John O’Shaughnessy acts as CEO and CFO for the Franciscan Sisters of Mary, a Roman Catholic congregation of religious women in St. Louis, Missouri. He’s become a leading advocate of faith-based investing, which aligns investments with beliefs and values. In addition, he’s a founding member of the Catholic Impact Investing Collaborative, a group of Catholic investors that seek to engage and share learned experiences of impact investing.
Invest for Good asked about what motivates his work and why he is determined to build a better world for his grandson. He has two grown children and lives with his wife in St. Louis, where he spends some of his limited spare time indulging his love of handball.
I grew up Catholic and have always been very influenced by my faith. Having discovered that I was really good with numbers, I studied accounting in college and then started working for Ernst & Whinney, one of the Big Eight accounting firms at the time. After a couple of years, I paused for eight months to volunteer full time with the Christian Appalachian Project in Kentucky. That experience convinced me that my long-term goal was to work for not-for-profit, mission-oriented organisations. My skillset was accounting, finance and business, but I wanted to direct that and use it to support an organisation that makes a difference in the world. I eventually found work as a finance director for a small, not-for-profit in Illinois. I came to the Franciscan Sisters of Mary when I was 30 years old and have worked here for 27 years.
The Sisters have always been good financial stewards and have gradually accumulated savings, but today there are few who remain in active outside ministries and draw an income. For this reason, 88% of revenue now comes from investment earnings, so reliance on sound investment management is supremely important. In 2009 we looked at whether those investments were producing positive social and environmental benefits as called for in the investment policy. That examination showed that, while we were good at avoiding harm in applying exclusionary screens, the investment program fell short in producing the social impact we were looking for. At that moment the choice seemed clear: either modify the investment policy to reflect what we were actually doing or find a way to live up to the policy’s missional mandates. Our sister leaders chose the latter.
That summer I discovered an online video from a breakout session of the 2008 SOCAP [Social Capital Markets] conference in San Francisco. The panelists suggested the potential for investing in enterprises that scale up solutions to address some of the world’s social and/or environmental problems while producing market-rate returns. This I had to see, so I went to SOCAP twice. Beyond the excitement of sharing space with social entrepreneurs, impact-oriented investors and financial innovators, I saw a spirit of collaboration that surprised me and was unlike anything I’d seen before. SOCAP was largely a secular convening and I represented the only Catholic group in attendance, but our Franciscan values seemed well aligned with the people there.
Later on, we hired Imprint Capital to help us integrate impact investments into our investment program. Once the strategy development phase was complete, Imprint helped source investments and conduct due diligence, as well as monitor and report on individual investments and the overall portfolio. Given that the congregation’s mission focuses on the “compassionate care of creation in collaboration with others”, we invest in enterprises involved in clean-energy generation, resource efficiency, sustainable agriculture and other sustainable land uses, sustainable transportation, conservation forestry, environmental detox and so on.
We carved out a 15% allocation for market-rate, risk-adjusted private investments and have accumulated three direct and 16 fund investments. We really like the added diversification these private investments bring, along with the added return boost. We recently added a 5% position to impact by investing in the Climate Solutions Fund run by Morgan Stanley. It’s a public markets, multi-manager fund inspired by the Dominican sisters in the U.S. and it’s wonderfully aligned with our FSM mission. Even more recently we incorporated Environmental, Social and Governance (ESG) into our four core, passively managed equity portfolios and our core fixed-income, investment-grade portfolio. ESG better aligns our investments with our mission, but we do accept the theory that better ESG ratings translate into better financial performance. Overall, we’re convinced our shift into impact investing and ESG have improved our risk and return profile. That’s a win/win and our sisters are really pleased the investment program is finally living up to FSM’s mission.
There’s just a lot going on in this space and people are very interested in being engaged, to build a community of practice around the enthusiasm and shared learnings. That’s what CIIC is about. It’s exciting but hectic.
One company we have invested in is Midwestern BioAg. It’s based in Wisconsin and helps farmers in ways that are far different from business-as-usual industrial farming. Industrial farming relies on the heavy use of nitrogen-based chemical fertilisers, pesticides and herbicides. Those boost plant growth but deplete the soil and emit enormous amounts of greenhouse gases. Midwestern BioAg is different - they sell biological fertilisers and amendments to farmers, and provide on-site field consultations. Their systems approach promotes soil quality that increases yields while reducing disease, pests and chemical runoff. In addition to reporting their financial results, each year the company discloses impact data such as sustainable acres farmed, greenhouse gases emissions avoided and sequestered, and reduction in the use of nitrogen inputs. The numbers are impressive. This is a business, right? They’re here to make money, but this is the kind of sustainable agriculture we really want to invest in.
It seemed to us that FSM was the only Catholic group doing this kind of investing, so in 2014 we helped kickstart what later became known as the Catholic Impact Investing Collaborative [CIIC, pronounced “seek”]. I called Catholic financial colleagues and said, “Hey, you want to join a conversation about this impact investing stuff?” That led to a dinner with 10 people to talk about impact investing. That first meeting was followed by conference calls that attracted more people and then regional gatherings, the creation of a website and the formation of a steering committee.
This year CIIC found a fiscal sponsor under which to operate and hired a coordinator. Our first gathering outside the US took place in London in October at the House of Lords. I also delivered a keynote address at a conference in the UK, in which I announced the rollout of the Catholic Impact Investing Pledge. This is a call to action for Catholic institutions to boost allocations to impact investments that create measurable, positive, social and environmental outcomes in service of the people and planet. At the outset we have six anchor Catholic signers. Another announcement is that CIIC will host a Catholic Impact Investing Summit next September in partnership with Loyola University Chicago.
One of my personal challenges with CIIC is that I’m no longer just a numbers guy sitting behind the scenes. When you lead something new, people want you to tell the story and to be able to speak about it. The challenge for me is that I’m not that articulate. For example, I had to prepare a keynote address for the UK bursars and I will spend an enormous amount of time in preparation, and I’ll exert a lot of energy. I don’t have a way with words and so it keeps me humble that I’m not this hotshot when I’m asked to speak. I’m this guy who has to struggle to get the right words out, but I’ve got something to say and I’m enthusiastic about it. What God does for me in this struggle is to teach me the value of humility and that’s really important to me. I also think that not being really polished can make you sound more authentic.
There’s definitely been more progress and interest around impact investing, certainly within Catholic organisations. But it’s not yet a huge groundswell of movement. I think that’s likely to change. The circumstances we’re facing around climate change and the environment is now in our face and we can’t avoid it anymore. Climate Generation by Lorna Gold really puts into perspective what’s going on with climate change relative to young people and their future. That’s not to mention the other challenges out there. A driving force here is young people. I’ve heard this from investment advisers, who are being challenged by the younger generation of clients to do something with their investments that make a difference. The game-changer for me came four and a half years ago when my grandson Sagan was born. I now see everything through his eyes. What used to be a big concern is now a real-life, family threat. That is what keeps me motivated.
Find out more about the Franciscan Sisters of Mary and CIIC and their approach to impact investing by visiting their websites.