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A History of Socially Responsible Investing

The idea that those who invest have a responsibility to make their investment decisions on more than profit is not a new one. Christians, Jews and Muslims all have long attempted to apply the teachings of their faiths to the handling of money.

The Talmud is as source of investment advice for Jews. Rabbi Asher Meir, an MIT-trained economist, argues that the Talmud argues that those who invest in bad companies become culpable for the acts of the company. He has also argued that certain types of investment can be considered a mitzvah, a good deed done from religious duty. Among the general principles of investing that draw inspiration from the Talmud are those of diversification into different asset classes and rules for the treatment of debtors.

Islamic law, shari'a, contains four categories of commands (hukm, or collectively akham): actions that are obligatory, actions that are recommended, actions that are discouraged, and actions that are forbidden. Islamic thinking on responsible investment argues for actively choosing to avoid investments that engage in proscribed activities while choosing investments to conform with those activities that are expected of good Muslims, according an article in "Business Ethics" co-authored by three shari'a scholars.

Shari'a, applied to investment, is generally seen as requiring fair dealing with employees and avoiding investments in businesses such as tobacco, pornography, and investments made in order to earn interest, while encouraging investments that do positive good such as the improvement of the environment and social impact projects.

The "father" of Christian socially responsible investment is generally believed to be John Wesley, the 18th Century Anglican cleric whose theological views form the basis of the Methodist Church. In a short history of modern social investing theory, Melissa Barry points to Wesley's opposition to "slave trade, smuggling, and conspicuous consumption" leads directly to the United Methodist Church's involvement with positive and negative screening of investments and encouragement of shareholder activism.

The Religious Society of Friends, or Quakers, may have, in fact, been the earliest social investors, according to Michael Knoll, writing in the journal "Business Lawyer." It is certain that the Quakers were the first to launch a public vehicle for socially responsible investment, the Pioneer Fund, which opened in 1928.

Until the 1960s, most religiously oriented social investment was aimed at avoiding "sinful" investment as defined by various religious groups' own views. Of course, not all groups agree on what constitutes sinful behavior: for some, consumption of alcohol is iniquitous while others incorporate the drinking of wine in their liturgy.

From the 1960s forward, responsible investment has become increasingly secularized. During the Vietnam War, American college students urged disinvestment in a chemical company that produced napalm. and in the 1980s, activists and religious groups pushed for disinvestment in South Africa to pressure the government to end apartheid.