Can ethical and profitable investments coexist? Traditionally, the prevailing notion is that ethics and profits are as incompatible as water and oil. Imagine racecar drivers attempting to gain an edge by cutting corners; if such actions went unpunished, everyone would try to secure unfair advantages.
However, the assumption that ethical business practices impede profitability may, in fact, be a misconception. While ignoring ethical practices might yield short-term gains, in the long run, companies adhering to ESG principles are likely to outperform those that do not. Sustaining customer loyalty is challenging for businesses that regularly violate basic ethical norms.
Moreover, publicly traded companies must attract new investors. People are cautious about investing in companies with dubious ethical records. If a corporation gains a reputation for prioritizing only profits, potential shareholders may wonder if they will be next in line to be mistreated. Hence, ethical stocks encompass far more than mere virtue signaling.
Lastly, Generation Z predominantly embraces ESG values. As such, the following ESG stocks are aligned with emerging norms and realities.
Sustainability Champion: Waste Management (WM)
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Waste Management (NYSE:WM) is not merely a dumpsite operator, but a key player in environmental sustainability, focusing on waste reduction and renewable energy. The company operates an extensive network of recycling facilities and runs the Recycle Right program, educating people on effective waste disposal. Additionally, it has a waste-gas-to-energy initiative, converting gas produced by natural decomposition of organic waste in landfills into renewable energy. By replacing fossil fuels with this sustainable energy source, WM reduces greenhouse gas emissions, benefiting the community and the environment.
With its enduring relevance, WM stands out for its robust margins and consistent profitability. Analysts rate its shares a moderate buy with a high-side target of $230, making it a top choice for ethical investors.
Sustainable Power Generation: NextEra Energy (NEE)
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NextEra Energy (NYSE:NEE) is a leading investor in renewable infrastructure, operating in 49 states. With a robust network of renewable energy facilities, including solar and wind turbines, NEE boasts around 72 gigawatts of operating capacity. The company’s investments contribute to a greater share of the country’s energy infrastructure stemming from clean and renewable sources. The global renewable energy market size reached $1.09 trillion last year, a figure expected to grow to $2.45 trillion by 2032.
Although NEE suffered due to challenging economic conditions in late 2023, analysts project a recovery, rating its shares a moderate buy with an average target price of $69.60, making it a promising ethical investment.
Social Responsibility: Costco (COST)
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In the realm of the “S” in ESG stocks, Costco (NASDAQ:COST) presents an attractive opportunity. I believe
It’s intriguing to consider the modern American penchant for wholesale retailers. With a modest fee, you can walk away with a jar of mayonnaise that weighs as much as a small child and a lifetime supply of pasta. While the stage might be set for humorous anecdotes, the true allure of big-box giant, Costco, lies in its treatment of employees.
According to the company’s website, Costco asserts the success of their business is intertwined with the wellness of their employees. This isn’t a unique claim, but what separates Costco is the mountain of independent assessments backing up this declaration. Glassdoor data from 2022 revealed that the retailer’s employees awarded the company an impressive four out of five for worker satisfaction, outpacing its competitors by a significant margin.
The Benevolent Behemoth: Costco (COST)
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This might not make Costco a market darling, but it is consistently a winner. Unsurprisingly, analysts have pegged COST stock as a strong buy, with a high-side target of $825, making it one of the top ethical stocks in the market.
Starbucks (SBUX)
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Starbucks is, without a doubt, a heavyweight in the world of caffeinated beverages, providing workers nationwide with that essential morning jolt. Besides fueling our daily grind, Starbucks appeals to modern investors by placing a strong emphasis on the “S” component of environmental, social, and governance (ESG) stocks.
What’s more, Starbucks prides itself on ethical sourcing of key ingredients and maintains an ethical approach to the manufacturing of its products, from the coffee beans to the furniture adorning its stores. The brand’s commitment to youth empowerment, hunger relief, and inclusivity programs further solidifies SBUX’s position as one of the top ethical stocks. Unsurprisingly, analysts have marked Starbucks’ shares as a consensus strong buy.
Visa (V)
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A household name in payment card services, Visa has a strong foothold in the market, boasting a staggering 52.8% market share, as per a 2023 Forbes article. While often the focus is on the “E” and the “S” in ESG stocks, Visa’s strong governance practices contribute significantly to its ethical stance. The firm’s commitment to diversity and inclusion extends not only to its workforce but thrives at the upper echelons of its leadership.
As a prominent blue chip, Visa operates under the sharp scrutiny of market forces. The company’s solid governance practices, combined with its strong market position, have earned the stock a consensus strong buy rating among analysts, with an average price target of $303.74.
Apple (AAPL)
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As a prominent figure in technology, Apple exerts unrivaled influence, with its products and ecosystem permeating everyday life. Director of Apple Leveraging this power responsibly, the company maintains rigorous governance standards while spearheading initiatives such as the Racial Equity and Justice Initiative, aiming to create more opportunities for people of color and Indigenous communities.
While the company has achieved much, scrutiny and public pressure could assist in further broadening leadership opportunities. Emphasizing shareholder voting processes focused on executive compensation, Apple continues to pursue ethical practices to complement its commercial success.
Microsoft: A Champion of Ethical Investing
Not too long ago, Microsoft (NASDAQ:MSFT) was adrift, seemingly coasting on dated software offerings. However, today, the tech colossus has transformed its trajectory. Through substantial investments in artificial intelligence (AI), it has consistently soared following a lackluster 2022. As AI becomes increasingly ubiquitous, Microsoft is primed to emerge as a significant beneficiary.
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Moreover, Microsoft epitomizes ethical investing, firmly positioned at the vanguard of environmental, social, and governance (ESG) principles. The company has set ambitious environmental targets, with its most notable commitment being to achieve carbon negativity, effectively erasing its historical emissions dating back to its establishment in 1975.
Beyond environment-focused endeavors, Microsoft champions social equity by advocating for greater participation of women in the technology sector. Notably, MSCI Ratings bestowed upon Microsoft a pristine AAA rating, the highest attainable, underscoring the company’s sterling commitment to ESG considerations. Understandably, analysts hold Microsoft stock in the highest esteem, with a unanimous strong buy rating and a price target of $469.45. Undoubtedly, Microsoft stands as a paragon of ESG-aligned stocks.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
