Best ESG Stocks

Investors are increasingly pouring money into companies prioritizing environmental and social responsibility. The ESG market is projected to grow $53 trillion by 2025, highlighting the growing demand for sustainable investing.

ESG investing considers a company's environmental practices, social responsibility, and governance. It goes beyond financial performance to analyze a company's impact on the world. With sustainable investing gaining momentum, explore top ESG stocks for your portfolio.

Quick Look at the Best ESG Stocks:

ESG Stocks to Watch Out for

The pandemic and climate concerns have fueled the rise of ESG investing. Today's investors often seek profits alongside responsible corporate behavior. Companies are responding by prioritizing environmental practices, social responsibility, and strong governance (ESG). This trend presents exciting opportunities for investors seeking sustainable growth.

Some stocks meet this criteria due to innovative and energy-light business models. However, ESG investing looks at criteria well beyond immediate business activity supported by value chains and operating procedures. 

Below is a list of five stocks to watch in the ESG space for 2022. These stocks range from Accenture (NYSE: ACN) with a share price above $400 to Best Buy (NYSE: BBY) with a share price around $100. However you may find stocks that trade between $5 and $20. 

Microsoft was founded by Bill Gates and Paul Allen in 1975 and is a leading provider of personal computers. Microsoft develops and licenses software for consumers and enterprises. 

The company is organized into three segments, including productivity and business processes (Microsoft Office, Skype, SharePoint and Office 365), cloud infrastructure and platform-as-a-service offering. The last segment is personal computing including Xbox, Bing search, display advertising, laptops and desktops. 

Nvidia is a designer of graphics processing units that enhance the experience on computing platforms. The firms’ chips are used in a variety of end markets such as high-end PCs for gaming, data centers, and automotive infotainment systems. 

More recently, the firm has diversified its focus from traditional PC to more complex sectors such as artificial intelligence and autonomous driving. These sectors increasingly leverage high-performance capabilities in graphics processing units. 

Salesforce.com provides enterprise cloud computing solutions, including Sales Cloud, the company's main customer relationship management software-as-a-service product. 

Salesforce.com also offers Service Cloud for customer support, Marketing Cloud for digital marketing campaigns and Commerce Cloud as an e-commerce engine. Its Salesforce Platform allows enterprises to build applications, and other solutions, such as data integration.

Accenture is a leading global IT services firm that provides consulting, strategy, and technology and operational services. These services are the anchor of successful enterprises and cover digital transformation, procurement services and software system integration. 

The company provides its IT offerings to a number of sectors ranging from communications, media and technology as well as financial services, healthcare and consumer products. ESG ratings are driven by the long-term resilience of companies through industry-specific evaluation of  ESG risks and opportunities. 

With $43.45 billion in annual revenue in 2024, Best Buy is the largest pure-play consumer electronics retailer in the U.S., with over $47 billion in 2020 sales alone. This was driven by its 10% share of the aggregate market and nearly 40% share of offline sales, according to Benzinga, CTA industry and Euromonitor data. The bulk of the firm’s sales are driven by mobile phones, computers, tablets, computers and appliances, which represent its three largest categories. 

Accelerated by the COVID-19 pandemic, the U.S. e-commerce channel has roughly doubled from pre-pandemic levels, with management estimating that it will represent a mid-30% proportion of sales moving forward.

Overview

ESG investing is growing exponentially, and more investors and issuers use ESG and climate-related data to support decision making. ESG investing began in the 1960s as a form of socially-responsible investing, excluding stocks and industries such as tobacco production or involvement in the South African apartheid regime. ESG stocks can be found in a range of sectors as discussed below. 

Which Sectors Dominate ESG investing? 

ESG stocks can be found within the secondary, tertiary and quaternary sectors. The secondary sector comprises construction, manufacturing, and processing, while the tertiary sector includes retailers, entertainment and financial companies. 

The quaternary sector deals with knowledge such as research and development (R&D), business, consulting services, and education. Table 1 presents a list of ESG-related stocks in each category

Table 1: ESG Stocks per sector. 

Source: Investors.com

How to Buy

You may be thinking of investing in ESG stocks, but how can you go about this? 

Firstly, to buy stocks, you’ll first need a brokerage account, which you can set up in about 15 minutes. After adding money in the account, you are ready to invest in stocks. 

Research ESG Stocks Before You Buy

Be sure to research the stocks you wish to buy. Be sure to research a range of companies and key terminologies to better understand what is included in ESG and whether the companies that you choose meet your expectations. be sure to check out and measure the earnings per share.

Decide How Many Shares to Buy

You should feel absolutely no pressure to buy a certain number of shares all at once. It is preferable to start really small and get a feel for what it’s like to own individual stocks. Remember that the price of stocks may change and it is preferable to  increase your positions over time. 

Compare ESG Brokers

The list below provides a comprehensive summary of brokers for ESG stocks.

Features to Look for in ESG Stocks

Ready to buy into ESG stock? Here are a few of the key features to look for:

Environmental: Environmental criteria include a stock's energy use, waste, pollution, natural resource conservation and treatment of animals. They can be used to evaluate any environmental risks facing the company. For example, there might be issues related to ownership of contaminated land and the disposal of hazardous waste. 

Social: Social criteria analyze a business relationship with stakeholders such as suppliers or customers. Does the company give a percentage of profits to the local community, show high regards for employees safety or encourage employees to volunteer ? 

Governance: You may be concerned if the company uses accurate and transparent accounting methods and whether stockholders are allowed to vote on important issues. They may want assurances that the company does not use political contributions to obtain favors.

Pros and Cons of ESG Stocks

One of the advantages of investing in ESG stocks is due to a supportive regulatory backdrop. Consumers increasingly want to consume environmentally-friendly products and policy makers have set various targets to reach net-zero emissions. This will boost the value for ESG-related stocks over time, despite the broad range of assets under this category.

Investing in ESG-related stocks helps you act against things such as climate change, gender inequality and general malpractice by providing a boost for businesses that operate in a much more green manner. 

The greatest drawback is the lack of diversity offered by ESG shares. Investors may be forced to by mid-cap stocks, which limit diversification especially in non-U.S. companies. ESG stocks avoid certain industries in line with acceptable standards, but focusing only on two industries could exacerbate diversification issues. 

Are ESG Stocks a Good Investment Right Now?

It may be the right time to invest in ESG due to COVID-19 that has consumer and policy pressures. A 2021 study from the Morgan Stanley Institute for Sustainable Investing found that  in a year of extreme volatility and recession, ESG-related funds weathered the year better than non-ESG portfolios.  

In late September, the SEC proposed new rules to bring more transparency on how funds disclose shareholder votes and decision-making processes on a range of ESG themes. As always, it’s important to do your own research and understand your values before you go forward with an investment.

Biggest ESG Movers of the Day

Take a look at the ESG stocks moving today. 

Future-Proof Your Portfolio

Environment, social and governance stocks are good investments if you want to balance your portfolio or invest in responsible companies. You can find appropriate stocks for sustainability in most sectors, but this may be limited to the U.S. 

Review our recommended ESG stocks to future-proof your portfolio today.

Frequently Asked Questions