Anyone committed to following Jesus Christ should have no problem with the proposition that our stewardship decisions should reflect His character and righteousness. The problem comes in applying that principle in everyday living.

It's been seven years since we published this article on the ethics that should govern our money-management decisions. For the benefit of our newer readers, here's a review of how we approach these issues at SMI.

In almost every financial decision we make — whether it be spending for consumer goods, spending on housing, spending on entertainment, spending on education for our children, or spending on investments — we run the risk of putting money into the hands of those whose activities are in opposition to our values. Even using skills and talents to help one's employer grow and prosper takes on an ethical dimension when looked at through the lens of stewardship. When legitimate ethical questions arise about a company's activities, where should we draw the line as to what constitutes an acceptable level of involvement with that company?

This is a difficult question, one on which Christians of good will can, and do, have differing views. The position I have taken in Sound Mind Investing is not as activist as some would like. Still, I have cordial working relationships with proponents of "socially responsible investing" (SRI) such Art Ally, founder of the Timothy funds, and many others.

I believe that those seeking to be more ethical in their investments sincerely strive to be faithful stewards. They want to be sure they do not lend economic support to those worldly forces in opposition to what they see as biblical values. I respect their concerns. This applies not only to those leaders who are active in the SRI marketplace, but also to the Sound Mind Investing readers who have written to share their hearts with me on this topic over the years.

I'm offering my perspective on SRI merely as one among many ways the matter can be approached. I have never attempted to impose it on others, nor have I insisted it is the only correct approach. But I do believe it is a reasonable one. It seems to me to be both biblical and practical.

I believe we would all agree that the Christian view of stewardship is centered in our relationship with Jesus Christ and recognizes that He is Lord over all aspects of our lives, not just our investment portfolios. Thus, it seems to me that decisions as to (1) where and for whom we will work, (2) how and for what we will spend our money, (3) how and in what we invest our money, and (4) where and how much we give of our money must all be kept in view. None of these is exempt from the scope of our stewardship responsibilities — and none is inherently more important than the other. It is this view of the "interconnectedness" of these four areas that, ultimately, leads me to the conclusions I reach. I think this will become clear shortly.

The basics of SRI

All practitioners of SRI (some Christian investors prefer the term BRI — Biblically Responsible Investing) create a set of portfolio guidelines, called "screens," which reflect the ethical values they wish to see represented in their investments. It's generally agreed that SRI falls into three main camps:

  • Avoidance investing or "negative screening" (penalize the bad guys). Investors in this category develop guidelines designed to weed out companies engaged in activities or practices that they find objectionable. This is probably the most common approach, and it is what most individual investors mean when they say they are interested in "ethical" investing.
  • Advocacy investing or "activist screening" (convert/replace the bad guys). This is the opposite of avoidance investing because it is quite willing to invest in companies with the intention of changing objectionable corporate behavior by exercising one's ownership privileges via shareholder resolutions. This strategy calls for an ongoing effort after the investment is made.
  • Affirmative investing or "positive screening" (reward the good guys). This is a proactive strategy where investment opportunities are sought in companies that are working to achieve those societal goals that the investor believes are important. Companies that underwrite community housing projects, search for alternative energy sources, manufacture pollution-control products, or have "nondiscriminatory" employment and promotion practices are examples of areas targeted for proactive investing.

On the secular side, SRI proponents have generally been in favor of affirmative action, animal rights, environmental protection, affirmation of homosexuality, gun control, low-income housing, and so-called women's issues. They have generally opposed air pollution, alcohol, defense and weapons contractors, gambling, nuclear power, and tobacco products.

This list of concerns shows that SRI activists hold, for the most part, politically liberal views concerning the way society, business, and government should be organized and operated. This is slowly changing as greater numbers of investors from the "conservative" ranks are using their influence in support of values they believe are important.

Obviously, what constitutes social responsibility is in the eye of the beholder. Many news sources have examined key differences among SRI mutual funds in how they define "responsible" behavior. Even among secular SRI funds, it's common for there to be disagreement as to how certain companies should be treated. The lesson is clear: If you're interested in an "ethical" fund, be sure the fund you select reflects your moral values.

