The year is 1914, and within the last year the world has witnessed two major catastrophies. The first was the warlock Dehuai's use of the reverse demon's gate invocation to summon the Seraphic Radiance into Shanghai, turning the city into a bonfire even in the wake of his defeat at the hands of one of his victim's friends and allies.
The second was the elevation of the Nemeton Float by the occultist Albert Simon, who had meant to summon God and re-create the world in his own image. His plans were thwarted by the one now called "Godslayer" and his friends, the same group of people — aided by Roger Bacon — who defeated Dehuai some six months prior. In the wake of these events, however…
The world has reached a boiling point, and World War I has begun. Demonic intrigue and supernatural plots bubble up in the shadows of the First Great War, threatening to engulf a turbulent world from just beyond its sight once more.
In summary, Shadow Hearts: Covenant-1 is set in earth, in the opening stages of World War I. Demons, magicians, and other supernatural creatures exist, as do humans who fight them. In all other respects however, the world is as we would have known it at the time — there is no masquerade, though few people personally have experience with demons/monsters, even if they are known to exist.
It follows the "Bad End" of Shadow Hearts, wherein Alice Elliot is dead and Yuri Hyuga is off on his own. The events of the second game have not kicked off fully yet, and probably won't barring both a partial cast and a desire for them to do so.