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A Brief History of Socially Responsible Investing

The ethics of Socially Responsible Investing are not new. In fact, they can be traced not only to specific Bible verses (see next section, God’s Financial Advice) but also to Jewish interpretive writing in the Talmud stretching back before Christ.

Drawing from several ancient Talmudic sources, Rabbi Dr. Asher Meier of the Business Ethics Center of Jerusalem confirms that Jewish tradition requires an ethical approach to investing: “Any economic activity that has special social value can be considered a preferred investment,” he wrote.1

Rabbi Lawrence Troster, who opines on Jewish moral responsibility and the environment, wrote that this sense of duty includes investing:

“It has been long recognized in Jewish law that investments make us property owners. In Judaism, property owners have rights but also many responsibilities about how they utilize their property. These responsibilities include not only preventing immediate harm from occurring to others but also potential harm.”2

“The general principle of the obligation to save and preserve life is called in Jewish legal sources, pikuah nefesh (see Leviticus 18:5 and its rabbinic interpretation in Babylonian Talmud Sanhedrin 74a). The extension of this principle forbids us from knowingly harming ourselves (Leviticus 19:28), mandates the proper disposal of waste and that noxious products from industrial production must be kept far from human habitation (see for example, Deuteronomy 23:13-15, Mishnah Baba Batra 2:9). The law of the parapet (Deuteronomy 22:8) is also used as an example of a general principle which requires us to prevent potential harm not only immediate harm (Moses Maimonides, Mishnah Torah, Laws of Murder, 11:4).” 3

The great Middle Ages Rabbi Maimonides (1135 – 1204 A.D.) forbade “the sale of weapons to people who may use them for violence or robbery (Mishnah Torah, Laws of Murder 12:12, 14).” 4

David Weitzner at Chabad.org explains why business ethics, including ways to invest, necessarily must take outcomes into account: “Like everything else that is meaningful in one’s life, the call to engage in business comes from Above. Authentically Jewish business ethics is about engaging in business in a way that changes the person, changes the environment in which that person works, and changes all those who come in contact with the business person through their daily business activities. Jewish business ethics is concerned with preparing that narrative that we all know we will need to eventually relay to the Heavenly Judge.5
“Perhaps you have heard of the classic Talmudic insight into our moment of judgment. The first question we will be asked after death, according to our sages, is, ‘Did you do business b’emunah (in good faith)?’” 6

Regarding Muslims, the Qur’an (circa 652-656) and other Islamic teachings have guidelines for Halal or Shariah-compliant investing that require investors to avoid some types of investments, including any that reap interest.7

Christians and Biblically Responsible Investing

In 1524, Christian reformer Martin Luther excoriated business people who left out ethics: “The merchants have a common rule… I shall sell my wares as dear as I can … But it means making room for greed and opening the door and window of hell…. so long as I have my profit and satisfy my greed, of what concern is it to me if it injures my neighbor in ten ways at once? So you see how this motto goes so straight and shamelessly against not only Christian love but also natural law as well.” 8

John Wesley (1703-1791), the founder of the Methodist movement, “urged his followers to shun profiting at the expense of their neighbors. Consequently, they avoided partnering or investing with those who earned their money through alcohol, tobacco, weapons or gambling – essentially establishing social investment screens,” wrote William Donovan in The Balance.com.9

Before the United States became an independent nation, English-born New Jersey tailor John Woolman (1720-1772) refused to buy any cotton or dye handled by slaves.

“What pious Man could be a Witness to these Things, and see a Trade carried on in this Manner, without being deeply affected with Sorrow?” he wrote.10 “Through abiding in the Love of Christ, we feel a Tenderness in our Hearts toward our Fellow Creatures entangled in oppressive Customs; and a Concern so to walk that our Conduct may not be a Means of strengh’ning them in Error.

“It was the Command of the Lord through Moses, Thou shalt not suffer Sin upon thy Brother: thou shalt in any wise rebuke thy Brother, and shalt not suffer Sin upon him. Lev.xix.17.” 11

In 1759, Woolman persuaded the Quakers in nearby Philadelphia to pass the first resolution in the colonies prohibiting their members from participating in any aspect of the slave trade,12 presaging the Abolitionist Movement that led up to the Civil War (1861-1865).