Avoiding direct involvement

Sound Mind Investing has brought SRI options to the attention of our readers many times over the years. We published a profile on the Timothy Plan, the first SRI fund to avoid companies involved in the abortion and pornography industries (in addition to the traditional alcohol, tobacco, and gambling screens) just one month after its inception back in 1994. There have been many further favorable mentions since. On multiple occasions, we've included whole articles highlighting those SRI funds run with a specifically Christian set of values and screens.

Still, it's fair to say that Sound Mind Investing has not placed a major emphasis on the use of SRI funds. There is a straightforward reason for that: In my view, regular non-SRI mutual funds are acceptable investment vehicles, even though they may, on occasion, hold objectionable companies in their portfolios. The important stewardship issue for me is that I don't directly involve myself with morally questionable enterprises in the four areas mentioned earlier — my work, my spending, my investing, and my giving.

Let's say we're talking about the tobacco industry. Philip Morris (now part of the Altria Group) is the nation's largest cigarette manufacturer. It is on just about every SRI investor's "bad" list. Until about six years ago, it also happened to own Kraft Foods, the largest food and beverage company in the U.S. While this ownership situation has changed, it was a great example of the difficulty one faces if trying to avoid any contact with objectionable companies. Here's how I would have applied my "direct involvement" criteria when Kraft was still owned by Philip Morris (Altria):

  • My Work
    Our work matters to God. He works, and He created us to be co-workers with Him. It's not something we do apart from Him. As authors Doug Sherman and William D. Hendricks point out in Your Work Matters to God: "All legitimate work is an extension of God's work. By legitimate work, we mean work that somehow contributes to what God wants done in the world, and does not actively contribute to what He does not want done."

    Because I want to avoid actively contributing to the production and sale of harmful products, I wouldn't take a job at Philip Morris. But because the products of Kraft Foods are generally useful, I would be willing to work there.

    Don't misunderstand me here. If you work at a company engaged in questionable activities, I'm not suggesting you need to quit your job tomorrow. Hopefully, you can use your position to effect positive change within your company. We're called to be salt and light, and that includes in the workplace. But I do think this is an area that deserves more thought than many Christians appear to give it.

  • My Spending
    I don't buy Marlboros (an Altria/Philip Morris product), but even when Altria owned Kraft, I saw nothing wrong with buying Kraft cheese and salad dressings, or other Kraft products such as A-1 steak sauce, Grey Poupon mustard, Planters nuts, Fig Newtons, Jell-O desserts, Tang or Kool-Aid juice drinks, Cool Whip frozen topping, or Maxwell House coffee.

    How could I buy the products of a subsidiary company such as Kraft knowing that my money will eventually find its way to a parent company of whom I disapprove? Because the complexity and interconnectedness of corporate America make it almost impossible to avoid this. Even assuming you could do the necessary research, it's unrealistic to think that Christians should go to the grocery or mall with a catalog in their hand listing the thousands of products that shouldn't be bought.

    I do agree, however, that it's possible to effectively focus attention on just one or two companies via boycotts. If a substantial segment of the Christian community was engaged in a united effort to bring about a change of behavior at Kraft (or any other company), I would certainly be willing to join in, even if it meant avoiding a long list of products.

  • My Investing
    I won't buy Altria Group (Philip Morris) stock, but I'll buy a mutual fund that might own some Altria stock. To me, there's a difference between making a direct conscious attempt to profit from the sale of tobacco products versus the indirect incidental contact I might have with Altria when I'm only trying to invest in a diversified portfolio of stocks that span the spectrum of American economic life. The Vanguard S&P 500 ETF used in our Just-the-Basics strategy owns shares in Altria.

    Let's assume I invest $10,000 in this fund that has roughly $133 billion in assets; how much ownership in Altria would this give me? I would own .000000075 of a fund that owns less than one percent of Altria. That means if Altria were divided into more than 1.4 billion pieces, I would own one piece. Such a microscopic ownership interest is, in my view, meaningless.

    Furthermore, we should bear in mind that when mutual funds buy shares of stock, that money doesn't go to the company in which they're investing. Many investors are under the false impression that companies cash in when you buy their stock (or invest in mutual funds which own their stock). This is not the case because such transactions take place in what's called the "secondary market."

    Investors are buying shares from other investors, not from the companies directly. It's the same as if you purchased a used Chevrolet. Your money would not go to General Motors, which got its money a long time ago and could care less whether you buy the Chevrolet or not. SRI funds are no different from "regular" funds in this regard.

