10 Best Stocks for Environmental, Social, and Governance (ESG) Investing

The COVID-19 pandemic highlighted the critical role corporations must play in addressing the world's most pressing issues. Governments alone cannot cure disease -- or halt climate change, provide safe working conditions, or close gender and racial pay gaps. These issues threaten quality of life globally and can't be solved without corporate resources and expertise.

What makes for a good environment, social, and governance (ESG) stock? The company must align its operations to support programs benefiting the environment, employees, local communities, and shareholders. Its performance history must be verifiable by ESG rating agencies such as MSCI and Sustainalytics.

Solid financial performance is a primary theme of ESG investing. As an ESG investor, you don't have to forgo solid returns to promote good corporate citizenship.

Institutional investors use ESG ratings to demand high standards for corporate behavior, and you can do the same. By investing in the best ESG companies, you support sustainable initiatives such as energy conservation, waste reduction, safer working conditions, ethical business practices, and more.

Nvidia makes graphics processing units (GPUs) used in gaming consoles, supercomputers, robots, and self-driving cars.

Business highlights: Nvidia is the major GPU supplier for AI data centers, and its dominant market share has made it one of the most valuable companies in the world. It should continue to grow along with AI demand.

Nvidia's 10-year total annualized return to shareholders exceeds 50%. Revenue for the 2024 fiscal year grew 126% to $60.9 billion, and earnings per share (EPS) grew 765% to $0.49 (split-adjusted).

ESG highlights: Nvidia's ESG initiatives include treating people fairly, strengthening diversity and inclusion, and pursuing social change with its products. Key actions taken under these goals include:

• Powering the most efficient supercomputer on the Green500 list
• Named #2 in Glassdoor's list of Best Place to Work

Intuit caters to consumers and small to midsized businesses. For consumers, Intuit offers subscription-based TurboTax and Credit Karma. Intuit serves businesses with its subscription-based accounting software Quickbooks. There are optional payroll and payment services integrated with Quickbooks.

Business highlights: Intuit holds leading share positions in its two legacy segments: tax preparation and business accounting software. The company acquired Mailchimp, a marketing platform geared to the small and midsized business customer, in late 2021. Mailchimp, along with Credit Karma, has contributed to Intuit's already strong operations.

Intuit's 2024 revenues came in at $16.3 billion, up 13%, with net income reaching $2.96 billion. That's led to a doubling of the stock over the last five years

ESG highlights: Intuit has been carbon-neutral since 2015. The company has achieved gender pay equity worldwide and equal pay for minority groups in the U.S. Intuit is consistently recognized as one of the best large technology employers. It's also committed to net-zero greenhouse gas emissions by 2040.

Investors should know that the Federal Trade Commission issued an opinion in 2024 finding the company engaged in deceptive advertising practices.

Idexx Laboratories makes and distributes diagnostic equipment for pets and livestock, which is sold primarily to veterinarians and animal hospitals.

Business highlights: An increase in COVID-19 pandemic-driven pet adoptions has increased overall spending on pet healthcare, and Idexx has benefited. The company's leadership position and strong product development performance should drive momentum over the next several years as adopted pets age.

Idexx reached $3.9 billion in revenue in 2024, an increase of 6.5%. Earnings per share grew 6% year over year.

ESG highlights: Idexx launched a global whistleblower policy to support compliance with the company's code of ethics. Idexx has also reduced energy consumption per square foot by 15% and has decreased indoor water use since 2017. The company is preparing to take a third-party carbon footprint assessment and ESG materiality assessment.

It's focused on expanding access to care for more than 500,000 animals in underserved communities.

Lam Research makes and services equipment used to fabricate semiconductors. The company operates in the deposition, etch, and clean steps of chipmaking.

Business highlights: Lam profits from the growing demand for innovative chip design. The company's main competitive advantage is its installed base of 60,000 units. The network provides ongoing service revenue, plus valuable feedback from chipmakers that can guide future product development.

Lam's revenue for the fiscal year ending June 30, 2024, was $14.9 billion, down 15% from the year, reflecting a cyclical decline in semiconductor equipment. The company increased EPS more than 70%.

ESG highlights: Lam is implementing sustainability measures throughout its organization to achieve 100% renewable energy by 2030 and net-zero emissions by 2050. The company has micro-inequities training and support for gender equality to promote inclusivity in the workplace.

Best Buy is a leading retailer of consumer electronics in North America. The company also provides services to design, set up, and maintain home media and home computing systems.

Business highlights: Best Buy has reinvented itself in the Amazon (NASDAQ:AMZN) era, and has done a lot better than most investors would have expected a decade ago. The retailer is using its larger installed base to cross-sell service offerings, including tech support subscriptions. That part of the business has upside, especially if Best Buy moves beyond technology-specific services.

