Ethical investing involves choosing investments based on ethical principles, such as environmental, religious, or social values. Unlike socially conscious investing, which follows a specific set of guidelines, ethical investing is more individualized. Investors typically avoid being involved in gambling, alcohol, or firearms, and carefully research to make sure their investments align with their values.
Other stocks that are avoided by ethical investors include the shares of companies where employees are mistreated, have high gender parity, or discriminate against employees due to their race, religion, or sexual orientation. Environmentally conscious companies are also a huge part of ethical investing.
Is Ethical Investing the Future?
A 2022 report by Stamford University noted that the younger generation considers ethical investing quite crucial. A 2022 survey of 2,470 individual investors, conducted by Stanford University’s Rock Center for Corporate Governance, found significant differences in Environmental, Social, and Governance (ESG) preferences based on age and wealth. Younger and wealthier investors are more likely to support ESG initiatives, even at the expense of returns, while older and less wealthy investors are generally opposed.
Over recent years, support for ESG proposals has surged, with average support among S&P 500 companies increasing from 18% in 2012 to 35% in 2021, and the number of proposals passed rising from 0 to 28. The survey found that 70% of young investors (18-41 years old) are very concerned about environmental issues, compared to only 35% of older investors (58+ years old). Similarly, 65% of young investors are very concerned about social issues, versus 30% of older investors. When it comes to governance, 64% of younger investors express significant concern, while only 28% of older investors do.
Moreover, 86% of older investors would not give up any or only a trivial amount of returns for carbon emission reductions, while 64% of younger investors would give up moderate or large amounts. Additionally, 91% of older investors are unwilling to sacrifice returns for workplace diversity improvements, compared to 62% of younger investors who are willing to do so.
The survey also found that investor attitudes towards ESG differ across fund companies. Investors in State Street and Invesco funds exhibit nearly twice the concern for environmental issues compared to those in Fidelity funds. A significant percentage of investors in Fidelity (40-45%) and Vanguard funds are unwilling to forfeit returns for ESG, while a smaller percentage in American Funds and BlackRock (25-30%) share this reluctance.
Despite these differences, 83% of investors across all demographics believe that fund managers should consider their views when voting on ESG issues. The results suggest that fund managers might need to allocate votes on a proportional basis to reflect the diverse preferences of their investor base.
7 Best Ethical Companies To Invest In According to Reddit
Our Methodology
For this article, we scoured through several threads to discover which companies were considered ethical according to the users. We narrowed down the list to 7 stocks that were most widely mentioned and used the hedge fund sentiment of each stock as a tie-breaker. The companies are listed in ascending order of the number of hedge fund holders as of the second quarter of 2024. The hedge fund data was taken from our database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7. HA Sustainable Infrastructure Capital, Inc. (NYSE:HASI)
Number of Hedge Fund Holders: 16
HA Sustainable Infrastructure Capital, Inc. (NYSE:HASI), previously known as Hannon Armstrong Sustainable Infrastructure Capital, Inc., is a company focused on climate investments. It collaborates with clients and provides capital to support the transition to cleaner energy. The company invests in behind-the-meter (BTM) building or facility-specific distributed energy projects, which are tailored to reduce energy consumption or costs for specific buildings or facilities. It is one of the best companies to invest in according to Reddit.
Additionally, it supports grid-connected renewable energy initiatives, including solar, solar-plus-storage, and onshore wind projects, aimed at generating cleaner power. It also invests in various Fuels, Transport & Nature projects, such as fleet decarbonization and ecological restoration efforts. The company carries out a range of investment approaches, including equity stakes, joint ventures, land ownership, and lending activities.
At a stake value of $58.42 million, 16 hedge funds held positions in HA Sustainable Infrastructure (NYSE:HASI) in the second quarter. As of Q2, Encompass Capital Advisors is the top shareholder in the company and has a position worth $18.76 million.
HA Sustainable Infrastructure (NYSE:HASI) is known for its innovative approach to climate investments and its expanding portfolio in sustainable infrastructure. The company has distinguished itself by targeting projects that aim to reduce or offset greenhouse gas emissions. According to the company’s website, it is the first publicly traded U.S. company to report the avoided emissions from each investment using its unique CarbonCount metric.
Since its initial public offering in 2013, it has channeled over $12 billion into assets that collectively prevent 7.4 million metric tons of carbon emissions, which is equivalent to removing the emissions from over 1.6 million passenger vehicles. Additionally, these investments help conserve more than 7 billion gallons of water each year. In 2023 alone, the company invested $2.3 billion in climate solutions. It is one of the best ethical companies to invest in.
