13 Best Ethical Companies to Invest in 2024

Ramish Cheema
11 min read

In This Article:

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.

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