  • My Giving
    It could be that a job with Altria Group would pay more than others available to me, or that a direct investment in Altria stock would have earned more than diversifying in a mutual fund. In either event, my giving could be increased. But that's not a sufficient inducement — greater giving potential doesn't necessarily "trump" my direct involvement ethic. My giving must flow from morally responsible decisions I make in the other three stewardship areas.

Avoiding even indirect involvement

Now, perhaps you believe my "direct involvement" criteria is not morally responsible. You believe that even indirect involvement is wrong. I respect your right to believe that, but I don't believe the Bible requires it. Nor is it likely you can live up to such a standard across the full stewardship spectrum. Consider:

  • Your Work
    You can work only for companies that have no questionable activities, either at the parent company or in any of their subsidiaries. Not AT&T, Disney, Johnson & Johnson, Viacom, General Electric, Bayer, Sony, Bank of America, Aetna, News Corporation, Wells Fargo, Time Warner, CBS, Merck… well, you get the idea. All of these well-known companies (and many, many more) fail screening tests used by Christian groups. If it's wrong to invest in them, even indirectly, surely it's wrong to work for them.
  • Your Spending
    Unlike the indirect support given when buying a company's stock, buying its products puts money straight into their pockets. With some companies, such as Anheuser-Busch InBev, it's relatively easy to know what to avoid. But would you be sure to avoid the full line of products offered by all the others on even a partial list of offenders, companies such as Johnson & Johnson (Aveeno, Band-Aids, Carefree, Johnson's Baby, Lactaid, Motrin, Mylanta, Neutrogena, and Tylenol to name a few) and General Electric (appliances, housewares, lighting, consumer electronics)? Not likely.
  • Your Investing
    Your ability to follow the biblical admonition to diversify your risk is very severely limited. Let's start with the stock market. Aside from the handful of Christian-screened stock funds available (assuming they meet your purity tests, which some may not — for example, not all screen out companies offering benefits to homosexual couples), no others qualify. U. S. government bonds, notes, and Treasury bills are also out. Whether promoting abortion or undermining traditional family values through humanistic education and welfare programs, there is much for Christians to be concerned about in the way our government spends money.

    Well, then, you can always just leave your money in the bank, can't you? Yes, but not with any assurance that your bank isn't using your deposits to make loans to help build such businesses as the local newspaper that aggressively attacks Christian home-schooling in its editorials. Or the bookstore that has racks of pornographic magazines right by the front door where even young children can see them. Or the abortion clinic that has become the largest in your state. Or the music store in the local mall that promotes music and videos that glamorize sexually destructive and drug-addicting lifestyles.
    The possibilities are almost limitless. The question is not if your bank has made loans to businesses engaged in practices abhorrent to you, but rather how many and for how much.

  • Your Giving
    It's sometimes suggested that even if a strict SRI strategy results in a much lower return on investments, it's a worthwhile tradeoff. My question is: how much lower, and in return for how great an increase in "purity"? If a set of SRI funds is 95% free of objectionable holdings and returns 7% annually over five years, while a set of "regular" funds is 85% free of objectionable holdings and returns 12% annually during the same period, was the tradeoff worth it? You may say yes, because it was a matter of conscience, and I won't object.

    But others in good conscience might say no, it wasn't worth it. Having one's gains significantly lowered in return for a marginal improvement in the moral content of a fund portfolio can strike some as poor stewardship. After all, in the Parable of the Talents (Matthew 25), the emphasis was on the return on investment, not how the bankers might have improperly used the deposits.

    While greater profit potential doesn't automatically overshadow moral concerns, neither should moral concerns — especially when the involvement is indirect and incidental — automatically be exalted above the return we get on our investments. A reasonable balance between the two — as well as with the "work" and "spending" categories — is needed.

The case for "socially responsible spending"

To do an effective job of withholding support from objectionable companies, we must be ready to boycott their products and services as well as their securities. Consider this excerpt from a story in Mutual Funds magazine:

"Will simply avoiding a company's stock affect its behavior? The short answer is that there's no proof that it will, nor even a rigorously articulated theory as to why it should. One argument is that steering clear of corporate bad guys lowers those companies' share prices, ultimately raising their cost of capital. That may be technically possible, but unrealistic: Even if boycotting shares lowered the price, that might serve mostly to open the door for management to take the company private at a bargain price. Companies need customers more than they need any particular group of investors" [emphasis added].

