Editor’s note: This column is part of InvestorPlace.com’s Ultimate Guide to ESG Investing.
Investing can be ethical and sustainable. In fact, many socially conscious investors are seeking out environmental, social and governance (ESG) factors that influence the kinds of investments they make. Known as ESG investing or sustainable investing, many people today, especially younger investors, are seeking out stocks that can provide them with a healthy return and leave them with a clear conscience.
Not long ago, ESG investing was a fringe concept. But now, a growing list of influential investment firms and companies are lending it weight. They are also taking steps themselves to behave in a more environmentally sustainable and socially conscious way. BlackRock (NYSE:BLK), in particular, has been leading the charge on sustainable investing. CEO Larry Fink recently said that by the end of 2020, 100% of BlackRock’s portfolios will integrate ESG metrics, up from 70% at the end of April this year.
Other companies are following BlackRock’s lead and heeding the calls for “climate justice” from environmental activists such as Sweden’s Greta Thunberg. Of course, with wildfires raging in California and Australia, it is getting harder to deny that the planet is warming at an unsustainable rate. According to Laura Gonzalez, an associate professor of finance at California State University, Long Beach, there is simply a growing awareness over the benefits of ESG investing. She told InvestorPlace:
“Beyond an awareness about the need to protect biodiversity and keep temperatures and ocean levels from rising, there is an interest in living simpler more inclusive thoughtful lives. The belief is that it makes a difference in the long-run both in mental and physical health. In consequence, this cultural shift has impacted an interest in sustainable investments that cater ever-evolving demands.”
As you start out on your ESG investing journey, consider these names to help save the planet:
- Ford (NYSE:F)
- Johnson & Johnson (NYSE:JNJ)
- Nike (NYSE:NKE)
- Amazon (NASDAQ:AMZN)
- Starbucks (NASDAQ:SBUX)
- Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL)
- Beyond Meat: (NASDAQ:BYND)
ESG Investing Picks: Ford (F)
Spurred on by government regulations around the world pertaining to vehicle emissions, automotive manufacturers are implementing strategies to reduce their pollution levels and be more environmentally friendly. Most major automakers now have some type of electric vehicle strategy. However, Ford is truly leading the charge when it comes to sustainability.
The Detroit-based company has adopted a 10-part environmental policy that includes everything from using sustainable fabrics in its vehicles to using recycled materials to build them. Today, 80% of the Ford Focus and Escape vehicles are made from recycled materials. And Ford has won praise for its ongoing focus on fuel efficiency. Its six-speed transmissions and diesel engines in its popular pick-up trucks particularly draw applause. Even the paint fumes in its assembly plants are recycled and used as fuel.
If all that weren’t enough, consider that Ford is the only company to have won the U.S. Environmental Protection Agency’s Energy Star Award multiple times. Truly, Ford is a carmaker with a heart. Investors might also like the fact that F stock is comparatively cheap at less than $7 a share. While Ford’s ongoing restructuring efforts have depressed the share price for a long time now, the stock is due for a rebound. And there is no doubting the company’s environmental commitment.
Johnson & Johnson (JNJ)
Johnson & Johnson takes social responsibility seriously.
Since 2000, the company has been an industry leader in manufacturing beauty and personal care products that are environmentally responsible and kind to animals. The company is even recognized by the People for the Ethical Treatment of Animals (PETA) for replacing animal testing with alternative methods.
Johnson & Johnson also has multiple environmental initiatives to reduce waste from manufacturing and distributing its many consumer products. These include using sustainable products and recycled packaging, as well as operating a fleet of hybrid vehicles. Johnson & Johnson has won “Earthwards” for its efforts to reduce water and energy use when producing its many products.
JNJ stock has risen 30% since its March low and now trades at $145 a share. Analysts have a median price target on the stock of $170, suggesting 17% upside from current levels.
ESG Investing Picks: Nike (NKE)
Sneaker and fitness apparel maker Nike walks the talk on the environment. The company today manufactures a sustainable line of clothing made with recycled polyester and various environmentally friendly materials. Nike has also been using an increasing amount of renewable energy sources at its manufacturing centers around the world.
