Investors and Money

Investors: It’s Just Money... or is it? 

By William Lockyear, CPA
NJCIR representative, Oregon Province

Jesuit institutions and sponsored works have become increasingly reliant on investment portfolios to generate returns sufficient to support their mission. After years of sky-high returns, most are bemoaning the recent declines. But imagine that during this time of market fluctuation, a broader measure of investment return was considered – one that took into account the moral and social consequences, as well as the financial implications of investment decisions.

The difficulty is that non-financial returns are not as easily quantified. Simple mathematics provides us with a rate of return, P/E ratio and manager comparisons, but how does one measure community improvement, a clean environment or the value of democracy? To gauge the success of non-financial returns requires a different mindset, as well as an understanding that an investment represents support (tacit or explicit) of the management practices of the company in which one has invested. It also provides management with a resource base to continue operations.

Underlying the SRI movement is a basic assumption that shareholder activism is an effective tool. Often the first response to a call for investment responsibility is divestiture. Clearly that is the simple way out. It is also the surest way for an investor to lose his or her voice and any possible influence.

Jesuit institutions have a responsibility to investors to use the proceeds of their investments to maximize the work being done by the institution. Once divestiture would have been the popular response to a corporation’s questionable business practices. Today, Jesuit institutions realize that they can continue to hold stock that was purchased based on sound investment fundamentals and use that position as a voice for the poor. Rather than raise possible oversight questions and impact future contributions by eliminating companies from their investment portfolios, institutions can instead effectively manage contributions while continuing to act in the service of faith and for the promotion of justice.

Excerpt from IN ALL THINGS, Fall/Winter, 2002