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Capitalism has always had a moral side. This is not a new idea; it is a truth that recent trends have made us overlook. Adam Smith, for example, was a professor of moral philosophy before he became known as an economist, so it is no coincidence that The Theory of Moral Sentiments was published before The Wealth of Nations. Many nineteenth- and twentieth-century Christian entrepreneurs, particularly Catholics, built their businesses on strong ethical commitments to their workers, communities, and society as a whole. Early joint-stock companies also relied on trust and reputation, which were essentially moral foundations. The invisible hand was never as morally lacking as some critics have argued.
What happened in Environmental, Social and Governance (ESG) investing over the last decade was rather different. It was the introduction of a moral vocabulary into capital markets, but a moral vocabulary borrowed from a very specific ideological tradition: one rooted in degrowth economics, Malthusian anxieties about human populations, and a version of environmentalism that was less concerned with the flourishing of the natural world than with the disciplining of human activity. ESG did not ask whether a company served human beings well. It asked whether the company’s carbon footprint, diversity metrics, and governance disclosures met targets set by activist rating agencies accountable to no one in particular.
The human cost of this approach was often ignored. ESG investing was based on the idea that investors should accept lower returns to advance ideological goals not chosen by the public. It is assumed that ethics and profits are at odds, and that ethical investors should be willing to give up profits for their values. As a result, companies were penalised for providing affordable food, efficient energy, and economic growth that helps families escape poverty.
That is why it is refreshing to see, during the same week as Pope Leo XIV’s visit to Spain, a new approach to ethical investment. This new framework is not based on current trends but on 2,000 years of philosophical and theological thought about people, justice, and the common good.
Magnifica Humanitas and the Recovery of a Tradition
On 25 May 2026, the 135th anniversary of Leo XIII’s Rerum Novarum, Pope Leo XIV published his first encyclical, Magnifica Humanitas. The choice of date was not accidental. Leo XIV explicitly places himself in the lineage of his namesake predecessor, whose 1891 document established the foundations of Catholic social teaching on labour, capital, and the obligations of economic actors to the common good. Where Leo XIII responded to the social disruptions of the first Industrial Revolution, Leo XIV turns his gaze toward a second and arguably more profound transformation: the revolution of artificial intelligence.
The encyclical’s main idea appears right at the start: humanity must choose between “building a new Tower of Babel” or, as Saint Augustine describes, “constructing the city where God and humanity dwell together.” The document argues against reducing people to numbers or productivity measures and instead affirms the unchanging dignity of each person. This is what the Catholic tradition calls the imago Dei, the image of God present in every person, no matter their background, productivity, or carbon footprint.
This is important for investing because capital is never neutral. Every investment decision shapes the kind of world we want to live in. ESG theorists recognised this, but they reached the wrong conclusions. Their framework assumed that human economic activity is mostly a problem to control, that consumption is something to feel guilty about, and that industrial civilisation is a flaw rather than a success. Magnifica Humanitas offers a very different idea: an economy that serves people, judged by how it promotes real human development and is grounded in the principles of the common good, solidarity, subsidiarity, and social justice.
The False Wager of ESG
The ESG framework was based on a basic philosophical mistake, and it is important to point it out. It is assumed that investing ethically always means giving up financial returns, or that doing good with money means making less. This idea was built into ESG ratings, which often penalised energy companies that provided affordable power, pharmaceutical companies that created treatments for common illnesses, and manufacturers that offered jobs in areas with few other options.
The consequences were not merely financial. ESG criteria were shaped by the priorities of a narrow ideological class: Western, post-materialist, overwhelmingly concentrated in the university and NGO sectors, and largely insulated from the economic pressures faced by ordinary working families. The Malthusian wing of the environmental movement, which views human population growth as a problem rather than a source of creativity and dynamism, exerted disproportionate influence on the frameworks adopted by ESG agencies. So did an environmentalism that treated carbon reduction as an absolute priority regardless of the developmental costs imposed on emerging economies and the energy costs imposed on the poorest households in rich ones.
