An environmentally minded investor will want to invest in ways that improve our planet’s environment and climate. It will not be enough to ride along with the way things are going — we need to bend the economy so that the world’s climate will not keep moving in a disastrous direction. This is transformative investing.
Transformative investing causes changes in the environment
The investment proposed here is an IRA, which will contain one or more mutual funds. Each mutual fund will own stocks from a number of companies. An advantage of this investment method is that the investor can convert one mutual fund with its IRA into another, with no tax considerations.
At the cost of oversimplification, it is useful to think of each company as one of three types,
- beneficial, actively benefiting the climate,
- harmful, directly damaging the environment in a way that makes the climate worse,
- in between, causing neither direct benefit nor direct damage to the environment.
In short, they may be called "the good, the bad, and the so-so." (Those who are acquainted with prioritizing cases in a disaster situation may recognize this as a form of triage.) The lines between the three groups are not clearcut, but thinking this way is still helpful.
The method proposed here can be summarized as avoiding the bad, encouraging the good, and improving the so-so. The third step, improving companies that are neither horrible nor perfect, comes through investment in a mutual fund that engages, or negotiates, with the companies it owns. This engagement encourages the companies to make changes for the benefit of the climate, changes they might otherwise delay, perhaps indefinitely. This is the transformation that we seek. Later pages in this website describe mutual funds that practice this transformative activity.
This website will list and describe mutual funds that act transformatively
The above applies to investment in stocks, which is a natural investment for a long-term purpose such as retirement savings. For investment in bonds, transformative investing simply involves buying beneficial bonds, those that are designated for specific environmental purposes. In the following pages, bonds are not emphasized, but are mentioned from time to time.