Companies primarily profit from our spending, not our investing. Targeting our routine daily spending can be a potent force for change. We encourage you to spend strategically to reward those companies that enhance the quality of life from a Judeo-Christian perspective and avoid rewarding those whose activities undermine the health of the family and children. If a company's behavior is offensive to your deeply held convictions, why reward it with your patronage?

Consider the potential effectiveness of a boycott:

  • Everyone can Participate
    All of us are buyers of products and services; not all of us have investment portfolios. Even if we do, they might not hold shares in the offending companies we are trying to influence. If you believe the value of your involvement is directly tied to the size and makeup of your investment portfolio, what do you do if your investments are modest in size and/or include no holdings, directly or indirectly, in the company in question? You may conclude that there's no role for you to play.
  • Ease of Recruitment
    There are millions of Christian families who would be quite upset with various companies if they knew the facts concerning those companies' activities and sponsorships. But in our society, it can be awkward to talk to your friends about personal money matters concerning their investments and how they can/should use them to stand for biblical values. On the other hand, it's relatively easy to hand someone an article on a boycott and ask that he or she take this information into account before doing further business with that company.
  • Ease of Implementation.
    Working for change through your investing requires adding an activity to already busy schedules, namely researching who holds the shares and communicating your requests that they divest their holdings. But to work for change through your spending adds few demands. It merely requires a change in spending patterns. This makes it easier for each of us to get involved as well as making it easier to ask others.
  • Concentration of Forces
    We can more readily join together and make our influence felt when we are all directing our efforts at a single decision-maker — the top officer of a particular company. In contrast, consider the challenge of influencing hundreds of fund managers and institutional investors (who may not share the same concerns) to sell a significant amount of their stock.

Businesses need our spending, not our investing, for their continued existence. Even if a million like-minded families decided to sell their mutual fund shares in protest, most companies would have only a public relations problem. The influence of those families is diluted because their investments are scattered across thousands of mutual funds and pension accounts. But if a million families who previously supported a company took their spending elsewhere, that business would notice a decline in sales and profits. That would be a far more serious problem.

Unfortunately, most Christians seem uninterested in practicing the kind of "socially responsible" spending necessary for boycotts to be successful. Boycotts can be a potent weapon, but even evangelical Christians appear to have little interest in wielding it.


Our options are limited by the fact that we are "in the world" and must function in it. Paul writes in 1 Corinthians 5:9-10,

"I have written you in my letter not to associate with sexually immoral people — not at all meaning the people of this world who are immoral, or the greedy and swindlers, or idolaters. In that case you would have to leave this world."

Paul recognizes the impossibility of completely avoiding all contact with disagreeable associations in the course of living our daily lives.

Some people believe that it's wrong to have any money invested in objectionable companies. Even if such a standard was attainable, there is still the question of whether the incremental gain in the purity of the portfolio is worth the likely decrease in investment return. For example, I want to breathe clean air, yet I don't feel the need to walk around wearing a gas mask — at a certain point, the marginal improvement in purity isn't worth the increased restriction. Likewise, I avoid investing directly in companies whose products or policies run counter to my values, but I also don't fret that minuscule holdings of objectionable companies may temporarily pass through my fund portfolio as I enjoy the higher returns and ease of use that SMI's mutual-fund-based investing strategies have historically provided.

Ultimately, I want us to become more effective by extending our ethical concerns to all areas of stewardship — our work, our spending, our investing, and our giving. Am I saying that "if you can't do it perfectly, then don't even make an attempt"? Of course not. I'm saying that it is helpful to make a distinction between the things you can do perfectly (or almost perfectly) and the things you cannot.

Far be it from us as Christians, who are responsible for handling God's wealth for God's glory, that we should provide direct financial support to the very people and institutions whose activities are undermining the biblical values we hold dear. I believe that it's possible to almost completely avoid having direct involvement or lending direct support to objectionable companies. So, make it a priority to do so all across the stewardship spectrum. And with respect to the things that you cannot do perfectly, such as avoiding all indirect involvement or support in your spending and investing, do what you reasonably can while keeping your stewardship responsibilities in balance.

As Christians continue to explore the issues involved in deciding where to "draw the line" concerning our financial associations, may our discussions be governed by Ephesians 4:2-3: "Be completely humble and gentle; be patient, bearing with one another in love. Make every effort to keep the unity of the Spirit through the bond of peace."