In the wake of December's Sandy Hook Elementary School shooting, investors may choose to be more socially responsible in their investments, says Angela Raitzin, an investment adviser at Morton Capital Management, who says it doesn't have to be either/or when talking about financial returns and common responsibility.

Raitzin spoke with Mergers & Acquisitions about pension review and the decision private equity firm Cerberus Capital Management LP made to sell off gun-maker Freedom Group Inc. Raitzin also defines and discusses the concept of socially responsible investing.

Why are state officials requesting state pension funds review investments after the Sandy Hook massacre?

People are trying to be proactive. Individual companies are actually divesting from investments that effectively support companies that produce guns or ammunition.

It came to light that a number of the state funds have actually invested in companies that produced guns or ammunition. The pension funds are actively looking at whether these investments make sense, given the nature of the fund.

What are the steps to reviewing pension investments?

The first thing you have to do is an investment policy review. What we do with our clients is set up an investment policy statement, at the state and pension level. You have to look and see what your portfolio statement includes. If you look at New York State, part of the investment policy of the pension is to enhance common good. It could be conflicting with the policy and it has to be consistent. At the end of the day we're asked to achieve a return.

Do you expect it to be a trend?

In the short term, it may be a trend among the states that were thinking about doing it anyway. I would be surprised if they hadn't been considering it in the past, as it's consistent with the values that they've expressed in their portfolios.

If firms follow Cerberus' lead, will it affect the gun industry?

It's hard to say what impact it will have on the gun industry. From the capital markets perspective, if Cerberus is selling the position, someone else is buying it. I would be surprised if companies aren't pulling back, but they may not be publishing it. Cerberus was a very quick response, and a lot of other companies and pension funds don't move that quickly. It may be something that unfolds over the course of 2013.

Beyond avoiding investing in gun makers, what more can investors do?

It does mean many different things to different people. Some people mean don't invest in alcohol, tobacco, adult entertainment or genetically-modified organisms or foods. So there's one view that you avoid the negative, and one view that you encourage positive investing. There is also the idea of encouraging diversity among boards, among the size of companies invested in as opposed to just large conglomerates. There are so many people drawn to it because you may have a particular value that resonates with you.

There is also a gender aspect to it. There's an angel investment group called Golden Seeds, which has received New York State funding. The issue they deal with is having women represented on boards and the funding of women-run companies.

For example, for financial services company TIAA-CREF, socially responsible investing is listed as a core policy, and diversity is listed as one of their objectives. It's more prevalent across Europe, but it is interesting to me that a large pool of assets is looking at that. Even investor Mario Gabelli has a socially responsible fund, called Gabelli SRI Green Fund Inc.

What evidence is there that socially responsible investing pays off?

One of the ways to track the investments is though the MSCI KLD 400 Social Index, which is an exchange-traded fund, used to invest in socially-responsible companies.

The interesting thing is that it's not that you're trying to achieve social good in a vacuum. You want a positive financial return and a social return, and there's absolutely evidence that you can achieve very attractive results.

There may be a sense that socially-responsible investing means you invest in companies that no one has heard of, but that may be a myth, as many responsible companies have had a socially responsible component.