Ratcheting forward to 1928, we see Philip Carret launching the Fidelity Mutual Trust, which became the Pioneer Fund, one of the first-ever mutual funds. Designed initially to serve church investors, the Fund had a policy of “screening investments on ethical grounds,” 13 rejecting companies that traded in alcohol or tobacco. With Carret’s guidance, the Fund survived the 1929 Stock Market Crash and the Great Depression and went on to become of the largest mutual funds. Of Carret, who died at age 101 in 1998, Warren Buffet said, “Phil was a hero of mine. He had the best long term investment record of anyone I know.” 14

For many years, “SRI was most commonly a faith-based phenomenon,” according to a TFC Financial white paper. The funds “avoided ‘sin’ stocks such as alcohol, tobacco, gambling, and pornography.” 15

Later, “the modern roots of responsible investing can be traced to the impassioned political climate of the 1960s. … the Vietnam War, civil rights, our natural environment and equality for women served to escalate sensitivities to issues of social responsibility and accountability. This broadened during the 1970s to include labor/management issues….” 16

In 1979, the near-meltdown of the nuclear power plant at Three-Mile Island in Pennsylvania fueled an anti-nuclear divestment movement. Ten years later, the massive Alaskan oil spill from the Exxon Valdez tanker in 1989 triggered more environmental activism aimed at divesting from fossil fuel companies.17

In 1986, Amana Mutual Funds Trust designed funds in accordance with Islamic principles.18 The trust does not invest in companies that make or sell liquor or have gambling operations, as well as some movie studios, following the Muslim laws against drinking, gambling and pornography. 19

In January 1994, MMA Praxis Intermediate fund, designed with Mennonite beliefs, sought companies that support positive values such as the respect for human dignity, responsible management, and environmental stewardship, while avoiding industries and activities like gambling, alcohol and tobacco production, and military contracting.20

Although with the rising number of SRI funds, including some based on religion, there wasn’t really an option for Christian conservatives or Pastors to invest without compromising their beliefs, including the sanctity of life and wholesome family values. In March 1994, Timothy Plan unveiled its Biblically Responsible Investing fund aimed at evangelical Christians. “This fund may have gone too far. It sounds like someone trying to preach to the converted and then setting up a big collection,” mutual fund analyst Michael Lipper told Bloomberg News.21 Despite some opposition, Art Ally had a leadership role in steering investments toward biblically responsible outcomes.

Also in 1994, some Catholic investment advisors opened LKCM Aquinas funds, “which focuses on issues such as race and gender equality, environmental practices, and human rights,” 22 according to Forbes.

A larger Catholic firm, Ave Maria funds, was launched in 2001. “The fund’s managers generally adhere to a socially conservative bent that excludes companies involved with abortion, contraception or pornography, as well as companies that offer domestic partner benefits.” 23

Other mutual funds reflect the values of Baptist, Lutheran, Presbyterian, Mennonite and evangelical denominations. “The largest group in terms of assets is Guidestone Funds, which have more than $7 billion in assets spread across 23 funds, including five target-date funds,” Forbes reports. “Guidestone avoids companies involved in alcohol, tobacco, gambling, pornography or abortion.” 24

The New Covenant Trust Company, which is owned by the liberal Presbyterian Church USA Foundation, excludes companies involved in firearms, as well as those in the alcohol, tobacco, or pornography business. 25

A Brief History of Socially Responsible Investing

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Series 1 of 6: BRIEF HISTORY OF SOCIALLY RESPONSIBLE INVESTING -- Using moral discernment when investing money is not new; it can be traced to Jewish moral responsibility under the Torah more than 1,000 years before Christ. Christian leaders such as Martin Luther and John Wesley also urged congregants to invest morally. During the 20th Century, the concept was embraced by various causes, from environmentalism to ending apartheid in South Africa.


Before investing, consider Each funds’ investment objectives, risks, charges and expenses. a prospectus containing this information is available through your Financial Advisor or funds’ website. Please read it carefully.

