In this article, we will take a look at the 13 best ethical companies to invest in according to Reddit.
With inflation touching record levels, massive layoffs and uncertainty about the economy, it’s hard for many to focus on “ethics” while making investment decisions. Ethical or ESG investing, however, has gained a lot of traction as companies and governments become aware of the importance of making the right choices to solve problems like climate change, water scarcity, food insecurity and more.
Companies today spend a fortune and a lot of time in publishing their sustainability reports and long-term ESG targets. Sometimes it becomes difficult for investors to figure out exactly what counts as “ethical” when it comes to investing. The ESG space is littered with vague terms and generic statements without concrete value. Amid growing backlash from some investors, the industry is taking action to fix this problem. Bloomberg recently reported that The European Sustainable Investment Forum has started the process of revising its methodology to reach accurate market size of the ESG industry.
The Bloomberg report quoted Emilie Rowe, head of financial services at Aspectus Group, who said:
“Fund managers need to start thinking about the way they communicate their ESG credentials, offerings, and commitments to clients.”
Rower said some companies “will need to make pretty stark changes when it comes to their communications strategy.”
Is it possible to find ethical companies that make money in the modern world? Redditors like to keep it simple. Reddit investors who care about ethics while making investment decisions usually have a consensus that if you want to find ethical companies, it’s enough to stick to those that steer clear of what count as major ills according to many, including tobacco, carbon emissions, gambling, animal testing, producing extremely harmful kinds of water and air pollution, etc.
A couple of comments portray the collective wisdom of Redditors engaged in discussion boars on the social media platform about ethical investing. One Reddit user in the “Stocks” subreddit said:
“I only invest in companies/products/services that I want see do well in the future and will improve society. Your money has a lot of bargaining power. We can’t complain about the wage gap or unethical corporations if we are willing to naively invest solely for the purpose of making money. Our money will place millions of dollars into the hands of CEOs and shareholders, so we want our money to go into good hands.”
Redditors also support investing in companies that take the human society forward and add to the overall progress of our civilization. Here’s a comment of a Redditor depicting this mentality:
“Only companies, industries/technologies, solutions that move our society forward in a sustainable bountiful way. I vote with my dollars and take my roll as an investor as an opportunity to support what I believe in.”
Our Methodology
For this article we scoured several discussion boards on Reddit where hundreds of people have discussed their favorite companies for ethical investing. We consulted subreddits like Green Investor, Stocks, WSB, Investing, UKEthicalInvesting, among others, to find companies that Redditors believe are ethical enough to invest in. Most of the Redditors recommend ETFs that track ethical companies instead of putting your money in a single company. Some companies however came up frequently in discussions because of their ethical practices and sustainable business models.
Best Ethical Companies to Invest in According to Reddit
13. ASN Biodiversity Fund
Number of Hedge Fund Holders: N/A
Netherlands-based ASN Bank offers several sustainable, green and ethical investment options. Redditors frequently mention ASN Biodiversity Fund as a viable option for ethical investors. ASN Biodiversity Fund has a size of over 26 million euros. The fund uses capital from retail investors and invests in large funds and listed companies “that have a measurable positive impact on biodiversity and nature restoration through sectors such as agroforestry and sustainable fishery.”
Last year, the ASN Biodiversity Fund invested 2 million euros in The Food Securities Fund, which supports farmers in sub-Saharan Africa to increase food security.
12. Sage Potash Corp. (TSXV:SAGE.V)
Number of Hedge Fund Holders: N/A
Potash plays a key role in fertilizer production, can increase crop yields and increase resilience of crops against pests. Sage Potash Corp. (TSXV:SAGE.V) is a Canadian company that explores for potash. Sage Potash Corp. (TSXV:SAGE.V) is a popular stock among Redditors on “Green Investor” subreddit. In March, Sage Potash Corp. (TSXV:SAGE.V) announced a deal with RESPEC LLC to expand a mining project in Southern Utah. Sage Potash Corp. (TSXV:SAGE.V) will be deploying solution mining, which the company said has less environmental impacts when compared to traditional mining methods.
11. Rocket Lab USA, Inc. (NASDAQ:RKLB)
Number of Hedge Fund Holders: 12
Redditors are fans of rocket and space companies and believe investing in these sectors will help the humanity in the long run. Rocket Lab USA, Inc. (NASDAQ:RKLB) was specially mentioned by some Redditors as a suitable option for those who want to invest in space and rocket technologies.
