Socially Responsible investment (SRI) has recently garnered a great deal of attention due to its increasing popularity among financial professionals and investors. The investment space referred to as clean technology, or “cleantech,” is perhaps its most prominent offspring, growing at a staggering pace on the heels of increased public attention to global climate change and a strong endorsement by the business community. Venture capitalists put more money into cleantech in the first nine months of 2007 than in the previous two years combined and VC investment in cleantech is approaching the percentage of investment claimed by Internet companies.
The SRI category has also spawned a lesser-known strategy called “faith-based investment.” This strategy stipulates that investors commit capital based upon investment criteria that are constructed according to religious principles, usually pertaining to a particular religious denomination. I was introduced to this multifaceted field through the joint degree program at Stanford Law School. After completing almost a year of law school, I applied and was admitted to the master’s program in the Department of Religious Studies at Stanford University. This program allows me to complete both a JD and a Master of Arts in three years.
As an object of study, faith-based investment exists in what heretofore could be labeled an academic no-man’s land: no one department, course of study, or program can lay claim to it. And interested scholars will find that traditional academic programs are nonexistent; its theoretical and practical treasures lay undisturbed. The joint degree program affords me entry into this undiscovered frontier and enables me to study the intersection of my interests in a way that would be impossible within the confines of a single discipline.
Catholic, Protestant, Jewish, and Islamic investment funds have been attracting record capital in recent years. Between 2000 and 2006, the dollar amount of assets managed by faith-based mutual funds increased sevenfold to $16 billion. Christian Brothers Investment Services, the largest investment management firm that caters to Catholic investors, now manages more than $4 billion in assets, an increase of almost 45 percent since 2001. It is Islamic finance, however, that is driving faith-based investment growth. The global Islamic finance market is currently estimated at $400 billion and is growing at a rate of 20 percent per annum. Sovereign wealth funds of Middle Eastern nations, Islamic banks, and individual Muslim investors have recently taken large positions in Western firms. Prominent examples include the government of Abu Dhabi’s purchase of a 7.5 percent stake in U.S. private equity powerhouse the Carlyle Group, Borse Dubai’s purchase of large stakes in NASDAQ and AIM, and the government of Dubai’s purchase of a controlling stake in U.S. luxury clothing retailer Barney’s.
Faith-based investment presents a set of unique and fascinating legal issues. They can generally be divided into two categories. First, the religious doctrines to which the investment criteria of faithbased funds refer are usually couched in the language of law or legalistic argument. Deciphering this legal language can be an imposing task. Indeed, the type of close reading and logical analysis to which one would subject a modern statute is frustrated by the archaic content and form of the text. For example, in order to examine Thomas Aquinas’s theory of virtue in his Summa Theologiae—a crucial text for understanding Catholic investment criteria—one is forced to navigate his scholastic argumentative technique.