13 Best Ethical Companies to Invest in 2024

Published on April 24, 2024 at 4:01 am by Ramish Cheema in Hedge Funds, News

In this piece, we will take a look at the 13 best ethical companies to invest in 2024. If you want to skip our overview of ESG stocks, then you can take a look at 5 Best Ethical Companies to Invest in 2024.

The relationship of the corporate sector with the well-being of the general population is always controversial. On one end, firms like Apple Inc. (NASDAQ:AAPL), Pfizer Inc. (NYSE:PFE), and Walmart Inc. (NYSE:WMT) have transformed people’s lives and allowed them to improve their health, stay connected, and shop for countless products affordably. On the other end, some of the most controversial companies in the world are among the most valuable as well. The best examples of these are the oil mega giants such as Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) who are often targeted by environmental activists due to the polluting effects of their products.

Balancing both these factors, i.e. the negative externalities that result from the costs of doing business and the benefits to society of private enterprise, is a field called Environmental, Social, and Governance (ESG). ESG seeks to invest only in those companies that are aware of the impact that their operations make on the environment and are actively working to mitigate this impact. It is a relatively newer phenomenon, and despite its noble objectives, the trend seems to have run into roadblocks as of late.

This is because the stock market of 2024 is quite different from the ‘environment’ that was in play in 2018, when ESG investing was gaining traction. In 2018, sustainable investing surged to $30 trillion, as investors forced companies to become more climate conscious and favored those that took the initiative. However, in 2018, interest rates weren’t as high as they are right now, and inflation had not yet tasted the impacts of loose monetary policies and global supply chain disruptions.

In 2024, the stock market and the broader finance industry are still recovering from both of these. While rates are still high and creating constraints for investors to raise capital, inflation is on a downward trend. At the same time, the fallout from the Russian invasion of Ukraine has shown that the global oil industry is still quite crucial to economic well being despite the fact that fossil fuels are also some of the biggest polluters on the planet.

Taking a look at recent stats, data from Bloomberg shows that 2023 wasn’t a particularly great year for ESG. The ESG market fell to $30.3 trillion in 2023 from $35 trillion at the start of the year, and subsequent data showed that 2023 was the worst year on record for the sector. This data comes from Morningstar Financial and it reveals that during the fourth quarter of 2023, sustainable funds marked their first full year of outflows in a decade. In Q4 alone, a whopping $5 billion went out of these funds, a figure that jumps to $13 billion for the full year. These outflows came on the back of disappointing performance of sustainable equity funds in particular, as Morningstar’s data shows that “32% of sustainable equity funds dropped to the bottom quartile relative to peers.” This also ensured that the fourth quarter marked the fifth consecutive quarter where investors preferred sustainable funds when compared to their traditional counterparts.

Before we head to the best ethical companies, it’s also important to know why ESG and stocks with a focus on the environment and broader business sustainability tend to have shied away from gains as of late. One of the biggest reasons behind this is high interest rates, which means that earning a profit becomes difficult. Therefore, companies that focus on sustainability have to deal with high business costs and have to fund costly projects, which means that investors find a better bang for their buck elsewhere.

On a final note, here’s what Madison Investments had to say about its Madison Sustainable Equity Fund’s performance during the fourth quarter of 2023:

Equity markets finished the year on a strong note with the S&P 500 up 11.7% during the fourth quarter, bringing the full year return to 26.3%. The Madison Sustainable Equity Fund (Class Y) returned 11.9% in the fourth quarter but lagged the S&P 500 for the full year, returning 18.0%.

