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What avoiding 'sin stocks' can't do

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I have been blessed to meet many Christian financial advisors across America. Not all, but some of them use a moral screening strategy to serve their investment clients. Moral screening is one of several strategies under the larger topic of faith-integrated investing.

While I have written elsewhere about how to invest for redemptive purposes, in this article I want to highlight some of the theological limits of moral screening. What is moral screening?

Moral screening is an investing strategy that assigns grades to companies based on their connection with various categories of immoral behavior. This allows investors to avoid investing in companies based on their grade in each category. A few of the common areas Christians often seek to avoid include abortion, tobacco, alcohol, pornography, and gambling.

Aiming for the Right Goals

There are several reasons believers might choose this approach. For one, it can be a way to honor the Lord and our moral values. It can also be a way to integrate our Christian faith into a very practical area of life.

The biggest challenge from my perspective isn’t whether we use a moral investment screener. The real challenge is keeping our eyes on the right goals for using, or not using, such a strategy. Honoring the Lord by honoring our conscience is a biblical and worthy goal. But other less helpful goals may also come to mind with this approach.

False Goal #1 – Removing Moral Guilt

Some may view screening as a way to avoid feeling guilty for the bad things being done by public companies. But, biblically speaking, guilt is being liable to God’s judgment, primarily for sins we personally commit (Deuteronomy 24:16, Ezekiel 18:20). It is true that in places Scripture alludes to the idea of corporate sin and confession (Daniel 9:5-9, Ezra 9:7). But as believers, we don’t escape God’s judgment by using a moral screener. We escape God’s judgment by confessing our sin and accepting the gift of righteousness offered by his Son, Jesus Christ.

Feelings of guilt can be based on reality, as when we do something wrong. But guilt can also be felt where it does not belong, as when we blame ourselves for things we cannot control. Will God hold us responsible for the behavior of companies in our investment portfolio? Only God knows and his judgment will be just (Luke 12:47-48). What we do know is that the solution for true or imagined guilt is not a screener, but the Savior.

False Goal #2 – Keeping Money from Bad Corporations

Others may see screening as a way to avoid giving their money to bad companies. While this is a good desire, it is probably not the best way to think about how investing works.

When you put money into a public market investment, you are not giving money to the companies you invested in. Your money is “exchanged” with other investors in the market. Technically, the only time money is transferred to the underlying company is at the initial offering of shares, which typically involves institutional investors.

My point is that when you buy $1,000 worth of a company’s stock, they don’t receive $1,000 into their bank account as a result. An illustration of this is buying a used car. If I buy a used Buick from my neighbor, none of my money goes to the parent company General Motors. They made their money from the initial sale of the vehicle years earlier. Similarly, retail investors are like the used car buyer. No matter how much they invest, none of their money goes directly to the company they invested in.

Some might argue that if lots of people avoided the same investment, this could have a negative financial impact on the company. However, the negative impact in this situation would likely be relatively small – certainly not dollar for dollar. The most direct way of keeping one’s money from a bad company is simply to avoid being a consumer of their product or service.

False Goal #3 – Avoiding Tainted Profits

Still others may think of screening as a way to assure their returns are not tainted by ill-gotten gains. The desire to not make money by ill means is good and rooted in Scripture (Proverbs 1:19; 10:2). But the application to investing must weigh other biblical truths as well.

  • In one sense, all profits are tainted by sin, just as all people are tainted by sin. There is no way to avoid this reality in a fallen world. In the absolute sense, you cannot avoid “tainted” profits in a fallen world no matter how you invest.
  • In terms of honoring the principle of ill-gotten gains, the primary profits we must avoid are ones we create by our own misdeeds. This is the context of biblical warnings against ill-gotten gain (Proverbs 1:14-15). Our own deeds related to making money must be just and right.
  • Also, in Scripture, money does not usually carry a moral stigma with it as it passes down to others. For example, at the Exodus the children of Israel received silver and gold from the Egyptians, which they may have used to construct the tabernacle (Exodus 12:35-36). Spiritual heroes like Joseph and Daniel received their entire livelihood from pagan kings, without moral impropriety. Jesus also received items of value from notorious sinners – and yet did not become tainted by their monetary gifts (Matthew 9:10-13).
  • When Proverbs 13:22 says, “the sinner’s wealth is laid up for the righteous” it implies that in God's judgment wealth may be transferred from sinners and given to the righteous. God may do this to honor and bless the righteous, and it does not taint them (Ecclesiastes 2:26).

What really matters in this regard is our heart posture before the Lord. If we are greedy for gain and show disregard for justice in how we get it, that is a sin issue. But it cannot be resolved by simply screening our investments. Only repentance and turning from our sin can address the heart issue.

In summary, some believers cannot in good conscience invest broadly in the public markets. In this case, an investment screener may help them to honor the Lord by honoring their conscience (Romans 14:2-3,6). That is something a screener can do and that is why some Christians may want to use this approach.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk, including possible loss of principal.

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. WaterRock Financial, LLC is a separate entity from LPL Financial.

Luke Bolton serves as director of operations at WaterRock Financial near Minneapolis, Minnesota. He earned a BA in theology at Northland International University and an MA in biblical studies at Central Baptist Theological Seminary. He and his wife are members at Bethlehem Baptist Church in Minneapolis. They enjoy exploring, reading, and having outdoor adventures with their two boys.

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC. WaterRock Financial, LLC is a separate entity from LPL Financial.

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