Earlier this month Rocket Lab USA, Inc. (NASDAQ:RKLB) said it will propel NASA’s TROPICS constellation of satellites into orbit across two missions from the company’s launchpad in New Zealand.
10. Beyond Meat, Inc. (NASDAQ:BYND)
Number of Hedge Fund Holders: 13
Beyond Meat, Inc. (NASDAQ:BYND) is one of the leaders in the plant-based meat industry. In February, Beyond Meat, Inc. (NASDAQ:BYND) jumped after the company said it is striving to become cash flow positive in the second half of 2023. For the full year Beyond Meat, Inc. (NASDAQ:BYND) expects its revenue to come between $375 million to $415 million while gross margin is expected to be in the low double-digit range, increasing sequentially throughout the year.
As of the end of the fourth quarter of 2022, 15 hedge funds tracked by Insider Monkey had stakes in Beyond Meat, Inc. (NASDAQ:BYND). The biggest hedge fund stakeholder of Beyond Meat, Inc. (NASDAQ:BYND) was Ray Dalio’s Bridgewater Associates which owns a $1.4 million stake in the company.
9. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 20
Calvert, a US-based investment company focused on responsible investing, was mentioned more than once on Reddit discussion boards for its ethical investment options. That’s why we decided to take a look at the company’s offerings and picked Apple Inc. (NASDAQ:AAPL), the top holding of Calvert US Large-Cap Core Responsible Index ETF. Apple Inc. (NASDAQ:AAPL)’s ESG scores are impressive and the company is investing heavily in ESG-related projects. That’s why Apple Inc. (NASDAQ:AAPL) ranks higher on several notable ESG ETFs.
As of the end of the fourth quarter of 2022, Apple Inc. (NASDAQ:AAPL) was one of the most popular stocks among elite hedge funds, according to Insider Monkey’s database of 943 hedge funds. 135 hedge funds tracked by Insider Monkey had stakes in Apple Inc. (NASDAQ:AAPL).
Polen Global Growth Strategy made the following comment about Apple Inc. (NASDAQ:AAPL) in its Q1 2023 investor letter:
“Not owning Apple Inc. (NASDAQ:AAPL) and NVIDIA detracted from our relative performance. With respect to Apple, we have not felt that the combination of growth available and the valuation made for one of our best ideas. Concerning NVIDIA, while there seems to be strong demand for data center chips, the valuation and lack of clarity around pace and magnitude of that growth has kept us at bay to date.”
8. Ecolab Inc. (NYSE:ECL)
Number of Hedge Fund Holders: 47
When it comes to ethical investing, Redditors are big fans of water-related companies. Ecolab Inc. (NYSE:ECL) was specifically mentioned by several Redditors as the company is one of the leaders in the water treatment industry. Ecolab Inc. (NYSE:ECL) has an impressive ESG profile.
As of the end of the fourth quarter of 2022, 47 hedge funds tracked by Insider Monkey were bullish on Ecolab Inc. (NYSE:ECL), up from 42 hedge funds in the previous quarter.
7. Enphase Energy, Inc. (NASDAQ:ENPH)
Number of Hedge Fund Holders: 63
Enphase Energy, Inc. (NASDAQ:ENPH) is one of the best ethical companies to invest in according to Reddit. Enphase Energy, Inc. (NASDAQ:ENPH) makes solar micro-inverters, battery energy storage and EV charging stations. These technologies are playing a key role in solving the climate change problem.
Earlier this month, Enphase Energy, Inc. (NASDAQ:ENPH) stock was upgraded by Piper Sandler to Overweight from Neutral with a $255 price target.
As of the end of the last quarter of 2022, 63 hedge funds tracked by Insider Monkey were bullish on Enphase Energy, Inc. (NASDAQ:ENPH). The biggest hedge fund stakeholder of Enphase Energy, Inc. (NASDAQ:ENPH) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $354 million stake in the company.
6. Costco Wholesale Corporation (NASDAQ:COST)
Number of Hedge Fund Holders: 66
Costco Wholesale Corporation (NASDAQ:COST) came up frequently on Reddit discussion boards talking about ethical companies to invest in. Redditors praise Costco Wholesale Corporation (NASDAQ:COST)’s proactive approach in increasing wages and overall employee benefits. Employee reviews for Costco on Glassdoor also back this sentiment, with hundreds of comments appreciating Costco Wholesale Corporation (NASDAQ:COST)’s work culture and benefits.
