strategies, and cash-plus options — giving clients a full range of investment choices, all within the same ethical framework.
The breadth of our offering matters. A church treasurer needs flexibility: different funds for different risk appetites, different time horizons, and different income requirements. Ethical investing should not mean a limited
The Answer, Simply Put
Can churches invest ethically without sacrificing performance? Yes — provided the investment manager has the expertise, the rigour, and the genuine commitment to both.
Ethical screening, applied thoughtfully, is a form of quality control. Active stewardship is a form of risk management. And a deep, theology-informed understanding of what your church actually stands for is the foundation on which everything else is built.
At Epworth, this is not a side offering. It is the only thing we do. We exist to help churches and charities invest in a way that is financially sound and morally credible — and we have been doing it for nearly three decades.
If your church is weighing up its investment approach, or if you want to understand how ethical screening would apply to your current portfolio, we would welcome the conversation. Get in touch with our team to discuss your church's investment needs.
The value of investments can fall as well as rise. Past performance is not a guide to future returns. Epworth Investment Management Limited is authorised and regulated by the Financial Conduct Authority.
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.