Socially responsible investing is on the rise. Overall, around one-third of Millennials say they often or always take environmental, social and governance (ESG) factors into account when choosing investments, according to a CNBC poll. Additionally, 72% of Americans surveyed indicate they’re at least moderately interested in sustainable investing.
If you’re new to socially responsible investing, figuring out how to create a standout ESG-based portfolio might seem tricky — unless you have some researched recommendations to rely on. If you’re a beginner to ESG investing, here are 10 socially responsible stocks that are worth exploring.
1. Microsoft
On the tech side, Microsoft is an ESG leader thanks to its commitment to reducing carbon emissions. The company aims to be carbon negative by 2030 and is dedicating $1 billion to the cause.
Financially, the company has strong returns over the long term. It also continues to innovate and will likely remain a household name for the foreseeable future. Couple that with its recent efforts in the privacy and data-security arenas, and Microsoft is a solid investment for ESG and everyday investors alike.
2. Levi Strauss
Levi Strauss remains one of the more popular clothing brands around, largely because of its jeans. However, the company didn’t just create one of the most famous garments in the world; it’s also one of the first companies in the clothing category to eliminate “forever chemicals” – such as PFCs and PFAS – from its products.
Plus, Levi Strauss updated its strategy post-pandemic, putting additional emphasis on direct-to-consumer and ecommerce approaches. In turn, it’s poised to continue with strong sales.
3. Teladoc Health
A leader in the telemedicine software niche, Teladoc Health aims to make healthcare accessible by eliminating the need to go to a doctor’s office for certain types of care. While its share price is far from the height it reached during the earlier days of the pandemic, many feel that was purely circumstantial, with current pricing more closely reflecting the company’s value.
However, it’s got potential for long-term growth and sustainability. Plus, the company has a solid commitment to social responsibility through its efforts to boost diversity, advance health equity and more.
4. Home Depot
While it may seem surprising that a retailer that sells a large number of wood-based products would qualify as an ESG investment, Home Depot does. The company is striving to become more socially responsible and sustainable by altering its approach to procurement to meet specific goals.
Home Depot has developed strict ethical sourcing policies while working to limit harvesting in areas where rainforests are endangered, choosing conflict-free products and avoiding materials from developing countries where exploitation is an issue. Additionally, it’s actively working to reduce emissions while remaining a leader in the home improvement space.
5. NextEra Energy
In the world of wind and solar energy, NextEra Energy is the leader. It also happens to have a solid history of strong market performance. While it isn’t a surprise that a renewable energy company is dedicated to environmental causes, NextEra Energy also performs well in other ESG categories. The organization has a clear commitment to its social and governance policies, allowing it to shine in every area.
6. Intuit
When it comes to finance software, Intuit is a trusted name. But the company behind QuickBooks, TurboTax and Mint isn’t just a whiz in that space; Intuit is also committed to the environment. Along with becoming carbon neutral in 2015, Intuit achieved its goal of using 100% renewable energy in 2020, 10 years before its original target of 2030.
As for the business side of things, Intuit’s products largely perform well. Plus, with Intuit focusing more of its efforts on the gig economy, it’s also poised for future growth.
7. NVIDIA
Another tech stock, NVIDIA is a large producer of computer chips, graphics cards and similar products. As a result, it’s a significant user of various minerals, giving it a strong connection to mining. Along with focusing on conflict-free minerals, NVIDIA has a strict anti-bribery and anti-corruption policy. Its dedication to ethics is admirable, particularly because every employee – regardless of their role – is required to make the same commitment.
8. Vanguard FTSE Social Index Fund
If you’re not just new to ESG investing but are also new to investing as a whole, the Vanguard FTSE Social Index Fund could be a solid choice. It’s a broad fund that excludes stocks involving non-renewable energy, weapons and vice products — those from industries that face regulatory issues or social disapproval, such as gambling and cannabis. It also excludes companies with certain kinds of controversial conduct or diversity issues.
By going this route, you get some innate level of diversification. Plus, it’s got a fairly low expense ratio, which can make it a more attractive option from a cost perspective.
9. iShares ESG Aware MSCI EAFE ETF
With the iShares ESG Aware MSCI EAFE ETF, you get international exposure and diversification while adhering to ESG principles. Stocks in this ETF come from companies all over the world, which can provide protection against volatility in the U.S. In some cases, other markets still fare well even when U.S. markets struggle, which is one of the appeals of ETFs with overseas assets.
Overall, this ETF avoids companies involved in specific industries, such as coal, oil, weapons and vices. The expense ratio is a bit higher than some other ETFs, but it’s still relatively reasonable. As a result, this option can be an easy way to get involved in international investments with built-in diversification — without encountering high costs.
10. Vanguard ESG US Stock ETF
Another option with strong diversification and a low expense ratio, the Vanguard ESG US Stock ETF features small-, mid- and large-cap companies that meet specific ESG criteria. Generally, this means no fossil fuel, vice or weapons businesses, though there are other considerations, too.
The included organizations are also all U.S. based, which some investors may prefer. However, it’s important to note that international investments can reduce overall portfolio risk, so it may be wise to balance this option with another ESG ETF that includes international offerings.
