Markets have long been accused of lacking morality. On February 10, the Vatican decided to supply one. The Institute for the Works of Religion (IOR), commonly known as the Vatican Bank, partnered with Morningstar to launch two stock market indices designed to guide Catholic investors. The Morningstar IOR US Catholic Principles Index and the Morningstar IOR Eurozone Catholic Principles Index are “built following market best practices and in accordance with Catholic ethical criteria, and intended to serve as a global reference point for Catholic investing.”
According to reporting by Business Insider, the US index is heavily anchored, with more than twenty percent of the portfolio concentrated in firms such as Meta, Apple, Tesla and Alphabet. The European index remains more geographically and sectorally diverse, with holdings including ASML, Santander, Hermes and Deutsche Telekom.
The move marks a notable shift in tone from just over a decade earlier. In 2014 Pope Francis openly criticized financial markets and speculation. “It is increasingly intolerable that financial markets are shaping the destiny of peoples rather than serving their needs, or that the few derive immense wealth from financial speculation while the many are deeply burdened by the consequences.”
The Vatican is not the first religious institution to enter the world of faith-based investing. As MoneyWeek notes, smaller religiously oriented products already exist, including the FIS Christian Stock Fund ETF (ticker: PRAY) and Global X’s S&P 500 Christian Values ETF (ticker: CATH). Still, it is striking to see one of the world’s oldest moral authorities step directly into modern capital markets, no longer condemning them from the sidelines, but attempting to navigate them.
This raises a more basic question: what is the stock market actually for? However noble the intention, the organizing principle of equity markets is profit, pricing risk, aggregating information, and allocating capital accordingly.
That uncomfortable truth was captured in the 1980s by Gordon Gekko in the film Wall Street. “Greed, for lack of a better word, is good. Greed is right. Greed works.” The sentiment was never seen as a sermon on virtue. It was a provocation about incentives, the truth about how markets discipline behavior not through moral judgment, but through the signals of profit and loss.
The most prominent episode in which the Catholic Church became directly entangled with financial mechanisms occurred during the construction of St. Peter’s Basilica, which was financed in part through the sale of indulgences in the fifteenth and sixteenth centuries. That episode blurred moral authority and monetary exchange in the service of a concrete institutional project, with consequences that extended well beyond Rome. Scripture itself draws a clear boundary between spiritual and worldly domains with the passage Matthew 22:21: “Render unto Caesar the things that are Caesar’s, and unto God the things that are God’s.”
Ironically, the Vatican Bank itself operates for profit. In 2024, it reported net income of €32 million (about $37.6 million), up seven percent from the prior year. Alongside this commercial reality, IOR’s investment policy for the new indices is explicitly moralized. The framework prioritizes the sanctity and respect for human life, environmental protection, and combating addictions, supplemented by an exclusion grid derived from social responsibility and sustainability criteria aligned with the United Nations Global Compact.
In practice, this approach closely mirrors Environmental, Social, and Governance investing. ESG frameworks place pressure on firms, and now religious institutions, to become vehicles for social objectives rather than providers of goods and services. While such an approach may appear more fitting for a moral authority than for a corporation, it still falls short of the profit-driven incentives that underpin capitalism’s effectiveness. Historically, broad-based capitalist growth has done more to improve human welfare than ESG programs have demonstrably achieved. As AIER contributor Russell Greene notes, “When it comes to results, the economic enlightenment enabled 128,000 individuals to escape abject poverty every single day. In contrast, it’s not clear if the ESG movement has accomplished anything of note.”
Simple market participation such as investing in a broad benchmark like the S&P 500, with its long record and transparent construction, would have sufficed. For example, placing $1,000 into the S&P 500 twenty years ago would have quadrupled in value, “The index has grown by 448.7% since 2005, when you made your initial investment. So, your original $1,000 would now be worth $4,487, minus inflation adjustments.”
Writing in the same era that Gordon Gekko entered popular culture, economist Milton Friedman argued that the social responsibility of business is to increase its profits, not because profit is virtuous, but because it is accountable.
“Only people have responsibilities,” Friedman wrote. “A corporation is an artificial person and in this sense may have artificial responsibilities, but ‘business’ as a whole cannot be said to have responsibilities, even in this vague sense.”
Given that the IOR operates for profit and has now entered public capital markets, the Vatican Bank would do well to remember that markets discipline behavior through loss and reward, not moral proclamation. Investors may act on conscience, but when markets are asked to serve moral ends, whether from the UN or the Vatican, price signals are replaced with certification and branding.
Profit is not a moral failure; pretending it can be replaced is. Markets coordinate human activity through incentives, not intentions. Asking them to do otherwise misunderstands both economics and morality.
