The Vatican's new policy for fiscal accountability emphasizes ethics, transparency and centralization.
“Investing in one place rather than another, in one sector rather than another, is always a moral and cultural choice,” says the Holy See in a statement issued on July 19, 2022, the day the Statutes and Policy of the Holy See’s Committee for Investments were presented. This institution, whose mission will begin on September 1, will be in charge of the entire investment strategy in a perspective that is transparent, centralized, ethical and profitable.
According to the new Apostolic Constitution Praedicate Evangelium, curial institutions will have to entrust all their financial investments to the Administration of the Patrimony of the Apostolic See (APSA), the Vatican’s “public bank.” Dicasteries (and other offices) can either transfer control of their assets directly to APSA or transfer them to the account opened by APSA for each entity at the Institute for Works of Religion (IOR), the Holy See’s “private bank.”
Non-curial entities, such as those belonging to the Governorate, are not required to do this, but these may also entrust their investments to APSA.
All such investments will then be supervised by the Holy See’s Investment Committee.
The Vatican’s new investment criteria
The Committee’s objective will be to ensure compliance with three main criteria, outlined in a document, “Investment Policy of the Holy See and Vatican City State.”
First, the Committee will have to “ensure that investments aim to contribute to a more just and sustainable world,” including systematically enforcing compliance with ESG (Environmental, Social and Governance) sustainability standards. It will also have to verify that the funds are entrusted to financial institutions “recognized by official regulators.”
Second, the Committee will have to protect the “real value of the patrimony” of the Holy See by ensuring that a “sufficient return” will allow it to contribute to funding its activities. To this end, investments must be of a “productive nature” — investments of at least three years — and not “speculative.”
The Investment Policy prohibits a number of financial practices, including: short-selling (investments based on the decline in value of financial assets or the bankruptcy of a third party), intraday (high-frequency investment), future and options markets, and investment in alternative markets, such as bitcoin. On the whole, investments considered high risk are systematically excluded.
Finally, the Committee will have to ensure that financial investments do not contradict the teachings of the Church, especially the Social Doctrine of the Church. The new policy emphasizes certain fundamental principles, including the sanctity of life, the dignity of the human person and the common good.
Laboratories, weapons, pornography, alcohol, nuclear power, oil
The policy clearly states that investments cannot be linked to pornography, prostitution, gambling, weapons and the defense industry, abortion centers, or laboratories and companies that manufacture contraceptive products and/or work with embryonic stem cells.
It allows but discourages speculative investments in consumer products, alcohol, nuclear and fossil fuel industries.
To enforce these principles, the Investment Committee will also be responsible for ensuring the experience, technical competence and ethical standards of those who will be in charge of managing the Holy See’s investments. It will also be responsible for monitoring all costs associated with the investments. Finally, in the event of a conflict of interest, the Committee will have to evaluate the situation and, if necessary, submit it to the Secretariat for the Economy.
A cardinal president and four expert members
On June 7, Pope Francis named the members of this new entity, which was officially created on June 1 with the entry into force of the new Apostolic Constitution Praedicate Evangelium. Chaired by Cardinal Kevin Farrell, the Committee is to be composed of four members from four different countries (in this case Norway, Germany, the United Kingdom and the United States) who have no connection with those mandated to manage the Holy See’s investments or with the investments themselves.
The Committee is responsible for establishing, confirming or modifying the investment mandates entrusted to APSA. It must also provide an annual report to the Council for the Economy and to the Secretariat for the Economy and two reports per year to the department in charge of financial affairs at the Secretariat for the Economy.
To this end, the Committee must meet by decision of the President. These meetings are attended by the chairman, the members, a representative of APSA (its chairman by default) and a compliance manager — appointed by the Prefect of the Secretariat for Economic Affairs and responsible for checking that investments comply with the standards and the Investment Policy. The latter two do not have voting rights, but together they have the right to veto the decisions of the Committee. A representative of the IOR may also participate, without the right to vote.
The entities of the Holy See that entrust their investments to APSA must form a “Delegation” that includes a superior of APSA and seven representatives of the most important entities of the Holy See. They are represented on the Committee by the APSA representative, to whom they entrust their investment proposals.
Effective September 1
The Statutes of the Committee and its “Investment Policy” were sent to all the entities of the Holy See by the Prefect of the Secretariat for the Economy, Father Juan Antonio Guerrero. The provisions of these two texts will come into effect on September 1, 2022.
This new structure, the last piece of the great Vatican economic pole set up by Pope Francis, is approved ad experimentum for a period of five years. A moratorium period is foreseen to allow the Vatican structures to comply with the norms.