Ethical investing is booming right now, with more investors seeking to put their money to good use. The latest buzzword is ESG Investing, meaning investing in companies that actively demonstrate a favorable Environment Policy, Social Responsibility, and transparent Corporate Governance.
In fact, according to the Economist, climate change is causing a surge in both ESG related discounted loans to companies with robust ESG policies and keen interest from stock market investors in ESG companies.
ESG now makes good business sense, and many of the largest most successful companies in the world have an active ESG policy as part of the core business strategy.
Top ESG Companies to Invest in
We can classify a wide variety of stocks as ESG companies. The ESG companies list includes many of the world’s popular stocks. I would like to thank the team over at our Partner Stock Rover doing the research and building a Top 20 ESG Portfolio right into Stock Rover. Additionally, the final section in this article shows the ESG Companies’ performance over the past 2 and 5 years.
1. Alphabet (NASDAQ: GOOG)
Yahoo! Finance gives the owner of Google a medium ESG risk score of 30. Alphabet receives a low environmental risk score of 0.9 and a high controversy level of four.
Alphabet is controversial because of charges of offensive material, political propaganda, and censorship on YouTube and Google. Alphabet (NASDAQ: GOOGL) often faces charges of monopoly because of Google’s dominance in search and online advertising.
Alphabet’s commitment to environmental sustainability is high. Alphabet plans to grow its green energy portfolio by 40% to generate 1.6 gigawatts (1.6 billion watts) of clean electricity, The Guardian reports.
Alphabet is investing in sustainable solar energy and wind projects in the United States, Europe, and Chile. The company will use sustainable energy to power its data centers.
2. Procter & Gamble (NYSE: PG)
The soap-making giant receives a 25 ESG risk score from Yahoo!! Finance.
P&G receives a high environmental risk score of 8.4 and a top social risk score of 8.6. Yahoo! Finance gives Procter & Gamble a significant controversy level of three.
Procter & Gamble management is trying to correct these deficiencies with a set of sustainability goals they call Ambition 2030. Procter & Gamble is trying to encourage responsible consumerism through powerful brands such as Tide and Ariel.
An example of P&G’s responsible consumerism is the use of laundry detergent and dishwasher pods. The belief is consumers use less soap with a pod.
P&G faces controversy because people have swallowed its laundry pods and died. News reports indicate thrill-seeking teenagers, toddlers, and people with dementia sometimes consume poisonous pods. Organizations such as Consumer Reports believe P&G could make pods safer.
3. Johnson & Johnson (NYSE: JNJ)
Yahoo! Finance gives Johnson & Johnson a severe controversy level of five and a high ESG risk score of 36. J&J has a high-risk rating because of charges it sold baby powder containing asbestos.
The asbestos is gone, but Johnson & Johnson faces lawsuits over asbestos in baby powder. A New York state jury ordered Johnson & Johnson to pay $300 million to a woman named Donna Olson, Asbestos.com reports. Olson claims asbestos in Johnson & Johnson’s baby powder caused her cancer.
4. MasterCard (NYSE: MA)
The credit and debit card giant received a low environmental risk score of 0.1 from Yahoo! Finance. That gives MasterCard a low ESG risk score of 20.
MasterCard has a huge controversy score because of the nature of its products. Many people view interest-charging instruments such as credit cards as dangerous and immoral. Many Muslims view charging interest as a sin.
ESG investors will appreciate MasterCard because of its low environmental risks score. Some values investors: including Muslims, will reject MasterCard because it makes money from interest.
5. BlackRock Inc. (NYSE: BLK)
The asset-management giant receives a moderate ESG risk score of 23 from Yahoo! Finance. Positive ESG factors at BlackRock include a low environmental risk score of 2.6 and an average controversy level of two.
BlackRock faces controversy because it invests in companies with low ESG scores. BlackRock owns stocks in oil companies and defense contractors, for instance.
BlackRock promotes ESG investing because several of its iShares exchange-traded funds (ETFs) use ESG principles to pick stocks. Those ETFs include iShares MSCI KLD 400 Social ETF (Ticker: DSI), and the iShares ESG MSCI USA Leaders ETF (Ticker: SUSL).
