With a mandate to make a positive change, religious organisations are among the richest asset owners and investors, and are increasingly looking at impact investments to make market returns. Unique to these investments are faith values, which decide the sectors, regions, and projects that receive the funds. In many cases, those values fit comfortably within the SDG puzzle. However, overall, faith-based investors have yet to develop major impact investing portfolios.
While there are no publicly available figures for the value of the assets owned by religious organisations, they are estimated to own over 7% of the Earth’s land surface. The Islamic finance industry was estimated to be worth $2.4 trillion at the end of 2017, according to the 2018 Global Islamic Finance Report, and in 2020 was almost $3 trillion, a figure that is expected to grow at a compound annual growth rate of 5% until 2024.
“What we do see is a big trend where faith-based investors have woken up and now understand that a lot of their assets are stuck in very traditional investment vehicles, as they need those revenues and returns from those investments to maintain churches, pay pensions, etc. So it is important for them to make sufficient returns, but they are also realising that in some cases there is a complete misalignment between their values and those funds they have been investing in,” says Maarten Toussaint, COO of FIIND Impact, an investment consultant and advisor, working with faith-based investors.
Even though faith-based investors have noble intentions, their investments are not bereft of returns. “We target market rate with our returns,” says Aaron Pinnock, senior impact investment analyst at the Church Commissioners for England. The portfolio’s target is returns of CPIH +4%. “So, in the last 30 years, our returns have averaged just over 9%, and that’s the kind of target that we are looking for going forward. We are not looking at impact as taking financial returns off the table, but it has to meet the kind of return requirement that will make other investments possible.”
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— Green Anglicans (@Greenanglicans) February 11, 2022