HA Sustainable Infrastructure’s (NYSE:HASI) recent performance is evidence of the effective execution of its mission. For the second quarter, the company reported non-GAAP EPS of $0.63, which surpassed expectations by $0.07. Moreover, the company reported revenues of $94.52 million.
During the quarter, managed assets of the company grew by 21% year-over-year to $13.0 billion, while its portfolio expanded by 27% to $6.2 billion. The yields on new investments made during the first half of 2024 were over 10.5%, and the total portfolio yield stood above 8.0% at the end of the quarter, which reflects its ability to secure high returns.
As the demand for clean energy rises, due to advancements in AI technologies, and the growing adoption of electric vehicles, the company is well-positioned to capitalize on the shift from traditional oil markets to renewable electricity markets. Its renewable energy investments currently reduce CO2 emissions by about 8 million metric tons annually. This combination of effective climate action and robust financial performance suggests that it is well-placed to continue thriving in the evolving energy landscape.
6. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 42
Ecolab Inc. (NYSE:ECL) is a leading global provider of water treatment, purification, and hygiene solutions. Initially, the company focused on innovative cleaning products but has since become a major player in the water, hygiene, and energy sectors. The company serves various industries, including food processing, healthcare, hospitality, and manufacturing, by offering technology and services that ensure water quality and safety.
Ecolab’s (NYSE:ECL) commitment to sustainability and innovation has solidified its position as a trusted partner in improving operational efficiencies and environmental outcomes for businesses worldwide. In 2024, it was recognized as one of the World’s Most Ethical Companies by Ethisphere for the 18th consecutive year. It is one of the best ethical companies to invest in.
Ethisphere Institute is a for-profit organization that specializes in defining, measuring, and promoting corporate ethical standards. The firm is well-known for its annual “World’s Most Ethical Companies” awards, which recognize organizations excelling in ethical business practices.
Moreover, Ecolab’s (NYSE:ECL) history is marked by key developments, from early sustainability efforts in the 1920s to pioneering initiatives like the Water Risk Monetizer and 3D TRASAR Technology. The company remains committed to diversity, equity, and inclusion, and has set ambitious 2030 Impact Goals to further its positive impact on the environment and society.
By 2030, the company aims to conserve 300 billion gallons of water annually, which is equivalent to the daily drinking water needs of over 1 billion people. It plans to reduce its greenhouse gas emissions by 50% while helping customers avoid 6 million metric tons of CO2 emissions each year.
Ecolab (NYSE:ECL) is also focused on enhancing food safety and reducing hospital-acquired infections and has a goal to prevent 1.7 million foodborne illnesses and 10 million hospital-acquired infections annually. Additionally, the company is committed to nurturing diversity, equity, and inclusion. It is striving to increase the representation of women and black, Indigenous, and other people of color executives by 50% and ensuring that 35% of all new hires are people of color.
As of the second quarter of 2024, 42 hedge funds held Ecolab (NYSE:ECL) shares worth $2.82 billion. As of June 30, the Bill & Melinda Gates Foundation Trust is the company’s most significant shareholder with 5.22 million shares worth $1.24 billion.
5. Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 49
Waste Management, Inc. (NYSE:WM) stands as a prominent figure in the North American waste management and environmental services sector. Over the years, the company has evolved into a comprehensive waste management company with a vast operational footprint.
Collection operations are the primary revenue driver for Waste Management (NYSE:WM), which involves the pickup and transport of waste to transfer stations, material recovery facilities, or landfills. Approximately 70% of collected waste is processed at its landfills. It is among our best ethical companies to invest in.
According to its latest sustainability report, in 2023, Waste Management (NYSE:WM) recovered over 15 million tons of material, with a significant increase in recovery capacity and a 3% boost in material recovery compared to the previous year. Key initiatives included opening or upgrading eight recycling facilities and adding nine organics processing sites, which expanded its network to 102 recycling and 49 organics facilities. It is one of the best ethical companies to invest in.
The company is making efforts to enhance recycling, including leveraging advanced technologies and expanding access through new facilities and digital tools. It is investing over $1.4 billion in new and upgraded recycling infrastructure by 2026 and is aiming to add 2.8 million tons of capacity annually. The company’s focus on consumer education through the Recycle Right program and initiatives like textile sorting and collaboration with brands like REPREVE highlight its commitment to sustainability.
