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Vatican bank chief de Franssu eyes socially responsible investment criteria for equities

Former Invesco chief now heads Istituto per le Opere di Religione

The head of the Vatican’s €3.2bn bank, Jean-Baptiste de Franssu, has said the body will look to develop a set of socially responsible investment criteria for investing in equities.

The bank, formally the Istituto per le Opere di Religione (IOR), provides transfer payment and wealth management services to Catholic clients and is mostly invested in sovereign debt with a small (1.7%) exposure to equities. But, asked about its potential investments in fossil fuel companies, especially in light of Pope Francis’ influential Laudato si’ encyclical last year, de Franssu said in this allocation “there is no such company that would go against the teaching of Laudato si’.”

He explained that the IOR had reduced its equities exposure at the end of 2014 given the volatility of the markets, but went on to say the IOR may reinvest in the future and “build again this equity exposure”.
“And then we will need to put in place very clear sets of socially responsible investment criteria to ensure that when we will be reinvesting in equities we do not fall in the category of stock that would go against the teaching of the Holy Father.”

De Franssu, the former Invesco Europe head who has been President of the IOR since July 2014, was speaking to Vatican Radio and Osservatore Romano, the Vatican newspaper (transcript), about the IOR’s 2015 annual report.He is a former president of EFAMA, the European Fund and Asset Management Association as well as a director of La Française, the French asset manager that has a partnership with Matthew Kiernan’s Inflection Point Capital Management.

“Very clear sets of socially responsible investment criteria”

His appointment was part of a major clean-up of the bank, which closed hundreds of accounts under pressure from international anti-money laundering regulators amid concerns about its use as a tax haven.

He declined to go onto the details of these “legacy issues”. But he said that, given changes that have occurred in terms of “strong governance, strong controls” means it is now “impossible to launder money at IOR”.

Elsewhere, the Church Commissioners for England have announced that total return on their investments in 2015 was 8.2%, exceeding their long-term target rate by 2%. It takes assets to £7bn.

The Church Commissioners continued to invest in forestry with two new holdings in Australia, bringing the total holdings to nearly 120,000 acres. The timberland and forestry portfolio delivered a total return of 13% in 2015.