The result was a race to the bottom: companies competed to satisfy the ideological demands of rating agencies, often making them less useful to human beings, less productive economically, and less honest about the trade-offs involved. The moral language of ESG served, in many cases, as cover for a sophisticated transfer of investment from productive companies to activist-favoured ones, with institutional investors bearing the returns cost and their clients — often ordinary pension-holders — bearing it ultimately.
Being Good Is Profitable: A Different Wager
The emerging framework of Christian ethical investment makes a sharply different claim: that doing good and doing well are not in fundamental tension. That investing in companies which respect human dignity, build communities, sustain families, and conduct their affairs with honesty and transparency is not a sacrifice of returns but a route to them. This is not naïve idealism. It is, on the evidence, an accurate description of how durable value is created.
Companies that treat their employees well retain talent and reduce costly turnover. Companies that deal honestly with customers build the kind of long-term loyalty that advertising budgets cannot buy. Companies that operate within coherent ethical frameworks are less exposed to the legal, regulatory, and reputational risks that destroy shareholder value. The Catholic social tradition has always understood that virtuous behaviour and genuine prosperity are linked — not accidentally, but structurally. The Thomistic tradition from which the Church’s social teaching flows sees the well-ordered society as one in which the virtues of individuals and institutions produce conditions for the genuine flourishing of all. Aristotelian eudaimonia, translated into investment language, turns out to be rather good for risk-adjusted returns.
Christian ethical investment does not pretend that every virtuous company will outperform every quarter. What it does assert — and what the data increasingly supports — is that the systematic exclusion of ethically problematic investments, combined with the active selection of those that genuinely serve human welfare, is compatible with competitive returns. Ethics does not demand sacrifice. And that changes everything.
Mutuactivos and the Market Signal from Madrid
This is not just a theory. A real example happened this week in Madrid, during a papal visit. Mutuactivos, the asset management branch of Mutua Madrileña—one of Spain’s largest insurance groups—announced two new investment funds based on Christian ethics: Mutuafondo Goodway Renta Fija Flexible and ETS Goodway Renta Variable Global. These are the third such funds from Mutuactivos, showing that Christian ethical investment in Spain is now being taken seriously at an institutional level.
Both funds are aimed at investors—such as religious groups, institutions, and families—who want to invest in line with the Church’s social teachings without sacrificing financial returns. The funds are managed in accordance with the principles of the Doctrina Social de la Iglesia and the Mensuram Bonam framework, which are guidelines from the Pontifical Academy of Social Sciences for ethical investing. Importantly, these funds are committed to matching the returns of regular funds, not sacrificing them, by making ethical investment choices.
To support the broader social mission of these funds, Mutuactivos will donate 0.10 per cent of assets under management each year to Catholic Church-linked institutions that promote the common good, human dignity, social inclusion, and charity. This is not just for marketing. It shows that investing can be a way to participate in the community, not just a way to build personal wealth.
GoodWay Ratings: Where 2,000 Years of Christian Ethics Meets Quantitative Finance
Both Mutuactivos funds use a tool that should be better known outside Spain: GoodWay Ratings. Developed by ETS Asset Management Factory with help from Alveus Investing and Virtus Universitas, GoodWay is Europe’s top Christian ethical investment rating system and may be the most advanced of its kind worldwide.
GoodWay reviews over 13,000 companies using the standards of Christian Social Teaching, which is based on Aristotelian natural law and more than 135 years of papal social teaching from Rerum Novarum to Laudato Si’ and beyond. The system does more than just give a compliance score. It acts as a full diagnostic tool: it finds where a portfolio does not match CST criteria, explains why each issue matters and which ethical or theological principle is involved, and suggests one or more alternative investments in the same sector with similar or better risk-adjusted returns.
This three-stage architecture — rating, diagnosis, and alternatives — distinguishes GoodWay from simpler exclusion-based screening tools. It does not merely remove offensive holdings from a portfolio. It actively rebuilds the portfolio around ethical alternatives, with the explicit guarantee that ethics will not cost performance. GoodWay’s own research suggests that approximately 30 per cent of the holdings in major global indices — including the MSCI World, the S&P 500, and the STOXX Europe 600 — fail to meet CST criteria. For Christian institutional investors who have been passively exposed to these indices through default retirement allocations or indexed vehicles, this means a significant proportion of their capital has been, unknowingly and involuntarily, financing activities that contradict their most fundamental convictions.
