OUR TOP ESG PICKS FACE A STORM

Most of our favorite stocks and funds focused on environmental, social and corporate governance issues struggled in an increasingly hostile climate.

- BY DAVID MILSTEAD AND NELLIE S. HUANG

It has been a tough year for investors who include environmental, social and corporate governance factors when assembling their portfolios, as well as our picks of companies and funds that are ESG leaders. The 15 stocks in the Kiplinger ESG 20 returned an average of 4.3% over the past 12 months, compared with 15.9% for the S&P 500. Just six of our stock picks outpaced the index. Of our favorite ESG funds, only one outperformed its respective peer group, and we're making several changes.

When we looked at the landscape a year ago, the climate for ESG investing was turning hostile. A number of companies, faced with pressure on social media, retreated from policies designed to promote diversity, equity and inclusion. Large investors began to pull out of groups formed to advocate that companies adhere to tough climate goals. Despite that, our picks did well compared with the broader market in the 12 months that ended August 31, 2024.

The election of President Donald Trump accelerated the attacks on ESG. From November 5 through August 31 of 2025, our ESG stock picks averaged a 3.7% return, while the S&P 500 rose 14.3%. There's no doubt ESG investing is in the crosshairs.

The Trump administration's Department of Justice asserts that DEI policies amount to illegal discrimination, for example. And Trump has repeatedly expressed disdain for renewable energy, particularly wind power. Many investors are following Trump's lead, pulling $12.2 billion from U.S. sustainable-investing funds in the first half of 2025, according to investment research firm Morningstar.