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Mellody Hobson is president of Ariel Investments, a Chicago-based money management firm that serves individual investors and retirement plans through its no-load mutual funds and separate accounts.  Additionally, she is a regular financial contributor and analyst for CBS news.

Tom: You are here this morning to talk about something many don’t know about – socially responsible investing. What is it?

Mellody:In general, socially responsible investing refers to an investment process that takes into account traditional financial measures, as well as a company or organization’s social responsibility practices. Based upon these considerations, the decision is made to invest in stocks and bonds from those companies, counties or municipalities that promote certain actions or reject those that participate in irresponsible actions. Basically, the process works to reward those companies that you agree with by investing in them, and avoids buying shares of those companies that do not share your values.

The concept of socially responsible investing has been around for a long time. Some of the earliest examples here in the U.S., prohibiting investments in companies involved with the slave trade. The practice later gained steam during the 1960s, focusing on civil rights, labor rights and women’s rights, and in the 1980s the practice featured prominently in the anti-apartheid movement.

More recently, socially responsible investing has focused on the environment, sustainable development, community investment and corporate governance. In fact, this sector has grown so rapidly that currently, about $1 of every $9 under professional management in the U.S. can be classified as an SRI investment.

Tom: How do analysts decide what investments are responsible?

MONEY MONDAYS: Socially Responsible Investing – A Primer  was originally published on blackamericaweb.com

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