Socially Responsible

Q. Should my investment decision take into account how constructive a company's activities are?

A. In recent years, the Socially Responsible Investment movement has moved beyond "negative screens," eliminating companies with undesirable policies. Now there is a corresponding interest in "positive screens," giving preference to companies with particular constructive policies, even over other companies who do not have objectionable activities. Of course "negative" and "positive" are judged by each fund based on its own objectives and values. What is negative for one fund may be positive for another.

A number of past columns have dealt with the Jewish parallel to negative screens – companies that may be forbidden to invest in because particular kinds of investment may make the investor ethically culpable for the acts of a bad company. In this column, we will study if there is a parallel also to "positive screens."

There is no question that Jewish tradition recognizes that business investment can be an agent for social good. The Talmud states that helping a needy person with a business investment is preferable to giving charity, and Maimonides writes that this is the highest form of charity. (1) But this law is not directly applicable to the SRI question, since in this case the benefit is not related to the particular line of business the needy person engages in, but only to the fact that he is in need of support.

In general, we seldom find that the sages favored one kind of investment over another based on its social benefit. Usually they emphasized standard criteria such as safety or liquidity. Perhaps just as secular economics emphasizes the legitimacy of acting out of self-interest by relying on the "invisible hand" of the price system, the sages of the Talmud acknowledged the legitimacy of self-interest by relying on the invisible Hand of God's providence.

However, there is one kind of business activity that we find the sages of the Talmud constantly encouraging and regulating: developing the land of Israel. In the time of the Talmudic sages, there was no Jewish sovereignty in the land of Israel, and the prosperity and security of Jewish residents was dependent on having a critical mass of Jewish settlement and agricultural development. As a result, the sages made many regulations intended to encourage landowners to buy and develop fields inside Israel instead of abroad.

The renowned 18th-19th century authority Rabbi Moshe Sofer opined in a much-quoted passage that in fact all economic activity in the land of Israel has the status of a mitzvah, that is, fulfillment of a commandment. "Not only working the land [is the fulfillment of a commandment] but also studying all crafts, because of the settlement and honor of the land of Israel, so that no one should say that in all of the land of Israel there is no qualified shoemaker or builder and so on, and they would need to bring them from other lands."(2)

So it follows directly that for Jews, investment in a business that operates in Israel is a "positive screen" – it promotes a business that has inherent added value because it promotes the development of the Jewish homeland.

However, I think that at an ethical level we can learn from this that any economic activity that has special social value can be considered a preferred investment. In another place, the Chatam Sofer writes that outside of the land of Israel, the Jews have no particular obligation to engage in crafts, because there are plenty of qualified craftsmen already. Therefore, they should devote themselves as much as possible to Torah study. (3) The statement does seem to imply that each country should as a whole give due consideration to their national development.

It is important to point out that on the whole the contribution a company makes to development is often closely related to its profitability, so the profit screen and the social screen need not diverge. But the basic principle is still established that an investment which contributes to the development of society is a preferred one from an ethical point of view.

SOURCES: (1) Babylonian Talmud Shabbat 63a; Maimonides Code, Gifts to the Poor 10:7. (2) Torat Moshe (Torah commentary), parshat Shoftim d.h. mi ha-ish. (3) Chatam Sofer Novellae on the Talmud, Sukkah 36a.