SOCIALLY RESPONSIBLE INVESTING: MAKE THE WORLD A BETTER PLACE
Over the last thirty years a new strategy of investing has emerged, called Socially Responsible Investing (SRI). As people strive to make a “better world” they have begun to integrate personal values and societal concerns with investment decisions. SRI considers both the investor’s financial needs and an investment’s impact on society. It used to be that many individuals felt that SRI was another feel good antidote of leftists, but while you may feel good about some kind of social cause, you are not maximizing your investment returns. There are others who view the whole SRI issue as one of a pure marketing gimmick, and when you actually look into the pro’s and con’s of each investment, an argument can be made if it’s socially responsible or not, or if it’s just pure politics of someone with some kind of a social agenda. There have been many articles written on the difference between the individual investor versus the financial advisor as per SRI.
Responsibility
If individuals want to reward or punish certain companies for their social policies, by investing or not investing, that’s their right; but can a financial advisor do the same thing, if knowingly it will lower an investors return? In this limited space I am not going to try and tackle that ethical question, but depending on how one defines SRI, there are so many more investment options today, than there were 30 years ago, that one can invest and “do good” and not have to sacrifice returns.
Definition
SRI means different things to different people. For some, it means not investing in corporations that they perceive are hurting the environment. For others, it means not investing in companies that take advantage of underage labor, and others may say that they will no longer invest in Israel because of “occupation of Palestinians.” On the other side of the coin, each of these aforementioned claims can easily be debunked, and the political agenda of the proponent is easily transparent. Many people feel that if you dig far enough into a company you can always find something that will offend you. I once had a client who was researching a certain investment. He said that he had decided to invest in them because they held the same beliefs that he held. They were against nuclear weapons, for using only products from small dairy farms, made sure that the highest paid employee was only paid twice what the lowest paid employee was. The problem was when you investigated a little deeper, what the company said and actually did was different. It turns out that the company was struggling financially and had to find a CEO. Well no talented CEO would take the job for the low salary, so they ended up having to pay an enormous amount to hire a CEO. They have always used eggs from caged hens, and finally they sold out to the biggest food company in the world, who are non-supporters of most of their social initiatives.
Halacha
While it may appear that I am not the biggest fan of SRI, I do think that for observant Jews, we have our own type of SRI, we just call it Halachic investing. I know of Rabbonim who prohibit investing in companies that profit in gambling or other types of deviant behavior. The boycott of flying El Al, or the Shefa Shuk supermarket chain because of Sabbath desecration is another example and if the Gedolim decide that we can’t fly the airline, are we allowed to buy the stock? Issues of Ribbis, Shabbos, Neveilos and Treifos, are other examples as well.
What to Do?
First and foremost when contemplating an investment you need to make sure that it’s a Halachicly permitted investment. Second, it pays to work with a financial advisor who understands the Halachic issues involved in certain types of investments. If we all invest according to the proper Halachic norms, may we be Zoche to “ eat the fruits in this world, and the principle remains for him in The World to Come, Shabbos (127a).
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.
Aaron Katsman is author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing (McGraw-Hill), and is a licensed financial professional both in the United States and Israel, and helps people who open investment accounts in the United States. Securities are offered through Portfolio Resources Group, Inc. (www.prginc.net). Member FINRA, SIPC, MSRB, SIFMA. For more information, visit www.aaronkatsman.com or email aaron@lighthousecapital.co.il