6. Ecolab Inc. (NYSE: ECL)
The chemical, sanitation, and pest-control company Ecolab receive a high environmental risk score of 14.1 because it uses pesticides. That gives Ecolab a high ESG Risk score of 32.
On the positive side, Ecolab receives a moderate controversy level of two because of a moderate governance risk score of 7.5. Ecolab is a well-run company with a lousy ESG score because of the nature of its business.
7. Visa (NYSE: V)
The payments giant has a low environmental risk score of 0.1 but a high social risk score of 11.2. Sustainalytics Inc. estimates Visa a low ESG risk score of 19.
Visa has a significant controversy level of three because of the nature of its business. Visa encourages consumerism and debt by issuing high-interest credit cards. Visa receives a moderate governance risk score of 7.9.
8. Apple (NASDAQ: AAPL)
Apple receives a high social risk score of 13 because of concerns about its supply chain. Many people consider the manufacture of Apple products by low-wage labor in China, in particular.
Sustainalytics, Inc. gives Apple a medium ESG Risk score of 24 because of a low environmental risk score of 0.6. Other complaints about Apple include charges of encouraging consumerism and bad habits. Some people believe Apple devices make people anti-social, cause mental illness, and discourage exercise.
9. Vertex Pharmaceuticals (NASDAQ: VRTX)
Biotechnology firm Vertex Pharmaceuticals received a high social risk score of 18.1 from Sustainalytics, Inc. The social risk score is high because Vertex’s products are risky and expensive.
Vertex receives a low environmental risk score of 0.2 because its business has a small environmental footprint. Vertex receives a moderate controversy score because of the low environmental score.
10. Gilead Sciences (NASDAQ: GLD)
The maker of antiviral drugs receives a perfect environmental risk score of 0.0 from Sustainalytics, Inc. Gilead Sciences gets a perfect score because its government generates no pollution.
Overall, Gilead receives a medium ESG score of 22 because it receives a high social risk score of 14.3. Gilead takes high risks because it creates and tests drugs for deadly viruses such as AIDS. Gilead’s business is socially responsible because it tries to treat destructive diseases such as AIS.
11. NVIDIA (NASDAQ: NVDA)
The chipmaker receives a low ESG risk score of 1.3 because of a small social risk score of 4.5.
NVIDIA receives a low social risk score because the social impact of its products is low. NVIDIA does not employ large numbers of low wage workers to make its products. That gives NVIDIA a lower controversy level of two.
NVIDIA’s social risks could increase in the future because it is heavily involved in artificial intelligence (AI) research and development. Some critics believe AI will destroy many jobs by operating next-generation robots and digital platforms. Others fear the military use of AI-controlled weapons.
Thus, NVIDA’s ESG risk score could increase in the future.
12. Intel Corporation (NASDAQ: INTC)
Intel receives a moderate environmental risk score of 4.9 because of the impact of its chip-manufacturing. Intel gets a moderate social risk score of 5.2 for unclear reasons.
The higher environmental and social risk scores give Intel a higher controversy level than NVIDIA. Sustainalytics, Inc. gave NVIDIA a lower controversy level of two because of Intel’s limited environmental risk.
13. Microsoft Corporation (NASDAQ: MSFT)
Microsoft receives a low total ESG risk score of 15 because of a low environmental risk score of 0.4. Sustainalytics, Inc. gives Microsoft a lower governance score of 5.2.
Microsoft, however, receives a significant controversy level of three because of its history. Microsoft; has historically faced charges of monopoly and antitrust law violations.
In recent years, Microsoft has faced complaints about the security and safety of its software. Many Microsoft applications are vulnerable to the WannaCry cyberweapon, for example. That gives Microsoft a social risk score of 9.7.
14. Berkshire Hathaway (NYSE: BRK.B)
Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) receives a high ESG risk score of 46 because of the nature of its business.
