Kiplinger ESG 20: Our Favorite ESG Stock and Fund Picks for Investors

Doing good and making money are no contradiction with these ESG stock and fund picks that ride the trend of socially conscious investing.

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ESG, an investing style that eyes a company's profits, risks and long-term sustainability through an environmental, social or corporate-governance lens, is weathering a political storm.

The values-based strategy, also known as socially conscious or sustainable investing, traces its modern-day roots back to the latter part of the 20th century.

Now, "ESG is a four-letter word," says Paul Beland, global head of research for wealth management at CFRA Research.

But backlash aside, ESG investing principles are as relevant today as they were 40 years ago, says Robert Klaber, director of sustainability research and a portfolio manager at Parnassus Investments, and they're still materially pertinent to a company's bottom line and investment prospects.

"We believe these investment concepts are durable for the long run," he says.

Since our last update of the Kiplinger ESG 20, our favorite stocks and funds that stand out on ESG and financial metrics, the headwinds have stiffened.

The Trump administration is less climate-friendly, intensely scrutinizing ESG and pushing for a federal government ban of DEI (diversity, equity and inclusion) initiatives.

Wall Street's top regulator is moving closer to rescinding a rule requiring public companies to quantify the business risk caused by climate change.

Employer-sponsored plans, such as 401(k)s, are in the crosshairs, too. A U.S. district court ruling in Texas earlier this year found that American Airlines (AAL) violated the law by including funds in its retirement savings plan from an investment firm considering ESG factors in its proxy voting and other related shareholder engagement measures.

Given the controversy, we want to reiterate that the Kiplinger ESG 20 comprises companies we think are good businesses with good investment prospects. Our picks include some of the best companies and stocks on the planet, such as computer chip designer Nvidia (NVDA) and software giant Microsoft (MSFT).

Our role is to provide readers with a broad range of investment options and strategies to consider as they look to increase their wealth.

The evidence shows there's still significant interest in values-infused investing. Seven of 10 investors say companies should incorporate ESG or sustainability considerations directly into their corporate strategy, according to consulting firm PWC.

The size of the U.S. market for ESG or sustainable investing is $6.5 trillion, according to US SIF, a sustainable-investing association.

And despite a retreat from ESG investing in the final quarter of 2024, assets in U.S. sustainable funds rose 6.3% last year, according to Morningstar. Investors still want to own companies that align with their values.

"I think people are asking themselves, 'If the federal government isn't going to prioritize the changes that I want to see in the world, how can I support that change?' One answer is through their investments," says Cy McMillan, co-manager of the Green Century Balanced Fund (GCBLX), a member of the Kip ESG 20.

Kiplinger's favorite ESG stocks and funds 

With this in mind, here is the Kiplinger ESG 20, a list of our favorite stocks and funds with an environmental, social or governance focus and healthy financial prospects. 

Each of our picks for the best stocks to buy has a strong record on at least one ESG pillar. But no company can be all things to all people; a firm we've highlighted for its strong governance focus, for example, may not also be an environmental star. As such, we have broken down our stock picks into three separate categories:

Environmental stewards: These companies offer products, services or technologies that provide solutions to problems such as greenhouse gas emissions, air and water pollution, or resource scarcity. 

Social standouts: These companies support their employees, customers and suppliers and treat them fairly, while positively impacting their community and the world at large.

Governance leaders: These companies are committed to diverse and independent boards, strong ethics policies, responsible executive pay that is tied to performance, and combatting corruption.

Meanwhile, our five favorite ESG funds are all focused on sustainability, but each has a unique approach. These funds might focus on an ESG category, seek a measurable impact on a specific challenge, integrate ESG criteria into a broader strategy or engage with firms to improve ESG practices.

For details on how our picks have performed and why we think they are standouts, read on.  All returns and data are as of April 17, unless otherwise noted. 

Nellie S. Huang
Senior Editor, Kiplinger Personal Finance Magazine

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.

With contributions from
  • Senior Associate Editor, Kiplinger's Personal Finance