The company is also working to grow domestic markets for recycled commodities and improve recycling streams. With new facilities and enhanced technologies, the company plans to broaden access to recycling services and support community sustainability goals.
In the second quarter, 49 hedge funds had stakes worth $8.7 billion in Waste Management (NYSE:WM). Bill & Melinda Gates Foundation Trust is the company’s largest shareholder with 35.23 million shares worth $7.5 billion, as of the second quarter.
4. First Solar, Inc. (NASDAQ:FSLR)
Number of Hedge Fund Holders: 66
First Solar, Inc. (NASDAQ:FSLR) is an American company in the solar energy industry that specializes in manufacturing solar panels and developing utility-scale photovoltaic (PV) power plants. The company is recognized for its innovative use of cadmium telluride (CdTe) in thin-film solar modules, a technology that has allowed the company to achieve significant cost efficiencies and energy production milestones.
It became publicly traded in 2006 and has since established itself as a key player in the global solar market, focusing on sustainable energy solutions that do not rely on government subsidies. With manufacturing facilities across the globe and a commitment to advancing solar technology, it continues to be a driving force in the transition to renewable energy. It is one of the best ethical companies to invest in.
It is one of the best ethical companies as it mandates that all suppliers follow the Responsible Business Alliance Code of Conduct, which includes commitments against using forced or child labor. First Solar (NASDAQ:FSLR) emphasizes voluntary employment, humane treatment, and a safe work environment. It offers competitive wages and benefits, ensures non-discriminatory practices, and respects employees’ rights to freely associate and bargain collectively.
Additionally, the company provides a confidential grievance channel and a third-party Ethics Hotline to report and address concerns. The company ensures there is no retaliation for reporting issues and conducts audits to monitor supplier compliance and environmental and social performance. This comprehensive approach shows the company’s commitment to ethical and humane practices within its global operations.
According to First Solar’s (NASDAQ:FSLR) CEO, Mark R Widmar, sustainability is central to the company’s mission and drives its operations. It aims to surpass industry standards in areas such as recycling, supply chain transparency, and environmental impact. Its commitment is reflected in the development of solar technology that prioritizes social and environmental responsibility.
This approach, termed “Responsible Solar,” ensures that the company’s products are not only high-quality but also support the fight against climate change and uphold ethical practices, including the prohibition of forced labor.
As of the second quarter, 66 hedge funds had stakes worth $1.7 billion in First Solar (NASDAQ:FSLR). This is up from 51 hedge funds with stakes worth $1.12 billion in the previous quarter. Robert Pohly’s Samlyn Capital is the company’s largest shareholder with $1.068 million shares worth $240.78 million, as of June 30.
3. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 71
One of the best ethical companies to invest in, Costco Wholesale Corporation (NASDAQ:COST) is a warehouse club that operates on a membership basis, offering a wide range of products. Established in 1983, the company runs over 800 warehouses globally and is one the largest membership warehouse chains in the U.S.
The company provides a broad range of items such as groceries, household essentials, appliances, apparel, tires, tools, sporting equipment, beauty products, garden supplies, and electronics. Among its offerings is the Kirkland Signature private label, which is highly popular among its members.
According to a report published in 2022 by Vidyalankar School of Information Technology, Costco (NASDAQ:COST) is one of the most respected companies globally, largely due to its ethical approach to business and employee treatment. Known for its commitment to fair practices, it pays its workers around 40% more than competitors like Walmart and Target, while also offering better health and retirement benefits.
This investment in employees not only reduces turnover costs but also improves overall productivity and customer service. While talking at an event at the Michael G. Foster School of Business, co-founder and former CEO, James Sinegal emphasized that treating employees well and delivering great value to customers are key to successful business operations.
In July, the company implemented an increase in the starting pay and maximum pay for several key roles, including service assistants and meat cutters. This wage hike raises the starting hourly wage to $19.50, which represents a 5.4% increase for the lowest-paid workers. Incremental wage steps based on seniority are also set to rise by $0.50.
According to the Society for Human Resource Management, this move is designed to ensure that Costco’s (NASDAQ:COST) wages stay competitive within the retail industry, particularly when compared to the average salary increases of around 4% to 4.5% that other companies are offering for 2024.
The company’s approach to employee compensation is part of a broader strategy that includes promoting from within. The majority of its management team, including those in various departments such as warehouse and merchandise management, have been promoted from lower-level positions within the company. This commitment to internal career advancement helps the company retain skilled employees and maintain a motivated workforce. It is one of the best ethical companies to invest in.