Insider Monkey’s database of 943 hedge funds shows that 66 hedge funds had stakes in Costco Wholesale Corporation (NASDAQ:COST). The biggest hedge fund stakeholder of Costco Wholesale Corporation (NASDAQ:COST) was Ray Dalio’s Bridgewater Associates which owns a $428 million stake in the company.
5. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 91
While Tesla, Inc. (NASDAQ:TSLA)’s ESG rating has dropped over the past few months, the stock remains a popular choice of Redditors. The reason why Redditors believe Tesla, Inc. (NASDAQ:TSLA) is an ethical investing option is simple: the company is the leader in the EV space and is playing a key role in moving the world away from conventional engine cars that are the biggest polluters in the world.
Hedge funds are also bullish on Tesla, Inc. (NASDAQ:TSLA). As of the end of the fourth quarter of 2022, 91 hedge funds had stakes in Tesla, Inc. (NASDAQ:TSLA), up from 88 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Tesla, Inc. (NASDAQ:TSLA) is Catherine D. Wood’s ARK Investment Management which owns a $1.1 billion stake in the company.
Polen Focus Growth Strategy made the following comment about Tesla, Inc. (NASDAQ:TSLA) in its Q1 2023 investor letter:
“The leading detractors to our relative performance were three companies we don’t own: NVIDIA, Apple, and Tesla, Inc. (NASDAQ:TSLA). In fact, not owning these three companies was a roughly 400-basis point headwind to our relative results versus the Russell 1000 Growth in the first quarter. We believe Tesla also has strong competitive advantages, at least on the auto side of the business, but we currently have some questions around the company’s leadership and the magnitude of its growth prospects.”
4. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 106
We chose NVIDIA Corporation (NASDAQ:NVDA) for our list of the best ethical companies to invest in according to Reddit because the stock ranks higher in the portfolio of Vanguard ESG U.S. Stock ETF, one of the most favorite choices of ethical investors on Reddit. The ETF tracks the performance of the FTSE US All Cap Choice Index and excludes companies involved in questionable practices and business areas like adult entertainment, alcohol, tobacco, cannabis, gambling and nuclear weapons.
Overall, NVIDIA Corporation (NASDAQ:NVDA) has strong ESG ratings and the company has committed to decrease it carbon footprint significantly in the coming years.
Polen Global Growth Strategy made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2023 investor letter:
“Not owning Apple and NVIDIA Corporation (NASDAQ:NVDA) detracted from our relative performance. With respect to Apple, we have not felt that the combination of growth available and the valuation made for one of our best ideas. Concerning NVIDIA, while there seems to be strong demand for data center chips, the valuation and lack of clarity around pace and magnitude of that growth has kept us at bay to date.”
3. Visa Inc. (NYSE:V)
Number of Hedge Fund Holders: 177
Visa Inc. (NYSE:V) makes it to our list of the best ethical companies to invest in according to Reddit because it is the top holding of the Global Sustainability Leaders ETF, which is a popular ethical investing option among Redditors. The ETF tracks the performance of an index that consists of large companies known as “Climate Leaders.” These companies have no direct or significant exposure to fossil fuels and they are not engaged in “activities deemed inconsistent with responsible investment considerations.”
Visa Inc. (NYSE:V) saw a jump in hedge fund sentiment during the fourth quarter, as 177 hedge funds tracked by Insider Monkey ended the period with Visa shares in their portfolios, up from 165 hedge funds in the previous quarter. The biggest hedge fund stakeholder of Visa Inc. (NYSE:V) is Chris Hohn’s TCI Fund Management which owns a $4.1 million stake in the company.
Polen Global Growth Strategy made the following comment about Visa Inc. (NYSE:V) in its Q1 2023 investor letter:
“We trimmed Mastercard and Visa Inc. (NYSE:V) to equal weights of the Portfolio. Mastercard and Visa operate as a duopoly in a large and growing market. Over the last 50 years, global personal consumer expenditures (PCE) has grown 7-9% annualized. We expect 4-5% long-term PCE growth going forward. Additionally, the shift from cash to credit continues unabated, with a total credit penetration of only approximately 50% globally.3 This shift provides Visa and Mastercard with another ~4-6% of growth. When combined with PCE, this gives both companies high-single-digit to low-double[1]digit revenue growth opportunities. This growth estimate is before accounting for growth amplifiers like the acceleration of e[1]commerce, the shift from offline to online, and additional services. Both companies enjoy extremely strong network effects that provide strong competitive advantages.
