Having divested from harmful companies, the investor will want to purchase something more satisfactory.  This website assumes that it will be an IRA, normally consisting of one or more mutual funds.  Whatever the details, the investor will try to select a fund that is likely to grow over time.  This meets the first criterion for a retirement fund, providing security in the future.  This will be assumed from here on, and not discussed further.  For suggestions, click here. 

The chosen mutual fund may own shares in companies that are actively working to improve the environment, such as by manufacturing parts for wind turbines, or developing methods for regenerative farming.  It may also own shares in ordinary companies that are not outstandingly strong on the environment, but that seem like good investments, likely to grow.  Although the fund probably owns such a mixture of the two types of companies, let us consider the two types separately, beginning with environmentally beneficial companies, which actively work on behalf of the environment.  What is the effect of buying stock in such a company?

The effect of such re-investment is the reverse of the effect of divestment.  The money that is paid for shares of the stock does not go to the company — it goes to the former owner of the stock shares.  Therefore, it does not have any direct effect on the operations of the company.  However, if the company does as well as expected, the share price will rise, rewarding the shareholders for their company’s good work.  The effect, if any, is to encourage the company to do more of the same, and perhaps to encourage other companies to imitate it.  The stock price will rise, helping provide security to the investors in future years, one of our two goals for a retirement investment.

Investment in a successful, beneficial company can provide long-term security.

But this is not enough!  The investment does not cause new initiatives or cause any company to give up harmful practices for constructive ones.  That is, it is not transformative.   

Investment in a good company provides security but does not cause new initiatives.

See References 7 and 8 for this.  In particular, Ref. 8 is an extensive, published report giving empirical support for the above assertion.  To bring about transformation, we must consider investment in companies that are not active improvers of the environment.