The appeal of the company goes beyond its ethical practices, Costco’s (NASDAQ:COST) membership-based model is a significant asset. This model generates a steady and attractive revenue stream, with membership fees bringing in $1.1 billion in the third quarter of fiscal 2024, a 7.6% increase from the previous year. The predictability and stability of this income contribute to the company’s financial strength.
As of the second quarter, 71 hedge funds tracked by Insider Monkey had stakes in Costco (NASDAQ:COST), with positions worth $5.95 billion. Fisher Asset Management emerges as the company’s largest shareholder as it owns a $2.5 billion stake, as of June 30.
ClearBridge Investments stated the following regarding Costco Wholesale Corporation (NASDAQ:COST) in its Q2 2024 investor letter:
“Consumer staples holdings were also standouts in the quarter, such as Costco Wholesale Corporation (NASDAQ:COST), which continues to execute well and delivered better than expected earnings, helped by strong traffic driving better expense leverage. Customers also looked to be shifting toward more discretionary purchases.”
2. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 73
NextEra Energy, Inc. (NYSE:NEE) is a prominent energy company renowned for its substantial role in the global energy sector. The company operates a diverse portfolio through its subsidiaries, which include Florida Power & Light (FPL), NextEra Energy Resources (NEER), and NextEra Energy Partners. FPL serves a vast customer base in Florida, while NEER is a leading global producer of renewable energy, focusing on wind and solar power.
From 2005 to 2021, NextEra (NYSE:NEE) made significant strides in reducing its CO2 emissions rate, improving it by 51% compared to the U.S. electric power sector average. This improvement occurred even as the company expanded its total generation capacity by 72% to keep up with increasing customer demand. While the company grew its operations significantly to serve more customers, it managed to cut its emissions rate more effectively than most of its competitors in the industry.
According to the company’s Net Zero blue-print, FPL has built one of the most efficient and environmentally friendly power generation systems in the U.S. Its modernized infrastructure has saved Florida customers over $12 billion in fuel costs and reduced CO2 emissions by more than 175 million tons since 2001. Its solar initiatives, including the largest community solar program in the country, have positioned Florida as the third-highest state for solar capacity.
NextEra (NYSE:NEE) has a 2045 Real Zero goal, which means that it aims to achieve net-zero emissions without adding extra costs for customers. The company is committed to ensuring that each new project remains cost-effective for customers while achieving emissions reduction goals, provided it receives regulatory approval. It is one of the best ethical companies to invest in.
It has outlined a three-part strategy for achieving its decarbonization goals. First, the company aims to become carbon neutral within its operations by 2045, without relying on carbon offsets. This goal shows its longstanding commitment to sustainability.
Second, the company plans to support the broader U.S. power sector in reducing carbon emissions, which include investor-owned utilities, municipal systems, and cooperatives. It will do this by investing in and advancing technologies like wind, solar, energy storage, and green hydrogen.
Third, NextEra (NYSE:NEE) is planning to lead efforts in decarbonizing the U.S. economy as a whole. It intends to become the go-to partner for businesses looking to cut their carbon footprints. By leveraging its expertise and data analytics, it will help commercial and industrial clients meet their own net-zero or Real Zero targets.
In Q2, NextEra’s (NYSE:NEE) shares were held by 73 hedge funds at a combined value of $2.1 billion. Rajiv Jain’s GQG Partners increased its stake in the company by over 850% in the second quarter to 12.5 million shares worth $884.560 and is the most prominent shareholder of the company.
ClearBridge Investments stated the following regarding NextEra Energy, Inc. (NYSE:NEE) in its Q2 2024 investor letter:
“AI-related momentum was a key driver of performance in the second quarter, lifting the enablers in technology as well as holdings like renewable power producer NextEra Energy, Inc. (NYSE:NEE) that supply the increasing energy needs of data centers. Parts of the market lacking an AI connection, like our medical device holdings, underperformed despite no change to fundamentals. We have managed through several similar momentum periods over our tenure and have delivered long-term results for shareholders by staying true to an approach that emphasizes diversification across three buckets of growth companies (select, stable and cyclical) and seeks to take advantage of attractive entry points into quality growth businesses.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) is a California-based prominent tech company that is recognized for its groundbreaking advancements in graphics processing units (GPUs) and AI. Originally concentrating on the gaming sector, the company developed sophisticated graphics solutions but has since broadened its range to include high-performance computing, AI hardware, and software.