Berkshire Hathaway has a high social risk of 51.1 because it owns a candy maker (See’s) and a company that distributes snack foods and cigarette McLane. Berkshire has a high environmental risk score of 42.5 because it owns pipelines, coal-burning power plants, and stock in oil companies.
Sustainalytics Inc. gives Berkshire Hathaway a governance risk score of 43.8. Berkshire receives a high risk-score of 43.8 because of Warren Buffett’s famous hands-off decentralized management style.
Berkshire Hathaway shows that companies with high ESG risk scores can make a lot of money. Thus, buying stocks with high ESG risks could be an excellent investing strategy. Buffett makes lots of money by taking many ESG risks.
Build Your Own ESG Portfolio
Although ESG investing can be complicated, having to wade through the ethical dilemmas in order to emerge with a list of companies you want to invest in, it does not need to be.
The team over at Stock Rover, our review winning stock screener and portfolio management tool, has made ESG investing that much simpler by putting together an in-built portfolio of the best ESG companies in the USA.
The Stock Rover team handpicked the top 20 highest rated companies according to the Environmental, Social, and Governance (ESG) Score.
The screenshot below shows the 20 best ESG companies, and I have combined that with a view that shows the Stock Rover ratings, sorted on Overall Rating Score. This makes it easy to make your individual investments based on company valuation, growth, or even financial strength.
The most significant benefits of using Stock Rover to manage your ESG investing portfolio are that you can track the historical performance of the portfolio and take advantage of the excellent Stock Rover rating system plus the Morningstar research they also provide.
ESG Portfolio Performance
Interestingly, investing in companies doing the right thing ethically is not bad for your investing returns. In the chart above, you can see that the portfolio performance for the Top 20 ESG Companies for the previous two years was 40%, compared to a return for the NASDAQ 100 of 36.9% and only 28.5% for the S&P500.
ESG Portfolio Performance 2 & 5 Year Results
| ESG Investment | 2 Year Performance | 5 Year Performance |
| Stock Rover Top 20 ESG Stocks | +40% | +113% |
| S&P500 Index | +28.5% | +77.3% |
| NASDAQ 100 Index | +36.9% | +108% |
5 Year ESG Portfolio Performance
In fact, if we take a look even further back, we can see that the 5-year return for this Stock Rover ESG portfolio was 113%, compared to 108% for the NASDAQ 100 and 77.3% for the S&P500.
Interestingly, some of the best companies in America are pushing hard to improve their ESG profile, so it is not surprising that the ESG portfolio performs well. What is surprising is that ESG companies can outperform the market.
Table: Top 20 ESG Investment Companies
Provided courtesy of Stock Rover, perform incredibly detail research and portfolio analytics and get access to Warren Buffett’s Fair Value & Margin of Safety Calculations.
| Ticker | Company | EPS 5Y Avg (%) | Ann. 10Y Return |
| NVDA | NVIDIA | 28.40% | 34.50% |
| MA | Mastercard | 20.80% | 32.10% |
| AAPL | Apple | 11.30% | 28.90% |
| CRM | Salesforce.com | – | 27.30% |
| V | Visa | 19.70% | 26.40% |
| EW | Edwards Lifesciences | 5.50% | 26.10% |
| HD | Home Depot | 16.30% | 26.10% |
| NEE | NextEra Energy | 6.80% | 23.80% |
| MSFT | Microsoft | 18.30% | 23.40% |
| VRTX | Vertex Pharmaceuticals | – | 19.80% |
| GOOGL | Alphabet | 19.70% | 18.80% |
| ECL | Ecolab | 5.80% | 18.50% |
| DIS | Walt Disney | 5.40% | 17.80% |
| INTC | Intel | 15.20% | 15.70% |
| A | Agilent Technologies | 39.20% | 15.40% |
| BLK | BlackRock | 6.10% | 13.20% |
| JNJ | Johnson & Johnson | -1.60% | 12.10% |
| GILD | Gilead Sciences | -22.30% | 12.00% |
| PG | Procter & Gamble | -14.40% | 10.40% |
| MMM | 3M | 0.90% | 9.80% |
