Among the consequences of the recent and ongoing financial crisis and economic downturn is a rekindling of interest in the moral dimension of economic life. In a recent two-part article at Catholic Exchange, Rev. Seamus Finn, OMI, identifies one particular area of renewed attention: moral investing.
Ethical investing — usually called socially responsible investing (SRI) — is the application of criteria other than maximizing financial return to one’s investment decisions. Its history dates at least to the Pioneer Fund in 1928, formed by evangelical Christians who wished to avoid supporting alcohol and tobacco production. Religious groups cooperated to form the Interfaith Center on Corporate Responsibility (ICCR) in 1971. It both served as a clearinghouse for investor information and encouraged the rise of a tactic closely related to SRI, the morally motivated shareholder resolution. Both tactics were used in the course of the SRI’s most famous campaign: disinvestment in South African companies during the 1980s as a protest against apartheid.
Catholics have been active in the movement for some time, as well. A number of Catholic religious orders participate in the ICCR; investment management companies such as Christian Brothers Investment Services handle billions of dollars for their clients; and there are several Catholic mutual funds, including Ave Maria Funds, LKCM Aquinas Funds, and Epiphany Funds.
This summary has so far failed to make some important distinctions, however — a weakness that unfortunately characterizes many Catholic discussions of SRI, including Father Finn’s.
The SRI movement is dominated by what can fairly be called leftist political leanings. This is not to say that there is no overlap between the concerns of mainstream SRI and the concerns of Catholic social teaching. The political bias does result, however, in a skewed set of priorities. That this is the case is clear from perusing the writings even of most Catholics on the issue. Father Finn’s listing of SRI’s concerns includes torture and kidnapping in South America; forced and child labor in Asia; and environmental degradation around the world.
Notice any glaring omissions? The commercialization of sex through pornography and other forms of entertainment is arguably the single most destructive force in Western culture since the 1960s, yet it does not receive a mention from most SRI advocates, including Catholic ones (Thomas Strohbar is a notable exception). As for the indisputably most egregious human-rights violation in contemporary America — abortion — it is not on the radar of the vast majority of SRI fund companies (though here the Catholic funds do better). Firms that are perceived to pollute the environment are pariahs to SRI activists, but those that contribute to Planned Parenthood are good corporate citizens.
I don’t wish to tar the SRI movement as a whole. It is decidedly a good thing that people are thoughtful about the moral implications of their investments. Pope John Paul II stressed that “even the decision to invest in one place rather than another…is always a moral and cultural choice.”
To say this, however, is not to say that every outfit claiming to be “socially responsible” employs a species of moral reasoning about economic affairs that is compatible with the Catholic tradition. To put it practically, a Catholic shifting his IRA money into an SRI account in many cases will not accomplish the goal of conforming to a genuinely Catholic vision of financial stewardship. For example, the Green Century Funds group engages in shareholder activism to prevent drilling for oil in the Arctic National Wildlife Refuge and to pressure the U.S. Chamber of Commerce to drop its opposition to climate- change legislation — two issues that are, at least, debatable within the parameters of Catholic social teaching.
What, then, is a conscientious Catholic to do? The question of moral responsibility in investing is admittedly a complex one.
Catholics should apply the same principles here as in any other kind of moral analysis. Good is to be done and evil avoided. Investing in companies that do bad things involves the possibility of cooperation with evil. Cooperation in sin may be either formal or material. Formal cooperation means that one shares the harmful intent of the evildoer; this is never permitted. Material cooperation, where the intention to do evil is not shared, may be permitted under some circumstances. Whether material cooperation is morally objectionable or not depends on the considerations of proximity (how close is the cooperation?) and proportionality (is the good that I’m doing proportionate to the evil in which I am cooperating?).
In the case of mutual-fund investing, one runs up against a serious obstacle: knowledge. Most funds invest in a large number of companies. These companies may each, in turn, possess a number of subsidiaries. An ongoing procession of mergers and acquisitions, which changes the makeup of these companies, further complicates the issue. In sum, it is simply not feasible for the average investor to be able to keep track of whether the companies in a given mutual fund are all “clean” with respect to participation in morally objectionable commerce.
Mutual-fund investing, moreover, implies a certain distance with respect to cooperation in evil. The decision of the investor to place money in a mutual fund is separated from the decision to engage in immoral activity by, at the very least, two or three layers of moral actors.
These considerations suggest that mutual-fund investing will not normally be objectionable from a Catholic perspective. But this should not be taken as a blank slate to ignore moral concerns in investments. There are solid Catholic mutual funds, such as Ave Maria, which apply screens to avoid the most objectionable companies and industries. While it is too much to say that the Catholic is obligated to participate in such funds, they do represent a praiseworthy option. The moral analysis changes further when dealing with investing directly in individual corporations: Here the cooperation is more proximate, and so more care is needed.
Some readers may no doubt find such an answer insufficiently concrete — but investing is not the same kind of act as theft or the use of artificial contraception. It involves a host of constantly changing factors and individual circumstances, all of which have a bearing on the moral question. On the issue of socially responsible investing– as in the Catholic moral life in general– there is no substitute for a well-formed conscience.
Disclosure: The author owns shares of Ave Maria Mutual Funds.