Are these the best ESG shares to watch in March 2024?

Billions of pounds and dollars are now invested in ESG funds around the globe - funds which invest in companies that score highly for their environmental, sustainable, social and corporate governance policies. Indeed, according to date from Morningstar, over $2.77 trillion was held in ESG mutual funds and ESG ETFs globally at the end of the first quarter of 2022.

Far from being the province of tree huggers, ESG is now good business as investors and consumers alike expect better behaviour from the companies they invest in or purchase goods and services from.

Best ESG shares to watch

Many of the world’s top companies are pledging to achieve zero net carbon status, dramatically reduce their water use, promote diversity and inclusion among their workforces and sustainability in their use of the planet’s resources. Many big name firms are also donating millions to worthy causes, supporting community programmes and encouraging their suppliers to do likewise.

Here are five companies we think are worth watching for their ESG credentials. These have been chosen for recent market news.

Past performance is not a guide to future performance.

1. Microsoft
2. NVidia
3. Cisco Systems
4. AstraZeneca
5. Diageo

Microsoft (NSQ:MSFT)

Microsoft Corporation ranks highly in ESG portfolios for its commitment to sustainability and social justice. The tech giant is committed to being carbon neutral and zero waste by 2030, and eliminating historical carbon from its business by 2050. It aims to protect more land than it will use by 2025 and build a planetary computer.

In terms of social endeavours, Microsoft is also committed to helping address racial injustice and inequity in the US for Black and African American communities. It has invested an additional $150 million to strengthen inclusion and double the number of Black and African American, Hispanic, and Latinx leaders in the US by 2025.

The technology firm recently reported solid fourth quarter figures, with revenues increasing by 18% to $62 billion thanks to strong sales at its Microsoft Cloud division. Net income rose by a third (33%) to $21.9 billion during the period. The buzz around artificial intelligence is turning into sales for the company, while its acquisition of gaming company Activision Blizzard has also now gone through.

Nvidia (NSQ: NVDA)

Chipmaker Nvidia also features prominently in many ESG funds’ top holdings. The company says its technologies now power 23 of the top 30 systems on the latest Green500 list. NVIDIA powers 90% of the new systems in the latest TOP500 list of the world’s fastest supercomputers. This includes the NVIDIA H100-powered system deployed at New York’s Flatiron Institute, which, it says, topped the Green500 list of the most-efficient systems.

It claims that its GPUs are typically 20 times more energy efficient for certain AI and HPC workloads than traditional CPUs. The company also plans to purchase or generate enough renewable energy to match 100% of its global electricity usage. The shares are up 235% this year and trade on an expensive price earnings ratio of 66.

Cisco Systems (NSQ:CSCO)

Cisco Systems provides cloud computing, IT security and networking services and features in the top holdings of a number of ESG funds. The company says it has delivered a 73% increase in representation of African American/Black employees from entry level to manager compared to its base year of 2020. What’s more, 91% of the electricity used at its sites is from renewable sources and it aims that by 2025 half of the plastic in its products will be made from recycled materials.

Meanwhile, Cisco’s management says there is a “huge opportunity” for it to benefit from the growth in artificial intelligence, with AI technologies across its collaboration and security portfolios designed to boost productivity, enhance policy management, and simplify tasks.

The shares are down by just under 1% this year but, compared to those of many other tech companies, trade on an undemanding rating of just 15. The stock also has a dividend yield of 3.3%.

AstraZeneca (LON:AZN)

As investors might expect, AstraZeneca has a major focus on health in terms of its ESG ambitions. It has established a number of healthcare programmes, such as the Healthy Heart Africa initiative, which aims to reduce hypertension and cardiovascular disease among patients in the continent and a Younger Health programme in 40 countries around the world.

The drugs giant says it has also invested $1 billion to reduce carbon emissions “from lab to patient” and $400 million to grow 200 million more trees by 2030. It also promotes a “speak-up” culture in terms of ethics and transparency at AstraZeneca, while 50.1% of its senior management roles are held by women.

The company is benefiting from strong cancer product sales and has also purchased a possible early stage obesity drug, ECC5004, from Chinese company Eccogene that could be a blockbuster.

Diageo (LON:DGE)

The drinks giant says it is putting “positive societal impact” at the heart of its business strategy, through a 10-year Environmental, Social and Governance (ESG) action plan. Diageo is aiming to promote responsible drinking, tackling problem areas, such as binge and underage drinking. It also seeks to be inclusive, champion women in 50% of its leadership roles by 2050 and promote sustainability, aiming for net zero carbon and a 40% improvement in water use efficiency.

It hasn’t been an easy 12 months for Diageo, which lost its long-time chief executive Ivan Menezes to illness last year and also weathered a November profits warning, following a slowdown in its Latin American markets. The shares are down 17% this year to 3,004p but are worth watching.

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ESG stocks summed up

There are many different ESG stocks available and these are just a sample of them. Always do your own research. Past performance is not a guide to future performance.

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