The strength during the fourth quarter can be attributed to the downward shift of the yield curve. Interest rates dropped during the fourth quarter as inflation moderated and the market began to discount an end to Fed rate hikes and even began discounting interest rate cuts in 2024. Rates rose during the third quarter, with the 2-year Treasury rising to 5.05% and the 10-year moving to 4.58%, its highest level since September 2007. Then in the fourth quarter, the 2-year rate fell to 4.35% and the 10-year fell to 3.94%. Both fixed income and equities rallied in the fourth quarter. The economy is still growing, real GDP grew 4.9% in Q3 and is expected to grow 1.2% in Q4, and 1.3% in 2024. Headline inflation is moderating but remains above the desired 2%. Inflation fell to 3.5% in Q3 and is expected to drop to 3.2% in Q4 with expectations for inflation to fall to 2.6% in 2024. Unemployment remains low at 3.7%, and the consumer continues to spend. However, with Covid savings dwindling and credit card balances rising, we anticipate consumer spending will slow in 2024. The market now expects that the Federal Reserve will cut the Fed Funds rate in 2024. Expectations are for the Fed to begin cutting rates in the second quarter. We continue to expect the Fed to keep rates high until inflation moves closer to 2%, which may not happen until 2025.

With these details in mind, let’s take a look at some top ethical stocks. A couple of top picks are Meta Platforms, Inc. (NASDAQ:META), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT).

A trader at a stock exchange, vigorously watching the stocks’ trends in the stock market.

Our Methodology

To make our list of the best ethical stocks, we ranked the top 30 most valuable holdings of the Vanguard ESG U.S. Stock ETF by the number of hedge funds that had bought the shares during the fourth quarter of 2023 and picked the top stocks.

For these best ethical stocks, we mentioned hedge fund sentiment. Hedge funds’ top 10 consensus stock picks outperformed the S&P 500 Index by more than 140 percentage points over the last 10 years (see the details here). That’s why we pay very close attention to this often-ignored indicator.

Best Ethical Companies to Invest in 2024

13. Adobe Inc. (NASDAQ:ADBE)

Number of Q4 2023 Hedge Fund Shareholders: 105

Adobe Inc. (NASDAQ:ADBE) is the well known software company headquartered in San Jose, California. Its Photoshop software is one of the best known image editing software in the world, and in April 2024, Adobe Inc. (NASDAQ:ADBE) shared that it will add artificial intelligence features to Photoshop later this year.

105 out of the 933 hedge funds part of Insider Monkey’s Q4 2023 database had bought and owned Adobe Inc. (NASDAQ:ADBE)’s shares. Ken Fisher’s Fisher Asset Management was the biggest investor due to its $2.7 billion stake.

Along with Amazon.com, Inc. (NASDAQ:AMZN), Meta Platforms, Inc. (NASDAQ:META), and Microsoft Corporation (NASDAQ:MSFT), Adobe Inc. (NASDAQ:ADBE) is a top ethical stock that hedge funds are buying.

12. Thermo Fisher Scientific Inc. (NYSE:TMO)

Number of Q4 2023 Hedge Fund Shareholders: 111

Thermo Fisher Scientific Inc. (NYSE:TMO) is one of the biggest medical instruments and devices companies in the world. The shares are rated Buy on average, and the average analyst share price target is $609.83.

During December 2023, 111 out of the 933 hedge funds surveyed by Insider Monkey were the firm’s shareholders. Thermo Fisher Scientific Inc. (NYSE:TMO)’s largest shareholder among these is Chris Hohn’s TCI Fund Management as it owns $1.6 billion worth of shares.

11. UnitedHealth Group Incorporated (NYSE:UNH)

Number of Q4 2023 Hedge Fund Shareholders: 113

UnitedHealth Group Incorporated (NYSE:UNH) is the largest healthcare benefits provider and plan manager in the U.S. 2024 has been quite a controversial year for the firm after it was targeted through a cyber attack earlier this year that disrupted healthcare services across America. The controversy is refusing to die down, as UnitedHealth Group Incorporated (NYSE:UNH) shared in April 2024 that another hack might have enabled criminals to steal sensitive customer data.

For their fourth quarter of 2023 shareholdings, 113 out of the 933 hedge funds profiled by Insider Monkey had held a stake in UnitedHealth Group Incorporated (NYSE:UNH). Rajiv Jain’s GQG Partners owned the biggest stake which was worth $1.8 billion.

10. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Q4 2023 Hedge Fund Shareholders: 120

Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor designer that makes and sells CPUs, GPUs, and other silicon products. Heading into its earnings for the first quarter, Wall Street appears to be quite optimistic about the firm’s future prospects, as it has rated the shares Strong Buy on average and set an average share price target of $180.33.

As of Q4 2023 end, 120 out of the 933 hedge funds covered by Insider Monkey’s research were the firm’s investors. Ken Fisher’s Fisher Asset Management is Advanced Micro Devices, Inc. (NASDAQ:AMD)’s largest shareholder through its $4.1 billion investment.

9. Salesforce, Inc. (NYSE:CRM)

Number of Q4 2023 Hedge Fund Shareholders: 131

Salesforce, Inc. (NYSE:CRM) is an American enterprise software company that enables firms to manage their customer relationships. April 2024 is ending with some good news for its investors, as the shares are up after reports indicate that Salesforce, Inc. (NYSE:CRM) is no longer pursuing a multi billion dollar acquisition to grow its business operations.

Insider Monkey scoured through 933 hedge fund portfolios for last year’s fourth quarter to find 131 Salesforce, Inc. (NYSE:CRM) shareholders. Ken Fisher’s Fisher Asset Management owned $3.9 billion worth of shares, making it the biggest investor.

8. Apple Inc. (NASDAQ:AAPL)

Number of Q4 2023 Hedge Fund Shareholders: 131

Apple Inc. (NASDAQ:AAPL) is a global household name when it comes to consumer technology. April 2024 hasn’t been a great month for the firm, as not only have its shares proved to be lackluster in gains, but multiple reports share that consumer interest in the Apple Vision Pro headset is declining.

After digging through 933 hedge fund holdings that covered 2023’s December quarter, Insider Monkey found that 131 had held a stake in the firm. Apple Inc. (NASDAQ:AAPL)’s largest shareholder is Warren Buffett’s Berkshire Hathaway courtesy of its $174 billion investment.

7. Mastercard Incorporated (NYSE:MA)

Number of Q4 2023 Hedge Fund Shareholders: 141

Mastercard Incorporated (NYSE:MA) is a financial technology firm that acts as a gateway between merchants and consumers. It’s one of the rated ethical companies on our list as the stock is rated Strong Buy on average. The average analyst share price target is $480.75.

As of December 2023 end, 141 out of the 933 hedge funds part of Insider Monkey’s database had invested in Mastercard Incorporated (NYSE:MA). Charles Akre’s Akre Capital Management owned the biggest stake which was worth $2.1 billion.

6. Visa Inc. (NYSE:V)

Number of Q4 2023 Hedge Fund Shareholders: 162

Visa Inc. (NYSE:V) is another payment gateway platform and services provider. Like Mastercard, it was also at the center of a bullish analyst note from Morgan Stanley in April 2024 that indicated that Visa Inc. (NYSE:V) was benefiting from the surge in global travel.

162 out of the 933 hedge funds profiled by Insider Monkey during Q4 2023 were the firm’s shareholders. Visa Inc. (NYSE:V)’s largest hedge fund shareholder is Chris Hohn’s TCI Fund Management as it owns $4.3 billion worth of shares.

Meta Platforms, Inc. (NASDAQ:META), Visa Inc. (NYSE:V), Amazon.com, Inc. (NASDAQ:AMZN), and Microsoft Corporation (NASDAQ:MSFT) are some top hedge fund ethical stock picks.

Click to continue reading and see 5 Best Ethical Companies to Invest in 2024.

AI Fire Sale: Insider Monkey’s #1 AI Stock Pick Is On A Steep Discount

Published on May 1, 2024 at by Inan Dogan, PhD

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A New Dawn is Coming to U.S. Stocks

Published on May 2, 2024 at by Insider Monkey Staff

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