Ethical and environmental concerns are increasingly prominent in today’s world, meaning many investors are now looking beyond mere financial returns. They're seeking companies that align with their values, prioritising Corporate Social Responsibility (CSR).
YOUR CAPITAL IS AT RISK
The “impact investing” movement is gaining momentum, but navigating the extensive landscape of potential investments can be daunting. This article will introduce you to five standout companies committed to ethical and socially responsible practices.
How We Chose These Stocks
Our research has centred on companies with robust ESG criteria and aims to cut through the ‘greenwashing’ that some firms use to project an ethical stance. It covers a variety of sectors and geographical regions so that investors can benefit from the risk-management benefits of having a diversified portfolio and staying in their positions for a more extended period.
| Company | Market Cap | Dividend Yield | Revenue |
|---|---|---|---|
| Gilead Sciences | 3.8% | $27.3bn (2022) | |
| Salesforce | 0% | $31.4bn (FY23) | |
| First Solar | 0% | $2.6bn (2022) | |
| Kimberly-Clark Corp | 3.94% | $20.2bn (2022) | |
| Hewlett Packard Enterprise | 2.98% | $28.5bn (2022) |
Table of contents
Gilead Sciences Inc (GILD)
GILD is a medical research and development organisation with a difference. It has been operating for more than three decades with the aim of advancing global health and providing medication access to those who might not otherwise have it. The firm has 11 commercially available HIV medications and is continuing to develop its pipeline as part of its global campaign against the disease. Of greater significance from an ethical point of view is its long-established aim to make its HIV treatments available to patients in low and middle-income countries.
In 2021, Gilead HIV medicines were made available to an estimated 16.5 million people living in resource-limited countries around the world. 99% of them receive generic formats of the medicine as the company forsakes profits to tackle the disease.
| Pros | Cons |
|---|---|
| Ethical approach: The impressive Gilead CSR policy illustrates how the ethical approach runs through the entire company, not just in the area of HIV research and treatment. It states the firm’s intention to “strive for positive social and environmental change within our company and our supply chain.” | Competition: Gilead operates in a highly competitive industry, meaning the company must continually innovate to stay ahead. In addition, as with all biopharma companies, patent expirations can result in competitors creating generic drugs, potentially eroding Gilead’s market share and revenue. |
| Solid finances: The financial elements of Gilead’s business model point towards the firm being a good investment, most probably for a buy-and-hold investor. | |
| Dividend yield: Gilead returns cash to shareholders via dividend payouts, with the current dividend yield an attractive one for long-term investors. | |
| Significant share: GILD has created the world’s two top-selling HIV medications, commanding over 50% of the worldwide treatment market and over 75% of the US market. |
Salesforce Inc (CRM)
Headquartered in San Francisco, Salesforce is a customer relationship management solution with the aim of bringing companies and customers together through a range of technology and cloud-based applications. One area where it tries to gain a competitive edge is its ESG policies, with the company stating: “Our commitment to equality and sustainability helps us be a better company – and foster more inclusive, equitable, and resilient communities.”
Salesforce stock is traded on the New York Stock Exchange under the ticker CRM.
| Pros | Cons |
|---|---|
| CSR criteria: Salesforce does well on CSR criteria. It has net-zero residual emissions and achieved sourcing 100% renewable energy for its operations. As a flagbearer for the ecopreneur movement, it aims to sequester 200 gigatons of carbon through conserving, restoring, and growing 1 trillion trees while also running projects to protect the world’s oceans. | Inflation and interest rate risks: Like other growth stocks, CRM’s price slumped due to the risk of inflation and interest rate rises, cutting into its clients' spending patterns. |
| Robustness: As bad as the economic outlook might be, Salesforce is a firm with a long-term plan and the capability to ride out temporary blips. Its CFO, Amy Weaver, has predicted that revenues will hit $50bn by 2026. | |
| Achieved net zero across the value chain: The company has maintained net-zero greenhouse gas emissions since 2018 and announced in September 202 that it had achieved net zero across its value chain and 100% renewable energy. |
YOUR CAPITAL IS AT RISK
First Solar Inc (FSLR)
First Solar describes itself as leading the world’s sustainable energy future. The Arizona-based alternative energy company is dedicated to investing in research and development, as well as the financing and construction of grid-connected PV power plants (also known as solar parks). The company is also a manufacturer of solar panels, as the name suggests. First Solar is traded on the NASDAQ under the ticker FSLR.
| Pros | Cons |
|---|---|
| Sustainability: First Solar not only has impressive CSR and ESG credentials but also plays a leading role in converting the world to using sustainable energy. First Solar is dedicated to social responsibility and protecting the environment. Not only does its core business activity involve providing clean, renewable energy from solar power, but it also states that it’s committed to sustainable PV manufacturing, responsible construction practices, and minimising the environmental impacts of all its products across its lifecycle. | Renewables currently rely heavily on subsidy and tax support from governments, and the industry may be impacted if and when those taps are at some point turned off. |
| Track Record: First Solar has a track record of not only meeting but also beating benchmarks, whether they relate to recycling, supply chain transparency, water footprints, or the health and safety of employees and community stakeholders. |
Kimberly-Clark Corp (KMB)
This may not be a company you immediately associate with being socially responsible. Kimberly-Clark started life as a paper company more than 150 years ago. Today, it is known for producing disposable products used by one-quarter of the world’s population on a daily basis. Its brands are sold across more than 175 countries. For a long time now, however, it has been striving to meet a broad range of ESG criteria. Traded on the New York Stock Exchange under the ticker KMB, Kimberly-Clark stocks can be traded via most brokers, including Hargreaves Lansdown and eToro.
