Economic and investment decisions always contain a moral element, but many Catholics who wish to invest in accordance with church teaching struggle to know where to begin.
Now, for the first time, the Vatican Bank has endorsed a share-market investment index made up solely of companies that follow its own ethical investment principles.
It means Catholic investors now have a new way to align their investments with church teaching, endorsed by the Vatican Bank which has launched two share-market indices in partnership with financial research firm Morningstar.
The move marks the first time the Holy See has directly shaped a benchmark for faith‑consistent investing, offering a clearer standard for Catholics seeking ethically-guided financial options or fund managers seeking to offer funds that meet recognised Catholic criteria.
This is significant because it may influence the ethical standards used by Catholic investment funds around the world.
It also reflects a growing interest among the Catholic faithful in ensuring that financial decisions are consistent with church teaching.
The Morningstar IOR US Catholic Principles Index and the Morningstar IOR Eurozone Catholic Principles Index each contain 50 companies selected according to the Holy See’s Unified Investment Policy—the ethical framework the Vatican Bank (formally known as the Institute for Works of Religion, or IOR) has used since 2022 to guide its own investment decisions.
According to Giovanni Boscia, head of asset management at the IOR they are “in strict compliance with the principles of the social doctrine of the church”.
This means the indices provide a benchmark that investment managers anywhere can confidently use when creating funds for Catholic institutions and individual investors.
A Christian ‘capital ecosystem’
A number of existing funds and indices, largely in the US and Europe, aim to reflect Catholic values (although there are far more Sharia funds which follow Islamic teachings).
The Vatican Bank wishes to increase the number of faith consistent funds and services available to Catholic investors.
Its president, Jean-Baptiste de Franssu, said in 2024 that “we have at our disposal only a handful of funds that meet Catholic ethical criteria” and advocated for “a way forward for Catholic investors and service providers to further develop a Christian capital ecosystem”.
These new indices are expected to support that goal of having global fund managers build specifically Catholic investment funds following these benchmarks.
Australian Catholics at forefront of Vatican investment reforms
What the Vatican includes, and what it rules out
The Vatican Bank has operated this policy since 2022 in managing the investments of the Vatican itself, and of its institutes.
It aligns investment decisions with the teachings of the Catholic Church, and excludes investment in companies whose activities contradict fundamental principles such as the sanctity of human life, the dignity of the human person or the common good.
The policy is founded in Catholic Social Teaching and according to the IOR it prioritises:
- Sanctity of human life
- Respect for human life
- Environmental protection
- Combatting addictions
- Social responsibility and sustainability
Although the policy is not public, it has been described as prohibiting investments involved in:
- Pornography or prostitution
- Abortion and abortion drugs
- Embryonic stem cell research
- Contraception
- Contentious weapons (such as landmines and chemical weapons)
It also places limits on investment in sectors such as alcohol, tobacco, and military weapons.
What makes this so different?
Investment indices are statistical tools that track the performance of a basket of companies.
Where this differs from other Catholic investment indices and funds is that the IOR selects the companies which meet the Holy See’s own investment policy for inclusion in the indices by Morningstar.
That gives the Vatican-backed indices a degree of authority that may appeal to Catholic institutions seeking closer alignment with church teaching.
Other indices such as the S&P 500 Catholic Values index are based on pastoral guidance such as the US Conference of Catholic Bishops’ Socially Responsible Investment guidelines, but the stocks are selected by S&P based on their interpretation of the pastoral guidance.
What does this mean for investors?
Catholic investors can now measure the performance of their investments against a published benchmark that has been endorsed by the Vatican. This has been back tested to 2016, allowing comparison against a hypothetical investment performance over time.
More practically, this means that financial institutions and fund managers can build funds and investment products using these indices to align their investments to the Catholic faith.
Investment managers are able to pay for details of the companies that make up the index. This allows them to either passively copy the investments as an index fund, or manage an active fund which limits its investment universe to companies contained within the index.
In this way an investment manager can offer a fund where they choose the investments but can assert that they conform to a Vatican-endorsed policy.
Church teaching and guidance on faith-consistent investing
Current pastoral guidance and Catholic teaching in faith-consistent investing is contained in the 2022 document Mensuram Bonam (“Good measure” in Latin).
This 64-page teaching and good practice guide for Catholic investors and institutions was issued by the Pontifical Academy of Social Sciences.
It explains how Catholics can develop a faith-consistent investment approach that excludes illicit activities, enhances social goods and engages with investments in alignment with Catholic Social Doctrine.
It teaches and interprets doctrine and lays out good practices for how this can be integrated into a practical investment program.
Some bishops’ conferences, notably the United States, Italy and Austria, have issued pastoral or teaching guidance about Catholic faith consistent investing.
There are different priorities and themes in each, but they are anchored in the Catechism and Social Teaching of the Church and have been further developed in Mensuram Bonam.
In Australia, there are a small number of investment funds that claim Catholic values, and the Australian Catholic Bishops Conference has not published this type of guidance. Individual dioceses and archdioceses maintain their own investment policy statements which contain ethical guidelines.
Therefore, the launch of the Vatican-backed indices may prompt renewed discussion in this country about whether a more consistent national approach to Catholic investing is desired or needed.
The Vatican Bank’s initiative will not resolve every question about ethical investing, as Catholics may still disagree about how best to apply church teaching to increasingly complex economic realities.
Nevertheless, the launch of these new indices represents a significant development at a time when many Catholics are paying closer attention to the moral consequences of their financial decisions.
Nick Fels is a doctoral candidate at the University of Notre Dame Australia.