We have trimmed Visa and Mastercard because their combined weight grew to over 12% of the Global Growth Portfolio because of their recent performance and to fund our increase in Amazon’s position size. We added to both positions when their prices were depressed due to cross-border transactions deteriorating materially from the pandemic. Cross-border volumes came roaring back when travel corridors reopened, and although we are several quarters removed from the cross-border nadir, Visa still grew volumes >30% in 1Q23. Total cross-border volumes are now 132% of 2019 levels. At 4.5% each, both companies remain high conviction positions for Global Growth.”
2. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 240
Amazon.com, Inc. (NASDAQ:AMZN) is added in our list of the best ethical companies to invest in because it’s one of the biggest holdings of Vanguard FTSE Social Index Fund Institutional Shares (MUTF:VFTNX), which is recommended by Redditors for ethical investing. VFTNX aims to track the performance of the FTSE4Good US Select Index. The fund’s holdings are selected based on ESG criteria and excludes companies that are involved in adult entertainment, alcohol, tobacco, cannabis, gambling, chemical and biological weapons, cluster munitions, anti-personnel landmines and nuclear weapons.
While Amazon.com, Inc. (NASDAQ:AMZN)’s ESG scores are not as impressive as those of other major tech companies like Microsoft and Apple, the company lists several projects and achievements related to ESG on its website and frequently makes headlines with its major investments in the ESG space.
Polen Global Growth Strategy made the following comment about Amazon.com, Inc. (NASDAQ:AMZN) in its Q1 2023 investor letter:
“We raised our position in Amazon.com, Inc. (NASDAQ:AMZN). During 2022, Amazon’s business experienced revenue deceleration from pre-pandemic levels combined with higher expenses resulting from inflation pressures as well as costs in their fulfillment segment. The fulfillment costs were set in motion during the pandemic when demand overwhelmed their network. More recently, AWS – along with Azure and GCP – experienced a deceleration in growth as customers globally feel pressure to optimize their usage in this tough macroeconomic environment. We don’t expect this deceleration to persist for the long-term given the secular trend of companies transitioning to the cloud.
For long-term investors, we believe this combination provides an opportunity and that Amazon is now poised to re-accelerate revenue growth, of which we are already seeing signs, while expanding margins and free cash flow. With respect to margins, given the fast growth in AWS and advertising, the latter generating almost $40 Billion in sales and growing at greater than 30% recently, the resulting mix-shift could result in operating margins of 10% or higher over time. This level would represent a 5x increase over 2022 levels. In sum, we are capitalizing on what we believe is arguably one of the most competitively advantaged business in the world, which is growing well, poised to accelerate that growth and expand margins, and is trading at an attractive price.”
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is one of the best ethical companies to invest in according to Reddit because the company is the biggest holding of iShares MSCI USA ESG Select ETF (NYSEARCA: SUSA), an ETF that is quite popular among ethical investors on Reddit discussion boards. Microsoft Corporation (NASDAQ:MSFT) was also mentioned as a standalone investment option for ethical investors by several Redditors.
Microsoft’s ESG scores are excellent and the company ranks higher on the Just Capital’s rankings, which grade companies based on the “issues that matter most in defining just business behavior today.”
Microsoft Corporation (NASDAQ:MSFT) is also the most popular stock among 943 elite hedge funds tracked by Insider Monkey as of the end of the fourth quarter of 2022. TCI Fund Management of Chris Hohn has a $5.3 billion stake in the company.
Polen Global Growth Strategy made the following comment about Microsoft Corporation (NASDAQ:MSFT) in its Q1 2023 investor letter:
“Microsoft Corporation (NASDAQ:MSFT)’s fundamentals have largely stayed intact despite the headwinds many technology companies are facing due to the macroeconomic environment. While growth has decelerated below our longer-term target (we expect low-double-digit revenue growth over the next 3-5 years), we believe the deceleration should prove to be ephemeral. Azure and Office Commercial remain bright spots, while Windows OEM has been and will continue to be a drag over the next few quarters. With respect to Azure, even at a decelerated rate, the business continues to grow well. After eight consecutive quarters of Azure’s top line growth being in the mid-to-high-40s range, over the last two quarters, growth has been 42% and 38%, respectively. Microsoft is a scaled business with multiple and interlocking competitive advantages, and we believe the company will compound at high rates for a long period of time.”
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Disclosure: None. 13 Best Ethical Companies to Invest in According to Reddit is originally published on Insider Monkey.