| Pros | Cons |
|---|---|
| Dividends: Kimberly-Clark currently provides a return to shareholders via its dividend, with its dividend yield currently at an attractive 3.94%. | Sector: The sector that Kimberly-Clark operates in is not exactly an eco-trailblazer, despite the firm leading the initiative to make operations more ethical. Kimberly-Clark is much more a case of buying into a firm doing the best it can in a tough environment. |
| A leading ethical company: The Ethisphere Institute has named KMB as one of the world’s most ethical companies eight times. | |
| ESG performance: Kimberly-Clark company does well on a number of ESG criteria, reporting that 96% of its manufacturing waste is diverted from landfills, and it develops programs to increase energy efficiency and seek lower-carbon solutions. It runs global social programs aimed at empowering women and girls, helping children thrive, and providing access to sanitation for people in need around the globe. |
YOUR CAPITAL IS AT RISK
Hewlett Packard Enterprise (HPE)
This is another company that may well surprise you when you look at its CSR reports. Hewlett Packard Enterprise is doing a great deal to meet ESG criteria and is doing well as a publicly traded US IT company. (Note that with the ticker symbol HPE, Hewlett Packard Enterprise is not to be confused with HPQ, a separate publicly traded company that split off from Hewlett Packard Enterprise in 2015.)
Traded on the New York Stock Exchange, Hewlett Packard Enterprise (HPE) has an attractive dividend yield. You can trade in HPE stocks via most online brokers that offer individual stocks, including eToro and IG.
| Pros | Cons |
|---|---|
| ESG: HP is doing surprisingly well on a range of ESG criteria. It has achieved a place on the CDP Climate Change A List as a global leader in corporate climate action. The company has been named one of the World’s Most Ethical Companies by the Ethisphere Institute five times. It has previously been included in the Corporate Equality Index, the Disability Equality Index and the Diversity Best Practices Inclusion Index. In 2022, HPE was recognised as number five on the Great Place to Work – Best Workplaces in Technology list. It also topped the Best Place to Work for Disability Inclusion list for 2022 and has an AAA rating in the MSCI ESG rankings. | Berkshire selling: While the initial news of Buffett’s Berkshire Hathaway taking a stake in HPE was positive news for the company and its shares, investors should see Berkshire cutting its stake in the company as a negative. Even so, it is still the third-largest institutional shareholder of HP, behind BlackRock and Vanguard, according to FactSet. |
| Buffett’s stake: The decision by Warren Buffett to buy $4bn of HPE stock in early 2022 resulted in his investment vehicle, Berkshire Hathaway, becoming the largest shareholder in the firm. However, investors should be aware that Berkshire has cut its stake in the company. Nevertheless, Buffett’s rubberstamp of Hewlett Packard Enterprise was an encouraging sign for investors thanks to his impressive track record. | |
| Dividends: As mentioned above, HPE has an attractive dividend yield alongside a solid balance sheet, quality earnings, and strong pricing power. |
Why Invest in Ethical and Socially Responsible Companies
More and more investors are choosing to invest in a way that aligns with their values by using ethical and socially responsible investing (ESG investing). Investing in ethical stocks is no longer a case of sacrificing returns in an effort to feel good. Thanks to fundamental changes in behaviour, it’s possible to buy into firms that tick both boxes. Here are some reasons why investors are choosing to invest in ESG companies:
ESG investing can help to mitigate environmental risks to your portfolio. For example, companies committed to sustainability are less likely to face regulatory fines or lawsuits, and they may also be better positioned for the potentially changing environment and consumer behaviours. In addition, for ESG-conscious investors, it provides an opportunity to invest in companies and causes they believe in.
Furthermore, with companies globally being pushed to become more ethical and socially responsible, those who are able to get a headstart may be able to benefit in the long run and execute in emerging industries and sectors. This may provide those companies with a springboard for potential long-term growth.
What to Know Before Investing in Ethical and Socially Responsible Companies
Investing in ethical and socially responsible (ESG) companies can be a rewarding way to align your financial decisions with your values. However, it's vital to approach ESG investing with a clear knowledge of the potential risks and opportunities involved. Here are some aspects things to consider:
Define your values: It’s essential to clearly define your personal values and the specific ESG factors that matter to you. Once you clearly understand your priorities, you can start identifying companies that align with your values.
Transparency: Not all companies are transparent about their ESG practices. For example, the UK’s Competition and Markets Authority (CMA) recently said it would closely examine environmental claims made by British consumer goods conglomerate Unilever. It's essential to research each company thoroughly. Look for businesses that regularly report on their ESG performance and have a clear commitment to continuous improvement.
Investment performance: While some believe there is a positive correlation between strong ESG practices and long-term financial performance, it's essential to recognise that ESG investing may involve higher volatility compared to traditional portfolios.
Long-term goals: ESG investing is generally a long-term approach, as it takes time for companies to integrate ESG practices into their business models and demonstrate tangible results. As an investment in ethical stocks might potentially be long-term in nature, making sure that your broker is credible is also important.
Continuous research: ESG investing requires ongoing research and a willingness to make adjustments to your portfolio based on changing ESG trends and your evolving values.
