Catholic-Driven ETFs: Navigating Finances with Moral Compass
- Author: Daniel Huefner
- Estimated Reading Time: Less than 5 minutes
Catholic-themed ETFs Operation: Understanding ETFs That Invest Along Catholic Teachings - Catholic-Focused ETFs: A Look at Investments Aligned with Church Teachings
In the wake of Pope Francis' passing, the world mourns, while the Vatican prepares for the convening of the conclave. But what does this mean for investors interested in ethically-driven investments that reflect Catholic values? Let's delve into the details of ETFs that invest "Catholicly."
ETFs in a Time of Change at the Vatican
The passing of Pope Francis has not sparked increased interest in Catholic-themed ETFs on online platforms like JustETF. According to a representative from Capital, it's unlikely that this event will have a significant impact on the investment choices of ETF investors, who primarily prioritize returns and risks over ideological considerations.
Navigating the Catholic Investment Landscape
One significant Catholic-aligned ETF is the MSCI World Catholic Principles, introduced by US asset manager Franklin Templeton about a year ago. Companies included in this index must meet general ESG criteria and align with guidelines set by the Catholic Church, such as excluding companies involved in abortion, embryo research, weapons production, and condom manufacturing. It's important to note, however, that these principles are not strictly applied in practice, resulting in less diversity compared to conventional ETFs.
The Portfolio Breakdown
A look at the Franklin Templeton ETF portfolio reveals around 700 companies from industrialized countries, with about half as many as its non-Catholic counterpart. The portfolio is dominated by tech companies like Nvidia, Visa, Mastercard, and Home Depot, but notable absentees include tech heavyweights like Apple and Microsoft due to their strong support for LGBTQ+ rights.
Diverse Paths to Ethical Investing
Beyond the MSCI World Catholic Principles ETF, other options exist for investors seeking to align their investments with socially responsible Catholic values. For instance, the S&P 500 Catholic Values ETF from Global X includes Apple and other tech giants.
Performance Overview
Catholic-aligned ETFs have demonstrated impressive performance in the past. Last year, the MSCI World Catholic Principles ETF from Amundi gained around 17%, slightly underperforming its non-Catholic counterpart (26%). Similarly, the S&P 500 Catholic Values ETF from Global X achieved a one-year performance of around 19%, mainly due to strong development in large US tech stocks. However, the non-Catholic S&P 500 counterpart generated significantly higher returns of around 32%.
Shifting Market Dynamics
Recent market turbulence due to Trump's tariffs has affected both ETFs, with both currently in negative double-digit territory for the year. It's essential for investors to carefully consider the unique characteristics and performance of these ETFs when making investment decisions.
Exploring the Enrichment Data
Overview:
Catholic-aligned ETFs, such as those tracking the MSCI World Catholic Principles Index and the S&P 500 Catholic Values Index, differ from regular ETFs primarily in their investment criteria, which are guided by Catholic values and ethical principles. Here's how they differ and perform:
Investment Criteria
- Screening Process: These ETFs undergo a strict screening process to ensure their investment portfolios align with Catholic teachings. This means they avoid companies involved in activities deemed unethical by Catholic doctrine, such as arms manufacturing, gambling, and abortion-related services.[1][3]
- Focus on Ethical Investing: By focusing on ethical investing, they appeal to investors who prioritize aligning their investments with moral values, potentially attracting a niche segment of socially conscious investors.[2]
Performance and Characteristics
- Market Focus: While some Catholic-aligned ETFs, like the Global X S&P Catholic Values Developed ex-U.S. ETF (CEFA.O), focus on international markets excluding the U.S., others may include U.S. stocks. This geographic focus can affect their performance based on regional market conditions.[2]
- Performance Metrics: The performance of these ETFs is compared against traditional market indices but with an added layer of ethical screening. They aim to match the market performance while adhering to their values-based criteria. For example, the CEFA.O ETF has seen significant interest recently, reaching a 52-week high.[2]
- Expense Ratios: Catholic-aligned ETFs generally have expense ratios comparable to other sector-specific or index-tracking ETFs, which means their costs are typically competitive with the broader ETF market. For instance, CEFA.O has an expense ratio of 0.35%, which is relatively modest.[2]
Comparison with Regular ETFs
- Market Alignment: Unlike regular ETFs that purely track market indices without ethical considerations, Catholic-aligned ETFs offer investors a way to align their investments with their faith or ethical values. This can lead to a more selective portfolio compared to a broader market ETF.[1]
- Investor Appeal: While regular ETFs appeal to a wide range of investors focusing on diversification and market performance, Catholic-aligned ETFs attract a specific subset interested in ethical investing. This niche appeal can affect their liquidity and market volatility.[2]
In summary, Catholic-aligned ETFs differ in their investment criteria by emphasizing ethical alignment with Catholic values and principles. Their performance can be influenced by their adherence to these principles, attracting a niche market of investors seeking to align their investments with their faith.
- The Commission has also adopted a proposal for a directive on the protection of employees in the event of an accident, diversifying its focus beyond religious-based investments.
- According to research, investing in technology companies remains a popular choice among Catholic-aligned ETFs, reflecting the growing importance of technology in the finance sector.
- Apparently, esg finance investing, which prioritizes environmental, social, and governance factors, shares similarities with Catholic investing principles, as both emphasize ethical considerations.
- In the ETF landscape, while some funds strictly adhere to Catholic values, others like the S&P 500 Catholic Values ETF make room for companies that may be involved in activities deemed unethical by Catholic doctrine, but still align with the ESG criteria.
