Looking for Signs: How to Avoid “Faith-Washing”

With the rise of ESG came greenwashing, a practice where a company would label itself “green” with vague claims and value-signaling, using terms like “natural” to give buyers positive feelings without making any changes to their business model. This was marketing at its finest.

Investment firms everywhere were swept up by the winds of the era, creating ESG funds to offer investors returns which they could feel good about. Although many portfolio managers were well-meaning, this was ripe for window dressing. Investments could be considered “green” based on sustainability policies on paper alone.¹ Funds could inflate their fees under the guise of ESG while being essentially an index fund with a slight underweight to fossil fuels.²

For Eventide’s multi-manager model portfolios, we are wary of the similar concept of faith-washing. If we are recommending investments that we believe are generally adherent to biblical principles, we must dive deeper than accepting the term “faith-based” carte blanche. Here are the main signs we watch for to avoid funds that may not be as authentically faithful as we would hope.

1. No dedicated values research team or vendors. Because faith-based investing requires thinking from an angle that many investment managers disregard, there is inherently additional labor and research involved in the decision-making process. We know this at Eventide well, with both a dedicated fundamental research team and our 5-person Business 360® Team, which considers the ethical positioning of a company before we invest.

2. Undifferentiated holdings versus the benchmark. A low active share indicates that a manager is participating in the majority of the investable universe and is likely not screening out many names which may have goods and services that many Christians find objectionable. Additionally, if a faith-based fund appears nearly identical to values-agnostic funds yet is charging higher fees, we are uncomfortable with both the ethical approach as well as the attractiveness of the investment.

3. An unclear philosophy. A faithful investment manager should have the wherewithal and thoughtfulness to say what they believe with clarity, built upon biblical truths. A manager who claims to be faith-based but has not taken the time to articulate it for investors is likely not being meticulous in their investment approach. Eventide offers a robust explanation of our avoid, embrace, engage philosophy, screening methodology, corporate engagement, and the biblical foundations that we have sought to apply throughout.

The winds of the ESG movement have died down and its popularity has waned. What has not and will not change are the timeless truths set forth in scripture. This includes values such as loving one’s neighbor, holding the laws of God close and walking with them daily, and avoiding ill-gotten gain. That’s not just wind; scripture is the ground itself. Let’s work together to be actually standing on it.