What makes GoodWay’s technological architecture genuinely remarkable is the integration of artificial intelligence into the ethical analysis process. In a striking convergence with the concerns of Magnifica Humanitas itself, GoodWay deploys AI not to replace ethical reasoning but to scale it: to apply the rigour of CST criteria systematically across a universe of thousands of securities, with the depth and consistency that no human team of any size could sustain manually. The system is validated by an independent Ethics Committee, and the broader ETS Asset Management Factory manages €3.4 billion in assets under Christian ethical frameworks. This is not a pilot programme. It is an operating industry.
Jorge Bolívar, the founder and chief executive of Alveus Investing, has described GoodWay as offering “not only a high-value proposition for any investor sensitive to the principles of Christian ethics, but also an innovative solution to the dilemma between ethics and profitability.” It seems that, after all, doing right and doing well are not, in the end, enemies.
The Race to the Top, not the Bottom
The ESG era produced what economists call a race to the bottom in corporate ethics: a competition among companies to satisfy the ideological demands of activist rating agencies in ways that bore little relationship to actual human welfare. Companies discovered that virtue-signalling was cheaper than virtue, that commissioning a diversity report cost less than building a genuinely equitable culture, and that buying carbon offsets required less operational change than reducing actual emissions. The moral vocabulary of ESG was real; the underlying substance, far too often, was not.
Christian ethical investment frameworks have the potential to invert this dynamic entirely, initiating what we might call a race to the top. If institutional investors — the pension funds, religious endowments, family offices, and insurance companies that together deploy enormous quantities of capital — begin to direct their allocations toward companies that genuinely serve human beings, treat their workers with dignity, operate with honest governance, and refrain from activities that instrumentalise or diminish the human person, then companies will have strong incentives to actually become those companies rather than merely to pretend to be them.
The crucial difference is the alignment of incentives. ESG demanded that investors sacrifice returns for ideological compliance. Christian ethical investment insists that no such sacrifice is required — that ethical companies, properly identified and rigorously assessed, are not only morally superior investments but also financially competitive. This shifts the entire logic of the game. Managers who wished to attract ESG capital had to meet the requirements of rating agencies. Managers who wish to attract Christian ethical capital will have to actually be good: to serve their employees, their communities, and their customers well, because that is what the framework rewards.
An Old Tradition, a New Urgency
It would be easy to dismiss the launch of two new Spanish investment funds and the publication of a papal encyclical as peripheral to the mainstream of global finance. That would be a mistake. The Mutuactivos announcement coincides with a broader and accelerating shift in the landscape of institutional investment: a growing disenchantment with the ESG paradigm, a renewed interest in investment frameworks that can withstand philosophical scrutiny, and a recognition among a significant — and growing — segment of global capital that questions of human dignity, family stability, and genuine social flourishing are not side-issues to be addressed in sustainability appendices but central to any serious theory of long-term value creation.
Pope Leo XIV’s Magnifica Humanitas arrives at a moment when this shift is gathering pace. It does not address investment directly — its primary focus is the challenge of artificial intelligence to human dignity and labour — but its animating framework, the insistence that economic activity must be evaluated by its service to the whole person and the common good rather than by technocratic metrics, is precisely the philosophical foundation that Christian ethical investment requires. The encyclical is, among other things, a reminder that the Catholic intellectual tradition has been developing the conceptual tools for human-centred economics for a very long time. What is new is the conjunction of that tradition with the computational power and quantitative rigour of a platform like GoodWay Ratings.
Capitalism has always had a moral dimension. What it has lacked, for too long, is a moral framework worthy of the name: one rooted in a genuine account of human flourishing rather than in ideological fashion, one that aligns rather than opposes ethical and financial incentives, and one that is rigorous enough to withstand serious scrutiny.
That is genuinely good news. Not merely for investors of faith, but for any serious observer—and believer—in human and societal flourishing, which requires competitiveness while retaining and growing in a strong moral commitment.