Best Buy produced record sales and earnings in fiscal year 2024, which ended Jan. 28, 2024. Revenues fell 6% to $43.4 billion, and GAAP (generally accepted accounting principles) EPS fell 10% to $5.68. Longer term, Best Buy's 10-year total return to shareholders is 214.8%.

ESG highlights: Women make up 45% of the board of directors. It has reduced water consumption by 24% since 2019. The company also committed $10 million toward building teen tech centers in Los Angeles and other places where young people can learn about programming, design, and music production.

Adobe provides software, publishing, and cloud storage for creatives, along with marketing analytics tools for business teams.

Business highlights: Adobe is a dominant leader in digital content creation, thanks to its flagship Photoshop software. Subscriptions to Adobe software provide a predictable, multibillion-dollar revenue stream. The company's newer marketing and analytics suite should drive deeper customer engagement and future growth.

Adobe reported record revenue of almost $21.5 billion in fiscal 2024, an increase of 11% over the previous year. The company has returned more than 500% to shareholders over the past 10 years.

ESG highlights: Adobe has achieved global gender pay parity. The company has also invested almost $87 million in communities to benefit 1.6 million underrepresented minorities. Half of Adobe's energy comes from renewable sources, and the company has set a goal of obtaining all power from renewable sources by 2035.

MSCI upgraded Adobe's ESG score from AA to AAA in December 2021.

Pool sells swimming pool supplies to pool builders, contractors, retail stores, and repair companies.

Business highlights: Pool dominates its space, selling to 120,000 wholesale customers in North America, Europe, and Australia. The company has a good track record of increasing its market share, making strategic acquisitions, and improving operating efficiency.

After a COVID-19 pandemic-fueled boom, Pool's business pulled back with revenue falling 10% to $5.5 billion in fiscal 2023, and revenue has continued to decline in 2024. The soft housing market has also weighed on the stock.

ESG highlights: Pool features Eco Select products and participates in the EPA's WaterSense program. The company publishes resources to help customers use water and handle wastewater responsibly. Pool has also provided free swimming lessons to kids and made donations to human rights organizations and through the National Forest Foundation.

8. Microsoft

Microsoft is the world's largest software company and a dominant cloud platform provider.

Business highlights: Microsoft has strong, growing subscription revenue from its software products. The company is also the No. 2 leader in cloud computing with its Azure platform. Azure's success and Microsoft's active acquisition pipeline should support strong future growth, and it's benefited from the AI boom as well.

Over the past 15 years, Microsoft shareholders have enjoyed total annualized returns of 20%. In the fiscal year ending June 30, 2024, Microsoft increased revenues 16% to $245.1 billion and diluted EPS by 22% to $11.80.

ESG highlights: Microsoft earns its status as a prominent ESG company for its leadership in energy conservation. Supported by its partnership with Black-owned solar company Volt Energy, Microsoft is working toward 100% renewable energy by 2025.

By 2050, the company plans to offset all the carbon emissions it's produced since 1975.

Salesforce provides customer relationship management (CRM) software -- applications that help businesses use their customer data to sell more products and services.

Business highlights: Salesforce caters to large corporate customers, which contributes to stable performance. They have a leading market share and predictable, subscription-based revenues. Salesforce has also grown through acquiring complementary businesses like Slack, Tableau, and MuleSoft.

Salesforce has a long history of producing double-digit annual returns for shareholders. Its fiscal year 2024 revenues of $34.86 billion marked an 11% increase over the prior year.

ESG highlights: Salesforce has achieved net-zero carbon emissions across its value chain and 100% renewable energy for its operations. The company has also established a racial equality and justice task force and spent $16 million on equal pay initiatives.

Cadence provides software and hardware used to design integrated circuits, systems on chips, and printed circuit boards more efficiently.

Business highlights: There's an ongoing demand for custom chips and chips that are smaller, faster, and more efficient. Cadence’s other ventures in 5G mobile, artificial intelligence, and autonomous cars are also showing increased activity.

These trends, along with the recently introduced Xcelium app, should drive continued growth for the company.

Over the past 10 years, Cadence has produced total annualized returns for shareholders of more than 30%. For the 2023 fiscal year, the company expects reported revenue growth of 15% $4.09 billion or greater.

ESG highlights: Cadence has achieved global gender pay equity. In the U.S, it also has race and ethnicity pay equity. The company is targeting a 15% reduction in carbon emissions between 2019 and 2025. In 2020, Cadence established a supplier code of conduct to extend its governance standards throughout the supply chain. It's also making efforts in sustainable design, reducing power consumption by 30% or more.

The best ESG stocks are financially strong, investable companies that are committed to making the world a better place -- while generating healthy returns for shareholders.

MSCI evaluates companies by their exposure to, and management of, material ESG risks in their industry. The scale ranges from AAA to CCC, and the leading ESG companies in each industry receive an AAA or AA ranking.

2. Intuit

3. Idexx Laboratories

5. Best Buy

6. Adobe

9. Salesforce

10. Cadence

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