svetikd / iStock.com Modern investors looking to build portfolios that are both profitable and ethical incorporate non-financial criteria known as environmental, social and governance (ESG) factors into their analysis of potential stock picks. The goal of ESG investing is to build a portfolio of companies that have demonstrated a commitment to corporate responsibility as well as to shareholder profits.

Although the modern ESG movement is still emerging, the concept is not new. For example, some investors decided decades ago that they would no longer purchase shares in companies that sell tobacco, manufacture guns or finance casinos out of their own personal convictions that those industries were harmful.

But today, ethical investing has gone mainstream, and everyone from retirees to major Wall Street hedge fund managers incorporates ESG stocks into their portfolios and investment strategies.

In response to this new outpouring of consumer demand, many of the biggest companies in the world have committed to corporate responsibility in an effort to attract modern investors who are committed to putting their money where their morals are through investments in ESG stocks. What Are ESG Companies?

ESG is not an industry in and of itself. ESG companies exist in segments as varied as telecommunications and cloud computing to life sciences and auto manufacturing. ESG stocks are not classified by the services they provide or the products they make or sell. They’re classified by their demonstrated commitment to the criteria that make up the ESG initialism: Environmental: This category involves a commitment to things like green energy initiatives, improved waste management and reductions in greenhouse gas emissions, water usage and water and air pollution.

Social: This subject deals with the human aspect of doing business — things like fair labor practices, the ethical sourcing of raw materials, commitment to human rights both at home and abroad and policies regarding gender and racial inclusivity, discrimination in hiring and promotions, sexual harassment and LGBTQ+ protections .

Governance: Finally, ESG companies must demonstrate an ethical record both in how they govern their businesses and in the governments that their companies support. That involves things like executive salaries, pay equity and the company’s record of political contributions to unscrupulous or corrupt politicians or candidates or the support of governments with histories of corruption or human rights abuses.

What Are ESG Stocks?

Independent ESG research firms score companies based on a wide range of metrics that measure their adherence to the principles of ESG investing. Companies that score high marks fall under the broad category of ESG companies — their company shares are known as ESG stocks.

According to Forbes, the concept of ESG stocks dates back to 2006, when the United Nations Principles for Responsible Investment (PRI) report formally outlined ESG criteria for the first time in history. Back then, there were 63 investment companies with $6.5 trillion in assets under management that incorporated ESG principles into their planning.

By the start of the 2020s, more than 2,400 ESG investment companies were managing more than $80 trillion in assets. 10 Best ESG Stocks

The following is a look at 10 examples of the most popular and highest-rated ESG stocks from a wide variety of sectors and industries. If you’re considering building a portfolio based on ESG stocks, these companies might be a good place to start. 1. Linde (LIN)

The UK-based gas production and distribution firm Linde operates all over the world. Its sustainability initiatives include programs to reduce waste and to conserve energy and water. The company dedicates a high-ranking member of its management committee to ensuring that any companies it acquires or partners with for joint ventures meet or exceed Linde’s sustainability standards. 2. Accenture (ACN)

Based in Ireland, Accenture uses its position as a management consulting, technology and outsourcing giant to help the companies it consults become more sustainable and equitable. It helps its client companies transition to net-zero carbon emissions , and sustainable value chains, technology and decision-making. 3. Microsoft (MSFT)

Microsoft has committed to being carbon negative by 2030 — the software giant has been carbon neutral since 2012. Its most recent initiatives include contracting for the removal of 2.5 million metric tons of carbon in fiscal years 2021-22, diverting more than 15,000 metric tons of waste from landfills in the last year and the launching of the Microsoft Climate Research Initiative. 4. Salesforce (CRM)

Cloud-based enterprise software firm Salesforce bases its ESG bona fides on six sustainability priorities: emissions reduction , carbon removal, regulation and policy, innovation, education and mobilization and its “trillion trees” ecosystem restoration […]

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