In its Graphics segment, it provides GeForce GPUs designed for gaming and personal computers, along with the GeForce NOW game streaming service. This segment also includes Quadro/NVIDIA RTX GPUs aimed at enterprise workstations and Omniverse software for creating and managing metaverse environments.
The Compute and Networking segment covers a wide range of solutions, including data center computing platforms and comprehensive networking systems. This segment also features Jetson robotics and various embedded platforms, as well as NVIDIA AI Enterprise, among other offerings. It tops our list of the best ethical companies to invest in.
In the second quarter, 179 hedge funds held positions in NVIDIA (NASDAQ:NVDA) and their stakes amounted to $53.67 billion. As of June 30, Fisher Asset Management is the most dominant shareholder in the company and has a position worth $11.54 billion.
NVIDIA (NASDAQ:NVDA) is making significant strides in addressing environmental concerns within the technology sector, especially in the context of artificial intelligence. According to digital news brand, Stockhead, the company’s advancements in GPUs are evidence of this effort. Its GPUs are highly regarded for their efficiency compared to traditional central processing units (CPUs), particularly in handling AI workloads.
According to CEO Jensen Huang, the GPUs are up to 20 times more energy-efficient for specific AI and high-performance computing tasks than CPUs. This efficiency is critical for reducing energy consumption and carbon emissions in data centers, which are becoming increasingly important as the demand for AI technology grows.
In addition to their efficiency, the company’s RAPIDS Accelerator is an important innovation that further enhances environmental sustainability. By optimizing the processing capabilities of its GPUs, the RAPIDS Accelerator can potentially cut a data center’s carbon footprint by up to 80%.
Major companies such as Adobe and AT&T have tested this technology and reported faster processing speeds, reduced costs, and improvements in AI model training. Furthermore, the Perlmutter supercomputer at the National Energy Research Scientific Computing Center in Berkeley demonstrated a five-fold increase in energy efficiency by utilizing Nvidia’s A100 Tensor Core GPUs.
NVIDIA (NASDAQ:NVDA) has also made significant advancements in AI ethics as evidenced by initiatives led by Nikki Pope, the company’s first-ever head of AI and legal ethics. Her team has introduced a beta-testing process involving community resource groups from diverse backgrounds to help identify and address unintended biases in AI products. This approach ensures that the company’s AI models are not only more efficient but also more equitable and transparent.
The “Model Card++” project, which enhances the transparency of AI models by providing detailed information on privacy, safety, and bias, has been well-received and represents its commitment to ethical AI development. The company’s ability to deliver powerful, efficient solutions and its proactive approach to addressing AI ethics make it a compelling player in the tech industry.
Furthermore, NVIDIA (NASDAQ:NVDA) also seems to have a healthy work culture as the company promotes a collaborative and non-hierarchical work environment, where teams are formed based on project needs and innovation is encouraged, even at the risk of failure. It is dedicated to providing excellent pay, benefits, and a supportive work culture, allowing employees to do meaningful work.
The company offers several benefits to support employees and their families through various life events. These include resources for building a family, such as adoption, fertility, and surrogacy support, as well as assistance for developmental disabilities through RethinkCare. The company also provides college preparation resources through Collegewise, and offers support for life changes like marriage, divorce, having a child, moving, buying a home, and becoming eligible for Medicare. The company extends benefits for mourning, gender affirmation, and LGBTQ+ support, and offers guidance for those leaving the company.
Aoris International Fund stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:
“If Information Technology was the dominant sector for the quarter, NVIDIA Corporation (NASDAQ:NVDA), which is the largest supplier of microprocessors used for generative AI applications, was the dominant company. NVIDIA’s share price rose by a third in the quarter and has increased by 255% so far this year. Since the beginning of 2023, its market value has risen by 8.3x, or $4.3 trillion, making NVIDIA the third largest company in the world by this measure.
As a result of the unusually strong stock price performance from NVIDIA and a few other large companies, equity markets have become increasingly concentrated. You can see this in the chart below, which shows that on 30 June, 27% of the market value of the 500 largest US companies was attributable to just five companies, more than twice the average of the last 20 years.
The composition of the Aoris International Fund will always be very different to that of the broader equity market. There will be periods, such as the most recent quarter, where this contributes to our performance lagging that of our benchmark. When it comes to NVIDIA and other AI-centric companies, rapid growth is exciting, but it makes it difficult for us to judge what is normal. Our preference is to own established leading companies where we can make a more confident, evidence-based judgement about their growth and profitability.”
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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