Introducing the Kiplinger ESG 20

Our picks have profit potential and are tackling today’s environmental, social and governance challenges.

- NELLIE S. HUANG and ADAM SHELL

This month we’re introducing the Kiplinger ESG 20, the list of our favorite stocks and funds that excel at meeting environmental, social, and corporate governance challenges. Buying stocks or funds that are planet- and people-friendly is becoming as important a goal among investors as saving for retirement. In response to crises tied to climate change and the global pandemic, as well as to pressing social issues such as income inequality and the push for racial justice, more investors are embracing the ESG investing movement in a bid to drive change and make the world a better place.

People who want to align their investments with their values seek businesses that not only focus on increasing profits for shareholders but also take steps to protect the planet, boost the well-being of their employees, keep customers satisfied and safe, and assist communities in need. Money invested in ESG funds could jump nearly sixfold this decade, to $1.2 trillion, projects BlackRock, the world’s largest money management firm.

You don’t have to sacrifice returns to jump on the ESG train. The S&P Composite 1500 ESG index, a broad measure of ESG-focused stocks covering U.S. companies of all sizes, returned 36.4% over the past year—barely a hair less than the 36.6% return of the S&P Composite 1500, its non-ESG cousin. Over the past three years, the ESG index has returned an annualized 18.6%; besting its counterpart’s 17.2% average yearly gain.