Institute calls for revision of halachic business ethics

The Institute for Advanced Torah Studies is calling for the launch of a taskforce to make amendments to the halachot of investing, in an effort to update halachic principles to accommodate the growing diversification of financial instruments post-Bachar reform. "There have been several attempts to make changes to the "heter iska", or transaction permission," said Rabbi Aharon Katz of the Institute for Advanced Torah Studies at the symposium on "Halachic and ethical means of coping with new financial tools" held at the Bar Ilan University on Thursday. "As more and funds will be shifting from banks to the private sector and the public and we see a diversification of the capital markets, there is need for the establishment of a taskforce of rabbis and economists to adapt halachic law to these changes." Katz added that the problem of interest was the main issue from a halachic point of view. The Torah commands that money be lent to a fellow Jew at no interest. However, one can lend with interest to a non-Jew or make an interest-bearing investment. The "heter iska," or transaction permission, turns the relationship between a lender and a borrower from one based on interest to one based on a partnership or joint investment of two parties. Thus, in the banking or mortgage business with a "heter iska" a business is not required to give interest-free loans to fellow Jews. The "heter iska" is a widely used document in the banking sector. "As financial instruments move out of the banking system following the Bachar reforms the public will be more and more exposed to new financial instruments in the non-banking sector and to different investment tools such as bonds, futures and options among others," said Prof. Ben Zion Silberfarb, head of the Aharon Meir Center for Banking and former director-general of the Ministry of Finance. As a result, it will become more difficult to observe Jewish law in investments in terms of assessing the reach of investments put into different mutual funds. For example, investments that help companies that desecrate Shabbat from which the investor makes a profit, said Silberfarb. This creates a problem for those concerned about the ethics of companies in which they invest or socially responsible investment. This situation has already given rise to special investment vehicles, such as the Millennium Good Eye Fund, which will only make investments in companies that abide by the halacha, in accordance with principles laid down by Rabbi Yehuda Silman, a member of the Badatz religious authority in Bnei Barak.