Vatican Bank makes first foray into equity indexes, setting stage for potential ETF launches

The Vatican Bank has made a significant move into the world of thematic investing by launching two equity indexes that track stocks aligned with Catholic values. This marks the financial institution’s first step into offering thematic investment products, with the potential for more financial products, including ETFs, in the future.

The Morningstar IOR Eurozone Catholic Principles Index and the Morningstar IOR U.S. Catholic Principles Index each consist of 50 medium and large-cap companies that adhere to Catholic ethical criteria, such as prioritizing human bonds and social justice. This move aims to enhance the Vatican Bank’s performance assessment and reporting processes, reinforcing its commitment as a financial institution serving the Catholic Church.

The Eurozone index includes companies like ASML Holding and Deutsche Telekom among its top holdings, while the U.S.-based index features Meta Platforms and Amazon. The launch of these indexes also opens up the possibility for them to be licensed for use in an exchange-traded fund.

This initiative comes at a time when the demand for ETFs and thematic investment products is on the rise. The global ETF market saw a nearly 30% increase, surpassing $14 trillion in 2024, and is projected to reach as much as $30 trillion by 2029. Investors are increasingly drawn to investment products rooted in social responsibility and other themes, as evidenced by the success of funds like Ave Maria Mutual Funds, which manages $3.8 billion in assets according to its website.

The Vatican Bank’s venture into thematic investing is part of its efforts to rebuild its reputation following a series of scandals. The institution has faced allegations of money laundering and ties to organized crime, particularly in the aftermath of the Banco Ambrosiano collapse in 1982. In 2021, former Vatican Bank president Angelo Caloia was convicted of money laundering and embezzlement in connection with his role at the institution.

By embracing thematic investing and aligning its financial products with Catholic values, the Vatican Bank is positioning itself as a reference point for the Catholic world while adapting to the evolving landscape of investment preferences. This move not only underscores the institution’s commitment to ethical principles but also reflects its dedication to transparency and responsible financial practices.