The Facts about SRI

True SRI investing is not as simple as it sounds.

Aaron Katsman , | updated: 2:40 PM

Investing for society?
Investing for society?

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 thought that SRI was a “feel good” antidote of left leaning liberals,  one that made people feel good about themselves, but prevented
There are those who view the whole SRI issue as a marketing gimmick
them from maximizing investment returns.

There are those who view the whole SRI issue as a marketing gimmick. When you actually look into the pro’s and con’s of each investment, an argument can be made about whether it is socially responsible or not, or just politics promoted by someone with a hidden agenda.

There have been many articles written on the difference between the individual investor versus the financial advisor with regard to SRI.

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.

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  the so called “occupation”. On the other side of the coin, each
SRI means different things to different people.
of these aforementioned claims can be debunked, and the political agenda of the proponent is easily transparent.
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, they were for using only products from small dairy farms and made sure that the highest paid employee was only paid twice what the lowest paid employee was. The problem was that when he investigated a little deeper, what the company said was not what it actually did . It turned out that the company was struggling financially and had to find a CEO.  No talented CEO would take the job for the low salary offered, so they ended up having to forego their salary principle. They used eggs from caged hens in their product, and eventually sold out to the biggest food company in the world, who are non-supporters of most of their social initiatives, for a handsome profit.

Observant Jews have their own type of SRI, but call it “Halachic Investing”, investing in the parameters of Jewish law. I know of Rabbis who prohibit investing in companies that profit from gambling or other types of deviant behavior. The boycott of flying El Al when it flew on the Sabbath, or of the Shefa Shuk supermarket chain because of Sabbath desecration is another example. If the Rabbis decide that it is forbidden to fly on an airline, are we allowed to buy the stock? Issues of charging interest (forbidden in Jewish law except for certain instances), Sabbath observance, dealing with non kosher animals are other examples of Halachic pitfalls.

When contemplating an investment, you can make sure that it’s a Halachically permitted investment by getting the help of an expert who knows the issues involved.

Then perhaps the words in the Talmudic tractate Sabbath (127a) may come true, in which it is said that the righteous “ eat the fruits [of their good deeds]  in this world, and the principal  remains for The World to Come.”
Aaron Katsman 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. a registered broker dealer, Member FINRA, SIPC, MSRB, NFA, SIFMA. For more information,  call (02) 624-0995 or email