Vatican Bank launches values-based equity indexes

EMMA PIRHALA / MANAGING EDITOR

The Vatican Bank, or the Institute for Works of Religion (IOR), recently launched two equity indexes monitoring the European and American markets. 

An index is a tool that measures the growth  of  a  selected “basket” of stocks. Announced on Feb. 10, the institution partnered with Morningstar, a financial research firm. 

The  bank   explained  that  the  indexes are guided by five core pillars, emphasizing Catholic faith-consistent investing. The principles include the  sanctity and dignity of human  life, environment stewardship and efforts to address addiction and recognition of the  values listed in the United  Nations Global Compact. 

USD Clinical Professor of  Finance Daniel Roccato helped define the Vatican Bank’s new equity indexes. 

“What  the Vatican  essentially did was they created an  index,”  Roccato  explained.   “Not a  fund  yet. But  they’ve  created  two   [indexes]:   one to track stocks in the United States and one to track stocks in Europe.”

The European index includes prominent European-based companies.  For  the  U.S. index, securities by Amazon, Meta and Tesla are among the largest names. 

The inclusion of companies with significant ties to the Trump administration has prompted backlash. Some have questioned the proximity of companies’ leaders — Jeff Bezos, Mark Zuckerberg and Elon Musk — to the Trump administration saying it presents an ethical dilemma. 

USD Vice President of Mission Integration Michael Lovette-Colyer shared insight on the intersection between values and finance. 

“It is important to keep in mind that the process is based on the organizations, and not the personalities,” Lovette-Colyer explained. “Tesla  in  the United  States is  inseparable  from   its founder  and  CEO.  And  so  that brings to mind all kinds of  questions and concerns, and even dissatisfaction with the person of Elon Musk… So the challenge there is that with Tesla, it is an electric car company, which is a great thing — to move toward electric vehicles. But it does have all this baggage now, for sure.”

Some speculate that the launch of these indexes could lead to the start of Vatican Bank-sponsored funds, which people could invest in. Professor Roccato held a similar idea for the future of the indices. 

“One of the logical next steps would be to create indices that you and I can invest in that would track those securities that reflect Catholic values,” Roccato shared. 

The Vatican Bank wouldn’t be the first to launch a fund that reflects Catholic teachings. An exchange-traded fund (ETF), called the Global X S&P 500 Catholic Values ETF, follows investment guidelines  established  by the United States Conference of Catholic Bishops (USCCB). 

This year, the ETF has grown at a similar  rate  as  the   S&P   500 — an index tracking the stock performance of the 500 leading companies in the United States. This demonstrates potential   success   for  funds  built on Catholic values. However, as a whole, environmental, social and governance (ESG) funds tend to be outpaced by the market index  since companies holding more ethical values may  have lower profit margins.  Roccato  noted  that,  despite the potential for lower returns, young investors are gravitating toward values-based investments. 

“Gen Z wants to invest,” Roccato said. “They want to put their money where their values are… The research tells us that younger investors are comfortable, they don’t want to lose money, but they’re certainly comfortable with giving up a little bit of profit if it means the investment comports with their values.”

USD senior and finance major Ella Fahrendorf is involved in University Ministry. She shared that the possibility to invest in a fund supported by Catholic values is exciting.

“I think it is great to have the opportunity to easily invest in companies that align with Catholic morals,” Fahrendorf said.

However, some students disagree and are more keen to invest based on returns. USD junior and finance major Preet Sethi explained his stance. 

“I invest based strictly on statistics,” Sethi said. “Finance  is  considered  a science in my eyes and should be treated as such.”

Currently, the U.S. index is priced at $4,956.34 and the European tracker  at  €2,209.13 ($2,602.10). Although no indication of a fund launch that people can invest in has been hinted  by  the  Vatican Bank, some investors await the opportunity to potentially invest in an Vatican Bank-sponsored fund.