In today’s vastly interconnected global economy, the task of growing capital in ways that promote the common good is one that Catholics working in the financial sphere have had to reckon with for many years. 

Numerous options already exist on the market to provide Catholics with investment opportunities that align with their consciences, such as funds run by the Knights of Columbus and Ave Maria Mutual Funds. 

A major development in the Catholic investing space took place in early February when the Institute for the Works of Religion (IOR), commonly known as the Vatican Bank, announced the creation of two indexes developed in partnership with Morningstar, a large secular investment firm. 

Each of the two indexes — one focused on the U.S. and the other on Europe — includes 50 mid- and large-cap companies selected in accordance with the IOR’s Investment Policy, which, according to the Vatican, is guided by the social doctrine of the Catholic Church. The IOR says its new funds will allow Catholic institutions, dioceses, religious orders and other faith-aligned investors worldwide to benchmark and evaluate performance in a manner consistent with Catholic teaching, particularly on issues related to life, social responsibility and environmental protection.

This all sounds positive on paper, but the inclusion of certain companies in the IOR’s new funds has raised some eyebrows. 

Perusing the top holdings in the funds, most of the companies are the typical large, successful firms that would be present in almost any index and are therefore neither specifically Catholic nor notably ethical. They include massive secular corporations such as Amazon, Tesla, Meta and Netflix, some of which support practices that conflict with Catholic moral teaching, including policies that reimburse employees for abortion travel.

The IOR’s new funds come following several decades of what some U.S. Catholic investors have described as an investment landscape in which large, secular investment firms sometimes take advantage of trusting Catholics by branding funds with milquetoast ethical screening parameters as “Catholic.”

So are the Vatican’s new funds really “Catholic?” What would a “Catholic” investment fund look like?

The Vatican has in recent years sought to offer more fulsome guidance on investing. In 2022, the Vatican’s Pontifical Academy released the 46-page document Mensuram Bonam — the title of which means “a good measure.” It exhorts all investors to consider the ethics and consequences of their actions, especially the impact of their investment choices on the world’s most vulnerable. It emphasizes that Catholic investors should seek not only to avoid harm, but also to actively promote good.

Drawing on Catholic social teaching, the document lays out general principles for investors to follow, including recognition of the dignity of every human being; promotion of the common good; solidarity with the most vulnerable; care for the environment; and subsidiarity — the idea that decision-making should be done at the most appropriate level.

Mensuram Bonam also lays out specific exclusionary criteria that Catholic investors need to be mindful of and screen for when investing. These include the funding of abortion, armaments, nuclear weapons, contraceptives, embryonic stem-cell research, pornography, addictive substances, human rights violations such as breaches of labor laws, corruption, and unfair business practices. There’s some nuance with certain investments, however, the guidelines exclude indiscriminate weapons, though hunting or law enforcement weapons may be legitimate.

On the flip side, Mensuram Bonam strongly emphasizes that Catholic investors should engage directly with companies linked to unethical practices, seeking to influence corporate behavior through practices like proxy voting, rather than withdrawing completely from the investment landscape. 

Rocky Investment Record

Mensuram Bonam, as comprehensive and as clear as it is, was born out of a turbulent — and arguably scandalous — period regarding the Vatican’s own investments. Notably, in 2021, the Vatican was accused of investing around $24 million in several pharmaceutical companies involved in making the “morning-after pill,” which led to a major overhaul by Pope Francis. 

In July 2022, just months before the publication of Mensuram Bonam, the Vatican under Francis published a new policy explicitly stating that the Holy See’s financial investments cannot contradict Catholic teaching. Investments are to be approved through an oversight committee, headed by Cardinal Kevin Farrell, which is set to operate on an experimental basis until 2027.

In fall 2025, the newly-elected Pope Leo XIV made a substantial change to the Vatican’s investment strategy. In a legal order, Leo granted permission to the Holy See’s main financial body to use financial institutions outside the Vatican for its investment activities, reversing Pope Francis’ 2022 instruction to move all funds to the IOR in the wake of the controversy over the Secretariat of State’s investments. 

Leo’s change nevertheless stipulated that investment activities, even if carried out by outside banks, must conform to the policies established by the Vatican’s investment oversight committee in 2022.

