Mike Stack, an ultrasound technician in Royal Oak, Mich., was volunteering at an antiabortion pregnancy crisis center about three years ago when he had a rude awakening.
While reading a special interest newsletter, he learned that the company handling his investments was a contributor to abortion provider Planned Parenthood. That got him wondering about his mutual funds: Did they own shares in companies with links to abortion practices?
"I thought, 'Jeez, I'm doing all this work to try to end abortion, and my money is supporting it,' " says Mr. Stack, a devout Roman Catholic. Within a few months, he was working with an antiabortion financial planner who helped him build an investment portfolio consistent with his beliefs.
Socially conservative activists believe the nation is full of people ready to have an awakening like Stack's. "Morally responsible" or "values based" investing, they say, has been an underutilized tool in their quest to rid society of abortion, pornography, and domestic-partner benefits for homosexual couples. It's a tool whose time has come, they say.
Social conservatives will have an opportunity to hear a lot more about investing that reflects their values. That's in part because this summer, the American Family Association will embark on a first-time mission to encourage its 2.8 million online members to purge their portfolios of companies that support a "gay agenda" and other "antifamily" practices. [Editor's note: The original version misstated that Women of Faith had committed to promoting ethical investing at 28 inspiration events it has organized this year. The group has made no such commitment.]
Hitching conscience to capital
Anecdotes, too, suggest a conservative wave of hitching conscience to capital. For example, four years ago, only about 15 percent of John Vleko's financial planning practice in Southfield, Mich., was dedicated to antiabortion investments. Today, it's more than 60 percent. But he believes many investors still haven't made the connection.
"Millions of people who feel so fervently about the causes that touch their hearts are helping to fund the enemy," Mr. Vleko says. "When people find out they possess this kind of moral leverage, I think we will see an increasing tsunami of taking money away from companies that are promoting the culture of death and spewing all this garbage that's coming out of the entertainment industry."
For most social conservatives, values-based investing represents new territory. Although what's known as socially responsible investing dates to the Vietnam era, socially conservatives have rarely been involved, says Tim Smith, president of the Social Investment Forum, a network of socially concerned investment organizations. One reason: SRI on the whole has embraced a number of traditionally liberal causes, such as shunning weaponsmakers – something that has held scant appeal for hawkish conservatives and those preeminently concerned with raising standards for sexual morality.
"We're talking about two universes here," Mr. Smith says. "The conservative Christian groups obviously see the world through a very different set of spectacles than, say, the Calvert Group or the Presbyterian Church (USA). So there's very little room for either interaction or cooperative effort."
Conservative activists have long used money to advance social change, but they've deployed it, not as investors, but as political donors and consumers. The AFA, for instance, used a boycott in the late 1980s to pressure 7-Eleven stores to stop stocking pornographic magazines. More recently, the group's members successfully urged advertisers on "The Book of Daniel," a television show about a clergyman with a drug habit, to withdraw their support. Show creator Jack Kenny last year said AFA's pressure was behind NBC's decision to cancel the show in January 2006 after just four episodes.
Until now, the AFA has overlooked investing as a tool for two primary reasons, according to AFA President Tim Wildmon. Consumer pressure is simpler to explain to a mass audience, he says, and the AFA hasn't had sufficient resources to rally an investing campaign on top of its other projects. He now sees values-based investing as an opportunity missed.
"We just dropped the ball on that," Mr. Wildmon says. "We haven't been very smart in that regard. But now that's about to start changing."
Values-based investing likely to grow
Social conservatives have seen their options multiply over the past six years. Launched in 2001, the Ave Maria family of Catholic-friendly funds has grown to include five funds. Each screens out firms with links to abortion, contraception, pornography, and nonmarital partner benefits. Also in 2001, the Southern Baptist Convention established GuideStone Funds, which shun firms involved in pornography, abortion, and vices. Seven of the 12 GuideStone Funds now count more than $1 billion under management, making it the largest family of socially conservative mutual funds.
The $2 trillion SRI industry, which represents about 13 percent of all professionally managed funds in the United States, still dwarfs the fledgling endeavors of conservative investors. Still, observers believe values-based investing is likely to keep gaining momentum. Ron Simkins, director of the Kripke Center for the Study of Religion & Society at Creighton University in Omaha, Neb., regards the growing acceptance of ethical investing as a natural extension of conservatives' 25-year quest to reform society through public policy initiatives and consumer boycotts.
"It's just a matter of growing up" and adding more sophisticated tools, Professor Simkins says. "Now, instead of boycotting Disney, they'll be investing in Fox Family Films."
Pioneers in values-based investing, however, see other factors at work.
After a failed attempt to launch a family of socially conservative mutual funds in the late 1990s, Stephen Bolt shifted to a new model when he established Nashville-based Faith Financial Network in 2002. FFN, which pays for exclusive endorsements from AFA, relies on a network of more than 100 representatives to plug socially conservative investors into suitable investments, based on a proprietary screening system.
Among red flags are a firm's exposure to alcohol, tobacco, and gambling industries, as well as abortion, pornography, and gay issues. Companies sponsoring the gay-rights efforts of Human Rights Campaign, for instance, get poor marks.
The model works, Mr. Bolt says, because socially conservative investors usually want top-performing investments, and this system doesn't put anything off limits for social reasons. Instead, investors learn which investments are the least objectionable among a list of top performers in a particular sector. They also get a chance, he says, to resist a societal slide in morality that wasn't a concern three decades ago.
"If you look at the dramatic, phenomenal, historic change in the values of this country over the past 30 years, you'll see that social conservatives are now decidedly on the defensive," Bolt says. He cites gay initiatives in corporate America as an example. "Thirty years ago … everybody thought like us. But today, that's not the case."
As values-based investing takes off, stakeholders are hoping to broaden the scope of salient social issues. Bolt, for instance, says his analysts will begin screening for environmentally troublesome companies within the next year.
In Birmingham, Mich., Marco DeCapite says he's pleased his investments don't support abortion or pornography, but he also wishes they would do more to address other Catholic concerns, such as environmental protection and poverty-related issues.
"There are other concerns that definitely need to be considered," Mr. DeCapite says. "We're doing what we can with what we have today."