Vatican unveils equity indexes tied to Catholic values investing

The Vatican Bank, officially known as the Institute for the Works of Religion (IOR), has launched two equity indexes tracking stocks that align with Catholic values. One focused on the United States and the other on the Eurozone.

This project is the result of a collaboration with Morningstar, marking an unusual partnership between the Vatican and the financial industry. The Vatican Bank has adopted new equity benchmarks, namely the Morningstar IOR US Catholic Principles and the Morningstar IOR Eurozone Catholic Principles.

“Both benchmarks […] are built following market best practices and in accordance with Catholic ethical criteria, and are designed to serve as a reference for Catholic investments worldwide,” IOR stated.

Catholic-aligned benchmarks expand ethical investing options

According to IOR, the Morningstar IOR Catholic Principles Eurozone Index and the Morningstar IOR Catholic Principles US Index comprise 50 issuers each and are focused on medium- and large-cap companies. They are fully compliant with the IOR Investment Policy and are designed to incorporate future developments in the Institute’s ethical Catholic investing approach.

Giovanni Boscia, Vatican Bank deputy director general and CFO stated, “Having benchmarks built in accordance with recognized Catholic ethical criteria allows us to make our performance assessment and reporting processes even more rigorous and transparent […] This initiative reaffirms our commitment as a financial institution serving the Church, further strengthening the role of the [Vatican Bank] as a reference point for the Catholic world.”

The Eurozone fund counts semiconductor supplier ASML Holding and telecommunications company Deutsche Telekom among its top holdings. On the other hand, the US-based index’s largest holdings include Meta Platforms and Amazon. 

These rollouts have opened up the possibility that the indexes could be licensed for use in an exchange-traded fund. Globally, investors’ appetite for ETFs and other thematic investment products is on the rise. 

The global ETF market increased nearly 30% to top $14 trillion in 2024, per PricewaterhouseCoopers. According to a PwC report, the combined value of those funds could hit as much as $30 trillion by 2029.

The move comes as the Vatican Bank works to reform its image after a series of scandals. The Holy See-linked financial institution has faced several allegations of money laundering and ties with organized crime, particularly after the collapse of Milan-based Banco Ambrosiano in 1982. In 2021, former Vatican Bank president Angelo Caloia was found guilty of money laundering and embezzling millions of euros in connection with his role at the institution. 

Meanwhile, the Vatican also maintains its own investment portfolio. It earned 38.1 million euros ($45.41 million) in profit from investments in 2024, according to its latest financial statement. Catholics constitute the largest religious group in the US, with more than 50 million Catholic adults nationwide.

Catholic based investing growth amid ESG  largest outflows

Meanwhile, investment products rooted in social responsibility and other themes are appealing to a certain slice of investors. The Ave Maria Mutual Funds, a fund family that allocates capital in accordance with Catholic teachings, said it had $3.8 billion in assets under management as of last year, per its website. 

Additionally, a US-based ETF, the S&P 500 Catholic Values Index, is structured similarly and has a market value of over $1 billion (€840mn). NVIDIA and Apple are the top holding companies in the index, accounting for 8.2% and 6.8% of the assets, respectively.

Overall, ESG and sustainable funds saw a sharp reversal in investor sentiment and performance last year. Morningstar reported approximately $84 billion in outflows of global sustainable funds last year, a change from about $38 billion in inflows in 2024.

Outflows occurred across major regions, including Europe, the US, and the rest of the world, with only about 26% of ESG indexes outperforming non-ESG counterparts. Additionally, data shows continued net outflows of roughly $27 billion in Q4 alone. However, a total sustainable fund assets still rose modestly due to market gains.

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