And, the company now requires its suppliers in 52 countries to develop and implement environmental policies of their own.
Nike calls this initiative Move to Zero. It highlights a number of environmental initiatives around the world, including wind-powered manufacturing plants in Europe and shipping boxes made from recycled cardboard. From any angle, Nike is committed to the Earth. NKE stock has nearly doubled since March to just over $126 a share — and it has been moving higher since June.
Amazon, which is one of the biggest delivery companies in the world, has been heavily criticized for its carbon emissions. The company has taken those criticisms seriously, and in June of this year announced a new $2 billion fund to help develop innovations to curb climate change. It has also announced that its operations will run on 100% renewable energy by 2025, five years ahead of schedule.
In late 2019, Amazon publicly set itself the goal of meeting the Paris Agreement objectives 10 years early and pledged to be carbon neutral by 2040. Amazon said that it would work toward using 100% renewable energy by 2030. It had also placed a big order for electric vans from automotive manufacturer Rivian. Driving that initiative further ahead, Amazon made a $440 million investment in Rivian.
Additionally, Amazon founder and CEO Jeff Bezos has promised to commit $10 billion of his personal fortune toward slowing man-made climate change. AMZN stock has doubled during the pandemic to a peak of more than $3,500 a share. While it has come off its highs in recent weeks, the stock has been a consistent winner.
ESG Investing Picks: Starbucks (SBUX)
Starbucks is about as green as a company can get. Starbucks embraced environmentalism before it was fashionable. The company buys fair trade certified organic coffee, and also ensures that each of its franchise locations are LED energy certified.
For Starbucks, it is all about creating “green” stores.
From its corporate office, Starbucks spreads its corporate “green building strategy” to its retail outlets around the world. This includes adjusting temperatures for its air-conditioned stores so they use less energy and purchasing cabinetry that uses 90% post-industrial materials. At the start of this year, the company set itself the goal of cutting its water use and greenhouse gas emissions in half by 2030.
SBUX stock has rallied 48% since the market meltdown this past March and now trades at $83 a share. Note it remains below its 52-week high of $94.13 per share.
Alphabet (GOOG, GOOGL)
Google has many initiatives underway, many of which are focused on environmental sustainability. In fact, the online search giant has an entire division called Google Environmental Innovations that focuses exclusively on a greener future. Top to bottom, Google has initiated a green supply chain process that focuses on sustainability.
The company powers its facilities with renewable energy sources and runs sustainable cooking seminars for staff and customers. Google has gone so far as to bring in goats to eat and trim the grass at its corporate headquarters in Silicon Valley.
Needless to say, Google encourages an environmentally aware culture among its staff.
GOOGL stock has also pulled back with the broader tech sector in recent weeks, but its share price is still up 35% from its March lows at $1,425.
ESG Investing: Beyond Meat (BYND)
Beyond Meat is making healthier burgers in a more sustainable way.
The company commissioned a study from the Center for Sustainable Systems at the University of Michigan to conduct a “cradle-to-distribution” life cycle assessment of its non-meat burger. Researchers analyzed greenhouse gas emissions, energy use, water consumption, land use and packaging. Then, they compared it to an uncooked quarter-pound beef burger delivered to retail outlets. The researchers discovered that the Beyond Meat burger generates 90% less greenhouse gas emissions, requires 46% less energy, has 99% less impact on water scarcity and 93% less impact on land use than a typical quarter pound of U.S. beef.
Perhaps its environmental benefits explain why the company has attracted a number of high-profile celebrity backers. To date, Bill Gates, Leonardo DiCaprio and Jessica Chastain have all taken a bite. Hedge funds seem to like the company too. At the end of June, a record number of U.S. hedge funds held BYND stock in their portfolios. They are no doubt attracted by the company diversifying its products to include meatballs, breakfast sausage. Additionally, its efforts to expand into China are also appealing.
BYND stock has been on a roller coaster this year but has nearly tripled since its March lows. It currently trades just below $150.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.