A few times over the years, I've heard proponents of social investing invoke the teachings of Warren Buffett in support of their activities (the most comprehensive argument along these lines is Patrick McVeigh's chapter in the old The Social Investment Almanac).
It's an attractive idea. Buffett's a great investor, and he not only has strong views on ethics and integrity, he expresses them with flair (even in cartoon form). Then you notice him saying things like "we have never made a good deal with a bad person," and it's kind of natural to think he's on board with the social investment concept.
Natural, but wrong. Buffett has sometimes owned securities that social investors would find objectionable. Although I believe most of its holdings pass typical social screens, Berkshire has owned tobacco securities, and is now drawing fire for PetroChina. Reuters reports today that "Berkshire Hathaway Inc. is keeping its PetroChina Co. shares amid growing criticism from Harvard University and others about investing in companies that might be linked to genocide in Sudan." Berkshire's official comment is here.
I have read an unofficial shareholder meeting transcript (all disclaimers apply) in which Buffett's partner, Charles Munger, was asked about PetroChina. He reportedly said "it would be hard to invest in oil without finding companies that are doing something we wouldn't do... I'm glad I don't have to take responsibility. If we had those standards we couldn't invest in anything. Every big oil company is involved somewhere in a country which is doing something we wouldn't do."
The news on Berkshire follows the Gates Foundation's decision to not implement social constraints, despite some fairly obvious issues raised by the Los Angeles Times.
I am two minds about this. On the one hand, I do think Buffett, Gates, and Munger are wrong if they think a stock certificate creates immunity from moral responsibility. A stock certificate can do miraculous things, but that is not one of them. In most ethical systems you have to consider the consequences of your actions, including financial ones. I think this is particularly true when we're talking about the richest people in the world. These people are not desperate for returns. It wouldn't kill them to pick a different name.
Or maybe it would. For all his folksy charm and rhetorical brilliance, Warren Buffett is a pretty specialized animal. He identifies superior investment opportunities, passionately, single-mindedly, and to the exclusion of many other things he could do with his time. Maybe asking Warren Buffett to do ethical investing is like asking Bobby Fischer to play ethical chess. Other people could, or could at least try - but perhaps, precisely because of who he is, he can't.
And that's an important point about social investing - how you do it depends on who you are. For Warren Buffett to be a social investor he doesn't have to do what I think is right, or what anyone else thinks is right. He has to do what he thinks is right. If more people just did that, I believe the world would be a better place. I have read everything Buffett has written, and found nothing there that contradicts this belief.
Postscript: I can't resist adding two words about Buffett's investment writings: read them! If you invest in equities for the long term, or plan to, you should go to the Berkshire Hathaway website and read every single Chairman's Letter. This will not make you as good an investor as Buffett, any more than reading Bobby Fischer's My 60 Memorable Games will make you a grandmaster. But in either case you will be way ahead of your neighbor.