Want LDS Church money to change the world? Here are some impact investing strategies.

(Illustration by Christopher Cherrington | The Salt Lake Tribune)

Sam Wolfe wants The Church of Jesus Christ of Latter-day Saints to reinvest.

Wolfe, a Latter-day Saint writer living in Cairo, would like his church to sell its stock in oil companies, military arms dealers and big banks. The funds could be directed to causes like eradicating youth homelessness, aiding the poor and providing health care to regions without it.

“I recognize that the church does good humanitarian work,” Wolfe wrote in an email to The Salt Lake Tribune. “Still, it has capacity to do much more good.”

Investing money to produce a positive social outcome is known as impact investing. Now that the church is disclosing how a chunk of its portfolio — $37.8 billion worth as of the end of 2019 — is allocated, more members like Wolfe are likely to call for their church to seek both financial and philanthropic returns.

Sam Wolfe

The church’s account — a “rainy day” reserve that reportedly holds $100 billion — already meets the definition of impact investing by virtue of what’s absent. In a quarterly filing to the U.S. Securities and Exchange Commission, the church investment arm Ensign Peak Advisors revealed a diverse collection of blue chip stocks and mutual funds with no holdings in tobacco, beer or big soda manufacturers. (The church teaches its members to eschew tobacco and alcohol, though its Word of Wisdom health code does not apply to even caffeinated sodas.)

That kind of divestiture is called negative screening and is the most common type of impact investing, said Rajith Sebastian, director of the Wharton Social Impact Initiative at the University of Pennsylvania. A more active type of impact investing happens outside the stock market.

Some institutional investors place their money into privately held enterprises that can deliver a positive result. One example on the Wharton Social Impact Initiative website is a startup that is designing a blood testing kit that patients can use at home instead of waiting for, and paying for, lab results.

“It's possible to have both a financial return and have a significant impact,” Sebastian said in a phone interview.

(Courtesy photo) Rajith Sebastian, director of the Wharton Social Impact Initiative at the University of Pennsylvania.

But those kinds of private equity investments can be challenging to make, said Bruce Usher, professor of professional practice at Columbia Business School. Institutional investors have to decide in advance on their financial and social goals. Then they have to perform due diligence on any investment candidate.

Another approach within the stock market is to practice ESG investing — environmental, social and governance. That means narrowing stock buys to companies meeting certain responsibility thresholds.

Google, for example, could meet the definition of an environmentally responsible company because most of the energy it uses comes from renewable sources, Usher said. (The SEC filing showed Ensign Peak Advisors owned $930 million in Google stock.)

An impact investor also could buy stock in companies with a racially diverse mix of employees and no gender pay gap (social) or corporations that give strong oversight to its board and a separation of duties among its executives (governance).

(Courtesy photo) Bruce Usher, professor of professional practice at Columbia Business School.

ESG investing, Usher said, doesn’t require an investor sacrifice financial returns.

“At the same time,” he said, “there’s a concern about whether you are going to actually change the world.”

Impact investors also could undertake what’s called thematic investing. The investor could put money into public or private ventures seeking, say, cures for infectious diseases.

This approach is more challenging than ESG investing, Usher noted, but also doesn’t require an investor to sacrifice financial returns. And it may actually change the world if the company succeeds.

The LDS Church already has components that provide a social benefit. The nonprofit Deseret Industries, for instance, sells secondhand goods while also providing job training to its workers.

A church spokesman declined to comment on whether its investment portfolio has specific social goals.

(Courtesy photo) David Chen, adjunct professor of finance at Northwestern University’s Kellogg School of Management.

David Chen, adjunct professor of finance at Northwestern University’s Kellogg School of Management, said institutional investors typically are not receptive to outside lobbying for changes in their financial practices. Sometimes, patience works.

The Utah-based faith, which the SEC filing showed had more than $670 million in Chevron and Exxon Mobil, could make a market-based decision to divest from big oil, said Chen, citing one example, and steer the money into companies focused on renewable energies. That could meet goals of being both socially conscious and creating sustainable investments.

“If I were a rank-and-file member of the church,” Chen said, “I’d be asking the church, ‘Are you looking forward in a way that the church historically has? Are you looking forward into the future and the trends where the world is going and are you also thinking about sustainability in the context of stewardship?’”

That could align with the church’s environmental aims. Latter-day Saint leaders have adopted many green building practices, warned about the perils of climate change and reminded members of a heavenly directive to care for the Earth.

(AP file photo) President Donald Trump points to his shopping cart during a tour of The Church of Jesus Christ of Latter-day Saints' Welfare Square food distribution center, Monday, Dec. 4, 2017, in Salt Lake City.

Sebastian, from the Wharton School, said an impact investor needs to calculate the potential harm. LDS Church membership in parts of Africa is booming. If the faith wanted to invest in a utility company there to deliver water or electricity to places that don’t have it, Sebastian would ask whether such financing would put any local companies providing interim solutions out of business.

“That,” Sebastian said, “could be a major negative impact in that region and on the church itself.”

Wolfe said he doesn’t expect the church to rearrange its entire vast portfolio but that “its investments should promote a better world, not merely seek profit.”