We recently compiled a list of the 11 Cheap ESG Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Cisco Systems, Inc. (NASDAQ:CSCO) stands against the other cheap ESG stocks.
These days, it seems like everyone wants to wear the “saving the world” cape. Whether this urge to make a real impact on the world stems from a desire to ride the social trend wave or simply out of genuine concern is, well, a debate for another day. For now, let’s focus on the fact that all companies must adhere to Corporate Social Responsibility (CSR) by law.
In other words, ESG companies are those that incorporate Environmental, Social, and Governance factors into their operations and decision-making. This framework is utilized to measure an organization’s practices and performance on sustainability and ethical grounds. In capital markets, some investors employ ESG criteria to assess companies and make their investment decisions accordingly, a practice known as ESG investing. While investing delivers financial returns, ESG investing offers both financial returns and societal impacts, and that’s what is most valued by some investors.
Some believe ESG investing is aligned with reduced risk exposure, stakeholder interests, and superior returns. Not only attractive in theory, but there are reports that back this form of investing. For instance, the Sustainability Megatrends Report by Cushman & Wakefield reveals that ESG companies are gaining traction from institutional investors. A survey of 250 institutional investors indicated that around 60% noted higher performance yield from ESG investments, and 78% were willing to pay higher premiums for these funds.
“Institutional investors are showing increased demand for properties with strong ESG-related management and activities,” the report underscores.
A US SIF “Trends Report” reveals that out of the US market size of $52.5 trillion, $6.5 trillion (12%) is identified as a sustainable or ESG investment. Having said that, as many as 73% of respondents believe the sustainable investment market will grow over the next few years. Therefore, community investing continues to shine with rising enthusiasm across several types of investors.
ESG companies are mainly ranked by third-party ranking agencies based on how well they perform across Environmental, Social, and Governance indicators. Using standardized metrics, proprietary models, and disclosures, the companies are then assessed and compared. Among the most notable agencies are MSCI, Sustainalytics (by Morningstar), Refinitiv ESG Scores, and S&P Global ESG Scores. In this analysis, we have used the ratings by Sustainalytics, which covers over 15,000 firms across 42 industries globally. The firm recently disclosed its 2025 list of ESG Top-Rated Companies, identifying Global 50 Top-Rated companies and other regional and industry leaders. Given this, we will take a look at some of the best ESG stocks to consider.
Our Methodology:
We have compiled a list of 11 companies ranked by Sustainalytics (by Morningstar) in its recent ESG Top-Rated Companies report. From the report, we identified companies with a forward P/E less than 15, extracted from FINVIZ. From there, we picked companies with the highest number of hedge fund investors, as per Insider Monkey’s database of Q4 2024. From less preferred to highly preferred, according to hedge funds, the selected stocks are listed in either the global, regional, or industry standings in the report.
At Insider Monkey, we are obsessed with 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Engineers using the latest Cisco TelePresence technology to collaborate with colleagues around the world.
Cisco Systems, Inc. (NASDAQ:CSCO)
Number of Hedge funds holding: 84
Forward P/E as of May 06, 2025: 14.93
Cisco Systems, Inc. (NASDAQ:CSCO) is a U.S.-based firm that offers information technology and networking services. Incepted in 1984, the company also offers network security and access management services. CSCO delivers its products and services directly and indirectly through system integrators, service providers, and other distributors.
If there were an award for combining technology, workforce, and broader networks perfectly to solve challenges towards sustainability, Cisco Systems, Inc. (NASDAQ:CSCO) would be the clear winner. The company has taken one clear strategy, The Plan for Possible, that guides in embedding sustainability in products, advancing clean energy access, strengthening relationships with suppliers, focusing on minimizing environmental impacts, and fostering climate resilience in society.
Like any other environmentally concerned enterprise, Cisco Systems, Inc. (NASDAQ:CSCO) has also set targets. While it hopes to achieve net-zero GHG emissions across value chains by 2040, the near-term targets revolve around reducing absolute Scope 1, Scope 2, and Scope 3 emissions, making it quite negligible. Having said that, the company is the first technology hardware and equipment company to get its 2040 goal approved under the SBTi Net-Zero Standard. In achieving this goal, the company is focused on energy-efficiency innovation, connecting clean energy, and collaborating with its networks to make the transition smoothly.
The design of energy-efficient products is a core part of its green strategy. Through its Plan for Possible initiative, Cisco Systems, Inc. (NASDAQ:CSCO) modernizes data centers, adopts energy management solutions, and builds smart energy infrastructure. Through CSCO’s Circular Design Principles, the company enhances the energy efficiency of its products, similar to that of the Cisco UCS X-Series Modular System, which has an improved cooling process in contrast to the previous UCS rack servers.
Additionally, the company has developed a Sustainability Data Foundation (SDF), which is a crucial source of sustainability-associated data for various cases. Cisco Intersight IT operations platform is another project undertaken that allows clients to dynamically adjust power for improved efficiency. Cisco Systems, Inc. (NASDAQ:CSCO) has directed US$39 million in investments from FY23 to FY25, emphasizing renewable energy and the development of fleet electrification projects. Additionally, the giant’s power purchase agreements (PPAs), particularly with the Spanish renewable energy provider IGNIS and in India for the development of wind and solar generation, is a testament to all its energy-related efforts. Thus, CSCO can be considered one of the best ESG stocks.
Overall CSCO ranks 2nd on our list of cheap ESG stocks to buy according to hedge funds. While we acknowledge the potential of CSCO as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than CSCO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.
