Catholic Church Issues Guidelines for Ethical Investing

VATICAN CITY — Earlier this month, the Vatican’s former chief auditor accused top church officials of stealing and mismanaging funds.

Then this week came evidence in a Vatican trial showing that the church had lost more than 100 million euros on a shady London real estate deal. On Thursday, that same court heard a surreptitiously recorded phone conversation between a once powerful cardinal now accused of embezzlement and Pope Francis, in which the pontiff appeared to consent to secretly pay up to a million euros in ransom to free a nun held hostage by militants.

And on Friday, the Vatican made public a guide to best financial practices in ethical investing.

“We’ve had rough times,” Cardinal Peter Turkson, the Vatican official who oversaw the drafting of the church’s money-managing guide said with a chuckle about the Vatican’s long, and critics say, continued tradition of murky transactions and financial intrigue, replete with tales of cash-filled envelopes and hidden accounts.

The 46-page document was originally scheduled to be released nearly a year ago, when Cardinal Turkson spoke in an interview about it. But the Vatican pulled the plug at the last moment, without explaining the delay. Church officials have not explained why the report was released on Friday, and Cardinal Turkson, who has moved to another Vatican department in the meantime, was not immediately available for further comments.

But he and other officials have maintained that the Vatican has cleaned up its act, and that the new guidelines, which are for Roman Catholic churches and organizations around the world, were another step in the right direction. He argued in the earlier interview that the guidelines would help the faithful avoid filling financial portfolios with morally high-risk investments that could result in eternally negative returns. “It’s a call to action,” he said.

Cardinal Peter Turkson at the Vatican last December.Credit…Guglielmo Mangiapane/Reuters

The report is part Vatican spiritual treatise and part Vanguard fund report, laying out principles to centralize and formalize Catholic asset management so that it is compliant with the social doctrine of the church. “The document simply is saying anyone who manages finances must also accept the responsibility of what the management of finances entail,” Cardinal Turkson said.

The new guidelines, which were already common among Catholic churches in developed nations like the United States and Germany, would push rich churches to get up to speed with the pope’s priorities, like climate change and helping migrants, and teach smaller churches dipping their first toes into the market about how to avoid hidden dangers.

Jean-Baptiste de Franssu, the president of the Vatican Bank, said dangerous investments included gambling sites, dirty gas polluters, war profiteers and “adult entertainment, as they say.”

When management of assets is outsourced without strict guidelines, he said, money can end up in less than holy places. “It certainly does happen,” he said.

The document’s name, Mensuram Bonam, refers to the biblical passage, “For the measure you use will be measured back to you.” It acknowledges that dioceses, Vatican congregations and Catholic organizations have a responsibility to grow their wealth, donations and investments to serve their mission, and insists that faith-consistent investment does not have to mean lower returns.

“There should be little to no fear of underperformance, or of the risk of not meeting one’s fiduciary responsibility,” the document says, arguing that the growing multibillion-dollar field of ethical investment shows that over the long term, one can “Do well by doing good!”

The guidelines urge investors to have awareness about “collateral impacts,” but they also acknowledge “gray areas” like “the abuse of ‘speculative products or investment techniques’ or using accounting practices loopholes that exploit the protection of tax havens.”

Mr. de Franssu added that in the shady world of finance, seemingly clean companies could have subsidiaries that were into “pornography or God knows what.”

A handout photograph from the Vatican of a day last year in the ongoing trial of 10 people accused of financial crimes.Credit…Vatican Media, via Reuters

“Gray areas” are especially difficult for churches new to the market to avoid, the document points out. Churches beginning to seek financial stability by moving away from grants and donations and toward “a business model of investment,” like ones in his native Ghana, Cardinal Turkson said, “can’t do that without showing them how to do it.”

The Holy See considers certain funds bad investments, no matter how lucrative. Companies that contradict church doctrine, on areas like abortion or contraception, are such offenders. But the guidelines also suggest that the faithful avoid investments harmful to workers or ones that strip natural resources, potentially producing economic migrants who undergo inhumane conditions to reach Europe.

Still, despite the pope’s emphasis on protecting the environment, many church investment portfolios include companies producing fossil fuels.

“We are not saying don’t be in it,” said Mr. de Franssu, adding that investors should ask questions like: “‘What’s your exposure to fossil fuel? And is that less than 5 percent of your portfolio?’ There are many factors you can take into account.”

Cardinal Turkson said that while some women’s religious groups in the United States had divested from oil and gas companies, the Vatican approach was to push for investments in sustainable energy and to urge the industry to move other local churches in that direction.

The document, he stressed, was a guide, not a church dictate.

“No one is going to come and penalize you, absolutely no one,” Mr. de Franssu agreed. “Except your conscience.”

The Vatican does not have a sterling record when it comes to financial matters. The American ­archbishop Paul Marcinkus, who ran the Vatican Bank from 1971 to 1989, was involved in a host of scandals, including the collapse of Italy’s largest private bank, Banco Ambrosiano.

Last year, a Vatican court convicted a former senior official at the Vatican Bank and his lawyer of embezzlement and money laundering, sending a strong signal that the church was determined to get its financial house in order.

Pope Francis during his weekly audience in St. Peter’s Square on Wednesday.Credit…Filippo Monteforte/Agence France-Presse — Getty Images

The latest stain has been the ongoing trial of 10 defendants, including Cardinal Angelo Becciu, once a top Vatican power broker, related to a disastrous investment in a London building. Vatican prosecutors are seeking to determine whether the defendants are criminally responsible for losing tens of millions of dollars of the church’s money, including funds in Peter’s Pence, donations made directly to the Holy See that are used for charity and to cover the Vatican’s deficit.

On a flight to Rome from Japan in 2019, Francis said Catholics should not be bothered that the Vatican invests its charitable contributions. “The sum of Peter’s Pence arrives and what do I do? Put it in a drawer?” he said. “No, that’s bad administration. I try to make an investment.”

Mr. de Franssu said the church had worked to reverse its lack of “transparency or accountability, which is also part of the social doctrine of the church.” Referring to the trial connected to the London real estate, he added, “If we had much better formalized investment process including on the ethical side, we should have avoided that situation.”

An investigation into a Sardinian charity connected to Cardinal Becciu produced a tape of Francis, which prosecutors accused the cardinal of secretly recording when he called the pope from his Vatican apartment. In the recording, Cardinal Becciu prompts Francis to confirm that the pope had authorized the payments to free a Colombian nun kidnapped in Mali in 2017 by al-Qaida in the Islamic Maghreb, which funded its activities by holding Westerners ransom.

Cardinal Becciu, who essentially acted as the Vatican’s chief of staff, is also a target of Libero Milone, the Vatican’s former chief auditor. The Vatican fired Mr. Milone in 2019 amid accusations of spying. This month he filed a suit against the Vatican for wrongful termination of his contract and for damages, essentially arguing that the church got rid of him because he learned too much about its financial shenanigans and bad investments.

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