The 10 Best ESG Stocks for 2022: Responsible Investing – GOBankingRates | Jewelry Dukan

svetikd / iStock.com

Modern investors looking to build portfolios that are both profitable and ethical are incorporating non-financial criteria known as environmental, social and governance (ESG) factors into their analysis of potential stock picks. The goal of ESG investing is to build a portfolio of companies that are committed to both corporate responsibility and shareholder returns.

Although the modern ESG movement is still nascent, the concept is not new. For example, some investors decided decades ago to stop buying shares in companies that sell tobacco, make guns, or finance casinos out of personal beliefs that those industries are harmful.

But today, ethical investing has gone mainstream, and everyone from retirees to large Wall Street hedge fund managers is incorporating ESG stocks into their portfolios and investment strategies.

In response to this new wave of consumer demand, many of the world’s largest companies have committed to corporate responsibility to attract modern-day investors who are committed to putting their money where their morals lie by investing in ESG stocks.

What are ESG companies?

ESG is not an industry in itself. ESG companies operate in segments as diverse as telecom and cloud computing to life sciences and automotive manufacturing. ESG stocks are not classified by the services they provide or the products they manufacture or sell. They are classified according to their demonstrated commitment to the criteria that make up the ESG approach:

  • Environment: This category includes a commitment to things like green energy initiatives, improved waste management, and reducing greenhouse gas emissions, water use, and water and air pollution.
  • Social: This topic addresses the human aspect of doing business – things like fair labor practices, ethical sourcing of raw materials, commitment to domestic and international human rights and gender and racial inclusion policies, discrimination in hiring and promotion, sexual harassment and LGBTQ+ protection.
  • Guide: Finally, ESG companies must demonstrate an ethical record both in conducting their businesses and with the governments that support their companies. This includes things like executive pay, pay equity, and the company’s record of making political contributions to unscrupulous or corrupt politicians or candidates, or supporting governments with a history of corruption or human rights abuses.

What are ESG stocks?

Independent ESG research firms rate companies against a variety of metrics that measure their compliance with ESG investing principles. Companies that score well fall into the broad category of ESG companies – their company shares are referred to as ESG stocks.

According to Forbes, the concept of ESG equities dates back to 2006, when the United Nations Responsible Investment Principles (PRI) report officially outlined ESG criteria for the first time in history. At that time there were 63 investment companies with $6.5 trillion in assets under management incorporating ESG principles into their planning.

As of the early 2020s, more than 2,400 ESG investment firms managed over $80 trillion in assets.

The 10 best ESG stocks

Below are 10 examples of the most popular and top-rated ESG stocks across a variety of sectors and industries. If you’re considering building a portfolio based on ESG stocks, these companies could be a good place to start.

company product stock price
Linden (LIN) Gas production and distribution $279.14
Accenture (ACN) Management consulting, technology and outsourcing $288.79
Microsoft (MSFT) software $260.40
Salesforce (CRM) cloud software $153.53
NVIDIA (NVDA) Computer graphics technology $139.37
Adobe (ADBE) computer software $370.53
JB Hunt (JBHT) transportation and logistics $173.77
Best Buy (BBY) computer electronics $71.85
xylem (XYL) Water Technology and Solutions $92.09
Texas Instruments (TXN) semiconductors and integrated circuits $166.16

1. Linden (LIN)

The British gas production and distribution company Linde operates worldwide. Sustainability initiatives include programs to reduce waste and conserve energy and water. The company appoints a senior member of its Management Committee to ensure that all companies it acquires or with which it enters into joint ventures meet or exceed Linde’s sustainability standards.

2. Accenture (ACN)

Ireland-based Accenture uses its position as a management consulting, technology and outsourcing giant to help the companies it advises become more sustainable and equitable. It supports its client companies in the transition to net-zero carbon emissions and sustainable value chains, technologies and decision-making.

3.Microsoft (MSFT)

Microsoft has pledged to be carbon negative by 2030 – the software giant has been carbon neutral since 2012. His recent initiatives include awarding contracts to remove 2.5 million tons of carbon in fiscal years 2021-22, diverting more than 15,000 tons of CO2 waste from landfills last year and launching the Microsoft Climate Research Initiative.

