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How the Vatican has changed its investment strategy

To appreciate the new Vatican's financial direction, consider various changes that continue to shape the emerging investment strategy.

For a long time, the Vatican has operated under a veil of secrecy, especially regarding finances. The financial scandals have rocked the Vatican and threatened the financial security of one of the wealthiest institutions in the world. Even amidst all the scandal, it was virtually impossible for mainstream media to get in-depth insight into the Vatican’s finances.

But the election of Pope Francis in 2013 on a mandate to overhaul the Vatican’s scandal-ridden finances, strengthens oversight of investments and spending welcomed an era of transparency. The reign of Pope Francis has breathed new life into Vatican’s finances with more accountability and a fundamental change in investment.

While the Vatican is the smallest state in the world, it’s also one of the richest. This and its intertwining connection with the Catholic Church makes it an interesting study in the financial world. Most of the nation’s financial wealth comes from donations invested in stocks, bonds, and real estate. Other sources of wealth include museum admissions, publications, selling coins, and selling stamps. 

To appreciate the new Vatican’s financial direction, consider various changes that continue to shape the emerging investment strategy. 

The Wind of Change

From 2013 when Pope Francis took over the reins, there were all indications that the papacy was to take a new direction based on the pope’s past. The first financial meeting came soon after the election of the pope in the summer of 2013.

The new pope met seven prominent financiers, including Jochen Messemer, a top executive at ERGO; Jean-Baptiste de Franssu, ex-chief of asset-management giant Invesco in Europe, a large German insurer; and George Yeo, former foreign minister of Singapore. The meeting’s agenda was simple: restructuring the Vatican’s scandal-plagued finances.

From the beginning of his reign, Pope Francis had hinted that it would no longer be business as usual. There was going to be more of a focus on the people in financial investments made by the Vatican. 

The changes continued with a clean-up of the Vatican’s complicated financial structures, including the pope’s action against the secretariat of state. This action transferred all real estate assets and holdings from the powerful office which had previously controlled the purse strings in the Vatican. The new law came amidst the backdrop of ongoing investigations into financial mismanagement. 

The Vatican’s decision to publish its budget also highlights the institution’s ongoing change in financial management. In the announcement, the Vatican was candid about the financial constraints it faces with financial reserves almost depleted.

Change in Investment Strategy 

The overhaul of finances in the Vatican has also impacted the state’s investment strategy. Seven years after the election of the pope, with a mandate to reform the state’s finances, a new investment strategy has taken shape.

One of the key changes in the investment strategy is the centralization of asset management. The aim of these modest changes is to curb corruption and reduce wastage. These changes come amidst one of the most devastating global crises. The Vatican has already decried the debilitating impact the Covid-19 pandemic has had on its finances.

 There’s also enhanced transparency in using donations. This has for a long time been a controversial topic with much of the money not accounted for.

Clean and Moral Investments 

One of the most important investment changes made by the Vatican in recent times is contained in a 225-page manual. This was released to mark the fifth anniversary of Pope Francis’ “Laudato Si”. 

In the manual, the Vatican urges Catholics across the globe to divest from fossil fuel companies and companies involved in war. The manual also advises investors to closely monitor mining companies and check their impact on the environment before putting their money in such organizations.

While there was no fanfare around the compendium, it has a significant impact on Vatican’s finances. The Vatican bank has already indicated it doesn’t invest in fossil fuels as a commitment to a better environment. This is the same approach taken by many Catholic dioceses and Catholic institutions across the world. 

The aptly titled “Journeying Towards Care For Our Common Home” section of the manual urges Catholics to invest in companies that support bans on child labor, show respect for human rights, and protect the environment.

The Vatican investment strategy has for long been shrouded in secrecy. With the opening up of the strategy to the world, it’s now easier to scrutinize how the state uses donations and other financial resources under its care. This is a new era that was long in coming. 

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