1 Rabbi Dr. Asher Meier, “The Jewish Ethicist: Socially Responsible Investments: All investments are not created equal,” AISH.com, at: www.aish.com/ci/be/48966911.html.
2 Rabbi Lawrence Troster, “Beyond the Letter of the Law: Jewish Ethical Investing in Light of Climate Change,” Huffpost blog, August 4, 2013, at: www.huffingtonpost.com/rabbi-lawrence-troster/beyond-the-letter-of-the-law-jewish-ethical-investing-in-light-of-climate-change_b_3367563.html.
3 Ibid.
4 Ibid.
5 David Weitzner, “Radically Jewish Business Ethics,” Chabad.org, undated, at: www.chabad.org/library/article_cdo/aid/825478/jewish/Radically-Jewish-Business-Ethics.htm.
6 Ibid.
7 “Halal Investing: Investing in Accord with the Sharia Law”, Iman Fund, undated: “They are advised to avoid investing in industries that promote alcohol, smoking, pornography and so forth. It is also Haram, that is, against the Islamic law, to invest in companies that derive their profits mainly from interest (lending money for profit), Casinos and gambling, pork, hedging in silver and gold, ordinary insurance and financial services that generate their income from interest.” At: www.investaaa.com/halal_investing.html.
8 Martin Luther, “Price Fixing by Commission,” in Walton Hale Hamilton, editor, Current Economic Problems: A Series of Readings in the Control of Industrial Development (Chicago: The University of Chicago Press, 1915), p. 158.
9 William Donovan, “A Short History of Socially Responsible Investing,” The Balance, February 7, 2018, at: www.thebalance.com/a-short-history-of-socially-responsible-investing-3025578.
10 John Woolman, “On the Slave Trade,” in Amelia Mott Gummere, editor, The Journal and Essays of John Woolman, (Philadelphia: Friends’ Bookstore, 1922) pp. 496-503, at: www.qhpress.org/texts/oldqwhp/wool-496.htm.
11 Ibid.
12 Mary Naber, “Christ’s Returns: Building an Investment Plan Beyond Profit,” Christianity Today, September 3, 2001, p. 79.
13 Benjamin J. Richardson, Socially Responsible Investing Law: Regulating the Unseen Polluters (New York: Oxford University Press, 2008), p. 114.
14 Quoted in Bud Labitan, The Four Filters Invention of Warren Buffett and Charlie Munger, copyright 2014 by Bud Labitan, p. 178.
15 “Responsible Investing Background,” TFC Financial white paper, December 9, 2015, at: www.tfcfinancial.com/PDF/White%20Papers/White%20Paper%20on%20Responsible%20Investing%20-%20Full%20Detail.pdf.
16 “Sustainable. Responsible. Investing for Impact: A Brief History,” SRI: The Conference on Sustainable, Responsible, Impact Investing (Nov. 1-3, 2018), at: www.sriconference.com/about/what-is-sri/history-of-sri.
17 Ibid.
18 “Amana Mutual Funds Trust 485BPOS Prospectus” (Aug 23, 1996), at: www.sec.gov.
19 Ken Brown, “Islamic Banking: Faith and Creativity,” The New York Times, April 8, 1994.
20 “MMA Praxis Mutual Funds 485APOS Prospectus (May 1, 2006), at: www.sec.gov.
21 Bloomberg Business News, “New Fund Seeks Christians,” The News Journal, April 15, 1994.
22 David K. Randall, “Easy Ways to Invest Based on Your Faith,” Forbes, May 22, 2009, at: www.forbes.com/2009/05/22/faith-mutual-funds-moneybuilder-personal-finance-religious-investing.html#35ed16558844.
23 Ibid.
24 Ibid.
25 Ibid, and see: www.newcovenanttrust.com/why-new-covenant-trust-company.html.


YOUR CHOICES COUNT: THE CASE FOR BIBLICALLY RESPONSIBLE INVESTING

Article 1 – A Brief History of Socially Responsible Investing
Article 2 – God’s Financial Advice
Article 3 – Biblically Responsible Finance from 1976 to the Present
Article 4 – Moral Investing – A Growing Field
Article 5 – BRI Historical Returns: Comparable–or Better
Article 6 – Impacting the Kingdom.

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