A new law proposed by Gilad Erdan is meant to encourage pension funds to take "social" considerations into account by compelling them to give an accounting of their policies regarding social investing. The pension holder would thus be given the information he or she needs to make social responsibility one consideration in the investment decision. The law would put Israeli workers in a position to exercise "socially responsible investing," a term which is all the rage in business ethics circles. SRI means that when you invest your money, you are not interested only in the monetary return on your investment; you also want to make sure your money is being used in a way that you consider socially responsible. Of course, this means different things to different people, and there are hundreds of SRI funds managing hundreds of billions of dollars. Some avoid "vice stocks" like alcohol and tobacco; others shun companies with bad records on the environment; others focus on women's rights, slave labor, etc. Another approach to SRI is not to avoid investments in problem companies, but on the contrary to invest in them and use the resultant leverage to try and influence their policies. If the stake is large enough this can be done directly, for example by demanding a board seat or threatening divestment; a smaller stake can be enough to get a "socially responsible" initiative put on a shareholder ballot. Managers are concerned about these initiatives and will often negotiate policies to keep them off the ballot. In the US, union pension funds have been politicized for decades, and influenced by member opinion to invest in "politically correct" assets - including Israel bonds. Lately the trend has broadened. One reason is presumably greater wealth, which gives investors the luxury of considering more than just the bottom line; another is the claims of SRI funds to have above-normal risk-adjusted returns. More interest and more money make possible the widening variety of causes these funds screen. Erdan's proposal is noteworthy for the fact that it doesn't impose any requirements on the funds' investments. It only obligates them to make an accounting of their investment policies. One might think that this requirement is useless: if consumers demand "socially responsible" policies, then the funds will automatically have an interest in implementing and publicizing them; if not, then the disclosure will have no impact. However, experience shows that educating the consumer has an important effect on buying habits. To take an example from food purchases, if only one company would put nutrition information on the label, consumers would have no basis for comparison and would be unlikely to buy specifically that brand just because they label. But when uniform labeling requirements were imposed, millions of customers began to compare ingredients - because they could. The same applies to financial statements. One could ask why the securities regulators place such strict requirements on financial accounting; companies have their own interest in reporting in order to attract investors. In fact, the public sophistication to demand this kind of transparency is often created only after quality information is first made available. Experience shows that relatively few investors really take interest in the social responsibility of the companies they invest in. Still, those relatively few individuals can have an important impact on "swing issues," socially undesirable problems that are relatively inexpensive to remedy, and that management is willing to take on just to avoid friction from a few investors. There is a related problem, however; since the ultimate lever is not the direct voting power of the "socially responsible" investor but merely the public relations impact, there is a tendency to focus on cosmetic issues and not the more serious ones. Decades ago, the economist Milton Friedman raised the question of whether what is called "socially responsible" really corresponds to what is good for society, or whether it is not perhaps just one more kind of special interest. He also suggested that business managers are trained to run businesses and may not have particularly astute judgment regarding the solution of social problems. Ultimately, this too is part of the educational progress fostered by transparency. To take an example, food labels at certain junctures triggered avoidance of certain foods before adverse health consequences were really proven. Hydrogenated plant oils were once considered a healthy alternative to animal fats; today they are generally considered no better or even worse. However, this learning process was itself partially due to the knowledge and consciousness introduced by the labeling requirements. So the proposed law imposing reporting requirement for socially responsible investing should have a positive impact on public awareness and activity in making our investments more accountable and ethical.