Putting Faith First

What single factor may explain why Whirlpool Corp. no longer donates to Planned Parenthood, why the Walt Disney Co. has a Roman Catholic priest on its board of directors and why Best Buy is cracking down on minors who try to buy shoot-’em-up video and computer games? Answer: a bunch of Catholic investors and their allies want it that way.

Investors with a holy vision are building a pulpit in the boardroom. According to an analysis based on data from investment tracker Morningstar, 58 faith-based mutual funds have formed since 2001, bringing the running total to 142. And faith-based investors’ tactics have become much more aggressive: they no longer just shun certain industries, such as tobacco, gambling or weapons manufacturing. Mirroring a greater trend in socially responsible investing, they are now buying stocks and leveraging pressure from the inside to promote their agendas. For instance, Mennonite Mutual Aid funds, which wants companies to be proactive in curbing HIV and AIDS, helped persuade Ford Motor Co. to report how the disease is affecting its global operations.

Among the most aggressive of the faith-based investors is Aquinas Funds, a small family of funds, with headquarters in Dallas, formed in 1994 and committed to advancing Catholic values. Aquinas has thrown its relatively modest financial weight–it manages some $170 million– behind the pro-life cause, arguing in its promotional literature that “investing in companies that are involved in abortions would be material cooperation with evil at a minimum.” In addition to lobbying Whirlpool and other firms that once donated to Planned Parenthood, Aquinas leans on drugmakers, hospitals and insurance companies whose stock the funds own to quit offering contraceptives or abortion services. Aquinas joined other investors in petitioning executives at Disney and Best Buy until both companies took steps to closely monitor products that could allegedly provoke faithlessness (such as films critical of religion) or harmful behavior in consumers (like those violent video games), according to former Aquinas Funds president Frank Rauscher, who launched its advocacy program in July 1994 and led it until July 2005.

All along, arguments have focused on the bottom line. “How many people are going to buy appliances because you give to Planned Parenthood … Probably zero, right?” Rauscher asks. “But how many people who are pro-life [would not buy one]? You may get a certain percentage of the public who says, ‘I’m just not going to buy their appliances because of that.'” Whirlpool says its changed donation policy was a response to customer pressure, including boycott threats, not Aquinas’ efforts. Walt Disney and Best Buy declined to comment.

But Rauscher, now a consultant on shareholder-advocacy issues, is convinced that the approach works–even though companies seldom admit it. “There are a lot of good companies out there,” he says. “They just have some things we call ‘warts’ that need to be removed.” Aquinas is prepared to remove them, one by one. –By G. Jeffrey MacDonald