Before Pope Francis’ directive, each Vatican dicastery could invest wherever it preferred — leading, for example, to the Secretariat of State engaging in controversial investments with secular firms Credit Suisse and UBS, EWTN Vatican analyst Andrea Gagliarducci told the Register. In many ways, Leo’s change in investment strategy represents a “return to the past,” he said.

“Pope Francis wanted to centralize all the investments and bring liquidity to the IOR, while now Leo is restoring the old freedom to invest if convenient,” Gagliarducci explained. 

The ESG Connection

The Vatican had, at least on paper, been using a popular framework of values-based investing called environmental, social and governance (ESG), sometimes referred to as impact investing, since 2012. 

ESG is a corporate scoring system that evaluates how a company protects the environment and adheres to social criteria. The use of ESG alone has garnered criticism from Catholics, however, because objectionable areas such as abortion, pornography, child labor, embryonic stem-cell research, contraception, and others are often not screened from ESG portfolios.

In fact, in 2024, the president of the IOR, Jean-Baptiste de Franssu, distanced himself from ESG and described the framework as “not consistent with Christian principles,” a criticism echoed elsewhere among Catholics in the financial sphere. 

Despite de Franssu’s criticism, the Vatican’s financial watchdog found that all of the Vatican’s investments in 2024 complied with ESG, as do the new IOR funds.

‘Very High’ Standard

So, given this background, what should Catholics make of the new “Catholic” investments the Vatican is offering?

Daniel Catone, founder and CEO of Arimathea Investing, a Catholic firm that offers rigorous investment screening, told the Register he welcomes the Vatican Bank’s effort to build Catholic financial infrastructure as an “important and necessary step.” 

It remains to be seen, however, whether these indexes ultimately become a morally rigorous and professionally credible example of Catholic investing. The goal, Catone said, should not be simply to replicate the conventional market with a few exclusions, but rather to create an “investment universe” compatible with Catholic teaching. 

If the funds’ ethical standards are rigorous, transparent, and guided by competent Catholic moral analysis, then a partnership like this between the Vatican and a large secular investing firm can work well, Catone said. But if the methodology ends up “resembling a generic ESG screen with a few added exclusions,” the result risks creating what Catone has elsewhere called a “crisis of authenticity,” where a fund is labeled “Catholic” but is not materially different from conventional investing. 

Since the screening criteria for the Vatican’s new funds are not currently transparent, there is room for improvement, Catone said. Catholics deserve “full transparency” on the screening criteria and revenue thresholds used for exclusions, as well as a clear explanation of how abortion-related employee benefits are evaluated; a detailed disclosure of how companies that derive a minority share of their turnover from military sectors can be legitimately included; the identity and qualifications of the moral review body overseeing the screening process; and, finally, a transparent record of engagement and proxy voting decisions.

Catone said: “I’m encouraged that the Vatican Bank is taking Catholic investing seriously enough to build benchmarks that explicitly reference Catholic principles. That alone is a positive development.”

“At the same time, once something is presented as ‘Catholic,’ the standard has to be very high — perfect as our Father in heaven is perfect,” he said. “Catholics are not looking for branding. We are looking for moral coherence.”

How to Evaluate ‘Catholic’ Funds? 

With all the funds on the market today that are labeled “Catholic” — even questionable ones from big secular firms — where does a prospective investor even start? 

Tim Schwartz, CEO of Ave Maria Mutual Funds, said Catholics looking to invest should scrutinize their adviser’s track record and history, as well as the criteria the adviser uses to “screen” potential investments and determine which ones are morally acceptable. 

Ave Maria uses just four clearly defined moral screens — abortion, pornography, embryonic stem-cell research, and policies undermining marriage — that are based on Church teaching and are set and maintained by a board of 10 Catholic advisers. Unlike other common approaches to Catholic investing, which may allow holdings in problematic companies if profits from immoral sources are very small, or if there is an attempt made to dissuade the company from immoral practices, Ave Maria takes an “exclusionary,” zero-tolerance approach to Catholic investing, whereby any corporate involvement in activities they deem immoral — regardless of revenue size — results in immediate disqualification. 

Ave Maria’s screening criteria tend to filter out some of the largest and most profitable companies on the stock market, such as large tech firms. But the “exclusionary” approach has nevertheless worked well for Ave Maria for 25 years and, as Schwartz said, appeals to Catholics who “really believe in what we’re doing, our process, and our philosophy.”