4. Salesforce (CRM)

Cloud-based enterprise software company Salesforce bases its ESG bona fides on six sustainability priorities: Emissions Reduction, Carbon Removal, Regulation and Policy, Innovation, Education and Mobilization, and its Trillion Trees ecosystem restoration initiative. The company achieved net-zero carbon emissions in 2015 and is on track to exceed -2.5 million by 2030.

5. NVIDIA (NVDA)

Computer graphics technology company Nvidia has one of the most exciting claims to corporate responsibility in all of business. It designed and built the EARTH-2 supercomputer to predict the effects of climate change. The company is committed to sourcing 100% of its global electricity consumption from renewable sources by 2025, and its GPUs are 20x more energy efficient than traditional CPU servers.

6.Adobe (ADBE)

Computer software giant Adobe has committed to running its operations on 100% renewable energy sources to achieve zero-carbon and zero-waste growth. It has also transitioned to sustainable design, business and marketing processes to conserve resources while championing policies and forming partnerships that promote sustainability.

7. JB Hunt (JBHT)

Transportation and logistics company JB Hunt is leading the industry in transitioning from land transportation to intermodal transportation that is 250% more fuel efficient. Its fleet of air-conditioned intermodal containers allows for the conversion of refrigerated intercity trucks. All of this is part of a broader strategy to reduce the company’s greenhouse gas emissions.

8. Best Buy (BBY)

Consumer electronics retail giant Best Buy has reduced its carbon emissions by 60% since 2009 and pledged to be carbon neutral by 2040. The company operates the world’s largest e-waste recycling program and aims to help its customers reduce their carbon emissions by 20% by developing eco-friendly products. Its goal is $5 billion in targeted energy savings by 2030.

9. Xylem (XYL)

Water technology and solutions provider Xylem is committed to achieving net-zero emissions by 2050. It promotes global justice by advancing access to clean water in developing countries and helps major utilities become more water efficient. The company has helped prevent more than 1.9 billion cubic meters of polluted water from entering public waterways.

10. Texas Instruments (TXN)

Semiconductor and integrated circuit maker Texas Instruments has received a 100% rating from the Human Rights Campaign Corporate Equality Index for six consecutive years. The company reduced greenhouse gas emissions by almost 19% in 2021 and reused or recycled 90% of its waste and surplus materials. It has also increased the percentage of underrepresented communities in its workforce to 20%.

Is ESG a good investment?

The only companies that are good to invest in are those that fit your investment goals and strategy – ESG just adds another layer of scrutiny and analysis to weed out those that don’t meet your personal ethical standards. You can apply these ethical standards not only to individual stocks, but also to the many ETFs and funds that use ESG guidelines to construct their portfolios.

For example, iShares ESG Aware MSCI USA excludes companies trading in nuclear weapons, thermal coal, oil sands and tobacco. The Vanguard ESG ETF excludes companies that profit from gambling, adult entertainment and cannabis.

Regardless of your personal moral criteria, there is evidence that ESG investing can pay off. Sustainable funds outperformed traditional funds in the first year of the 2020 pandemic, Morgan Stanley said. The following year, S&P Global reported that most ESG funds outperformed the S&P 500 in 2021.

Beware of ESG scammers

When deciding between potential ESG stocks for your portfolio, be aware of so-called greenwashing. This is the case when companies misrepresent their commitment to corporate responsibility through misleading marketing, advertising, branding and packaging.

Businesses know that modern consumers demand that the companies whose products they buy take real action to improve environmental sustainability, social justice and equity.

The practice of greenwashing allows “dirty” companies to give the false impression that they follow ESG best practices. It can be difficult to tell the difference, so look for ESG scores from reputable third-party rating agencies such as CDP Global Environmental Information Research Center, FTSE Russell, MSCI and RobecoSAM.

Information is correct as of September 1, 2022 and is subject to change.

Editor’s note: This content is not provided by any of the organizations discussed in this article. Any opinion, analysis, review, rating, or recommendation expressed in this article is solely that of the author and has not been reviewed, approved, or otherwise endorsed by any entity named in this article.

Our in-house research team and on-site financial experts work together to create content that is accurate, impartial and timely. We verify every single statistic, quote, and fact against trusted primary sources to ensure the information we provide is accurate. Learn more about GOBankingRates’ processes and standards in our editorial policy.

Leave a Comment