Environmental, social and governance, or ESG, investing has taken off over the past decade. Investors want to make money while making the world a better place. And, ESG stock investing aims to be the vehicle to make that happen.
ESG investing is based on the principle of only putting capital into companies that meet high standards in how they treat the environment, their employees and their stakeholders. By giving capital to good companies and depriving poor-scoring companies of capital, over time, it should offer a serious boost to the fortunes of the companies that treat the environment and society well.
There’s a great deal of debate over what exactly constitutes a good ESG company or not. Some sectors, such as defense contractors or alcohol makers are often excluded from ESG investments, and there are understandable reasons for those decisions. So, for the sake of simplicity, I’ll be using the IBD Top 100 ESG stocks list to define eligibility and selecting the seven best ESG stocks to buy today starting from there. With the rules set, let’s get started.
Chipotle (NYSE:CMG) makes a great burrito, sure. But what makes Chipotle a great ESG investment? Chipotle has long been a leader in sourcing its ingredients from organic sustainably raised sources.
In the past, this has led to supply chain issues, as it has been difficult to source enough meat safely without running into contamination and hygiene issues. Regardless, Chipotle has persisted in its quest for higher-quality ingredients. In 2021, Chipotle bought 8 million pounds of certified humane pork, 11 million pounds of Global Animal Partnership (G.A.P.) certified beef and a whopping 77 million pounds of certified humane chicken.
It’s not just meats, either. The company purchased more than 35 million pounds of locally-grown produce in 2021, along with sourcing its sour cream from pasture-raised dairy cows. The company is also well-known for partnerships with farmers. This has helped repair Chipotle’s reputation following its food safety scandals while also setting a more sustainable path for the restaurant industry as a whole.
Waste Management (WM)
Waste Management (NYSE:WM) is one of the world’s largest waste collection, disposal and recycling companies. This is an area fraught with risk as far as the environment goes. A company that mishandles trash can cause a great deal of harm in terms of runoff and other forms of contamination.
Waste Management, however, is known for its ESG chops. This comes down to a few factors. One, it builds what it deems “modern landfills,” which are designed for a second use. Once a landfill reaches capacity, it can be covered with terrain and turned into a park, solar farm or other adaptive use.
Waste Management also uses its properties to produce solar power, renewable methane gas and other such green energy sources. On top of that, Waste Management has invested in building a green fleet of vehicles to reduce its fossil fuel consumption. With the surge in gasoline and diesel prices lately, Waste Management’s efforts have saved the company money. That’s doing good for the planet and doing good for shareholders at the same time.
Companies don’t just make the ESG lists for their environmental efforts. There are also the other two pillars: Social and governance.
Costco (NASDAQ:COST) stands out for its social elements. For decades, Costco has paid its employees far-above-market wages and fat benefits packages. This has given the company an incredibly low turnover rate among its employees. This is a rare feat in the retail industry. It’s not uncommon to find Costco employees who have worked there for ten years or more.
This committed and loyal workforce paid off for the company in spades. During the pandemic, when so many retail companies had trouble finding a capable staff, Costco was able to carry on its business seamlessly. Its commitment to strong labor practices both safeguarded the company’s operations during a crisis and also ensured that Costco would be there to deliver essential goods to communities at the time of highest need.
Thermo Fisher Scientific (TMO)
Thermo Fisher Scientific (NASDAQ:TMO) is the world’s largest life sciences supplies and equipment manufacturer. The company makes an extensive range of products for academic research, biotech and pharmaceutical studies and government orders among other customers.
Thermo Fisher highlighted its importance to national security in 2020 when it was among the first to market with a fast, reliable Covid-19 test. It also provided countless lab supplies and equipment to biotech companies that helped develop the novel Covid-19 vaccines.
While Thermo Fisher is far more than just a Covid-19 company, its exemplary performance during the pandemic demonstrated the importance of having a large capable life sciences company to turn to during a crisis. Even with supply chains breaking down internationally, Thermo Fisher was able to get essential goods to the right places on time. Combine that with a good reputation with its workforce, and Thermo Fisher is a top-notch ESG investment.
Microsoft (NASDAQ:MSFT) often tops ESG lists, as it scores highly in all three categories. And, in ESG-themed exchange-traded funds (ETFs), Microsoft is often the largest holding as well.
Microsoft isn’t a flashy ESG pick by any means. But it gets the little stuff right. It treats its employees well and is known for having a diverse workforce. It has done a lot in terms of lowering the carbon emissions of its offices and server facilities. And its core products, such as the Office software suite, have arguably done more to reduce paper waste than just about any other invention. Microsoft checks all the right boxes to be a core ESG stock holding in the technology space.
Texas Instruments (TXN)
Texas Instruments (NASDAQ:TXN) is one of the world’s largest semiconductor companies, and quite possibly the largest in analog semiconductors. This field is important because it helps power a variety of niche applications vital to powering forward key innovations such as automation.
The company’s chips for sensing and processing real-world information such as weather data serve various applications integral for making remote work, security and monitoring systems possible. These reduce the amount of transportation that humans have to engage in physically to oversee properties and industrial processes.
Perhaps most vitally, Texas Instruments has built a huge franchise in chips for smart cars. You’ll find Texas Instruments gear in everything from the dashboard entertainment system to radar units and chipsets for remote communications and monitoring.
As cars become autonomous and electric, they rely more on the sorts of equipment that Texas Instruments makes to operate safely and efficiently. Given that electric cars are one of the pieces of low-hanging fruit humanity can harvest on the path to a more sustainable society, Texas Instruments plays a key role in ESG portfolios.
Ball Corp (BLL)
Ball is one of the world’s leading packaging companies, along with having aerospace operations. Investors know the company for making aluminum cans and other such beverage receptacles.
Historically, people drank something and then threw the bottle or can in the trash. It’d then rust away in a landfill. Ball is aiming to change that. The company’s 2030 sustainability goals include reaching 85% recycled content in Ball’s aluminum cans, and helping consumers hit a 90% recycling rate on said cans as well. In addition, Ball will be using all renewable energy at its facilities by 2030 as well.
Ball is an example of how seemingly mundane companies can make a big difference for the environment. Today, far too many beverages are sold in plastic bottles that often cause terrible consequences for the environment. Ball is working to help reduce plastic waste while supporting infinitely recyclable aluminum-based alternatives instead.
On the date of publication, Ian Bezek held a long position in TXN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.