Best Ethical Shares UK to Watch in 2024
Over the past several years, ethical investing has grown into a popular investment strategy. Ethical shares and stocks offer a unique way to gain exposure to the financial markets while also having a positive impact on the planet.
Therefore, investing in ethical stocks and shares can be aligned with personal values. In this article, we discuss which ethical stocks to watch this year, why many investors now choose to focus on ethical shares and address some frequently asked questions.
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What are Ethical Shares?
Ethical shares represent companies that meet certain environmental, social, and governance requirements. Those requirements are also known as ESG criteria. If a company meets the criteria, it means that they have implemented sustainable and ethical practices.
Ethical shares and stocks offer investors the opportunity to build their own investing portfolios while also contributing to the values a company stands for. By choosing ethical shares, the investor can build a portfolio that aligns with personal beliefs while also having the opportunity to generate a return. Of course, a return is not guaranteed as investments go up and down.
Best Ethical Stocks to Watch
The interest in ethical stock trading is growing. Interested investors in ethical shares and stocks have their choice of a range of options and possibilities across the UK, US and European markets.
The following list of the best ethical stocks to watch is based on each stock’s ability to create positive change, whether from an environmental, social, or ethical perspective. Of course, a company can always change its values so staying up to date with the latest research is important.
It's also important to note that a company trying to be more 'ethical' may not have an impact on its share price. As always, thorough research on the company's fundamentals and long-term growth prospects will also be important.
Here are the top five ethical stocks to keep an eye on in 2023:
- Tesla - Leading the Development of Electric Cars and Energy Storage
- Beyond Meat - Food Industry Innovator Providing Plant-Based Meat Substitutes
- Ecolab - Sustainable Solutions and Services to Optimise Water and Energy Use
- United Natural Foods - Wholesale Distributor of Organic and Natural Foods
- Microsoft – A Tech Company with Ambitious Goals to Achieve Carbon Neutrality
Tesla - Leading the Development of Electric Cars and Energy Storage
Tesla is known for innovation. The company - led by Elon Musk - specialises in the production of electric vehicles but is also engaged in finding new ways of storing energy and the production of solar panels. Tesla aims to have a strong commitment to sustainability and renewable energy.
One of the initiatives of Tesla is the offering of carbon credits to other companies. Tesla has its own carbon credit initiative, which has been profitable for the company and at the same time helps other businesses offset their carbon emissions.
Historically, Tesla's stock price has seen significant growth since its appearance, and now one of the ten most valuable companies in the world.
However, there have been concerns regarding a slowdown in electric vehicle sales which is likely to impact its profitability and share price.
Beyond Meat - Food Industry Innovator Providing Plant-Based Meat Substitutes
Beyond Meat is a brand you might recognise from the local supermarket or burger chain. The company produces food in an environmentally and sustainably friendly manner, by replacing meat with plant-based products. The company is vocal about its mission and wants to protect the world’s future.
Beyond Meat does this by enabling positive choices when it comes to using natural resources and improving animal welfare. For investors in ethical shares UK and US with a special interest in animal welfare or meat substitutes and plant-based food stocks, Beyond Meat offers an ethical opportunity.
Beyond Meat went public through an initial public offering (IPO) in 2019. Its share price has been extremely volatile ever since with swings both to the upside and downside. This is not out of the ordinary after an IPO.
Currently, the stock price is trading below its IPO price. Investors will need to assess the continued growth of plant-based meat substitutes which will be correlated with the company’s long-term share price.
Ecolab - Sustainable Solutions and Services to Optimise Water and Energy Use
The Ecolab company - founded over a century ago - offers energy, water and hygiene technologies and services. The company is dedicated to sustainability and is working hard on reducing its carbon footprint.
Ecolab has set ambitious goals to achieve this, including reducing its own water usage and greenhouse gas emission across all its operations and developing and implementing high standards to become one of the leading green companies in the world.
Since 1983, Ecolab’s stock price has grown from $1.73 to over $235.00 during the most recent all-time high in 2021 but is now trading well below it. The company’s commitment to long-term sustainability will decide whether it stays as an ethical stock to watch.
United Natural Foods - Wholesale Distributor of Organic and Natural Foods
United Natural Foods is a wholesale distributor of natural and organic foods. The company is committed to sustainability and reducing its environmental impact. According to their mission statement, important concerns for United Natural Foods include, but are not limited to, climate action, community development, responsible procurement, and waste reduction.
As one of the biggest wholesalers of natural and organic foods to supermarkets all over the United States and Canada, United Natural Foods sure can lead the way in this industry. To attain their goals, they set up a strategy named ‘Better For All’.
United Natural Foods is an option among investors interested in ethical shares. The true test of the company’s share price is how well it can deal with higher inflation which has affected all industries over the last several years.
Organic and natural foods tend to be the most expensive and become dearer during periods of high inflation. Therefore, analysing the global macro trading environment is also important when deciding which ethical share to invest in.
Microsoft – A Tech Company with Ambitious Goals to Achieve Carbon Neutrality
Microsoft is probably the tech company that profiles itself as the most sustainable and ethical stock. The company has set some clear goals to improve its environmental impact - including being carbon neutral by 2030. The company even uses Microsoft AI and disaster management non-profit SEEDS to shine a light on the threats of climate change.
Furthermore, Microsoft has invested significantly in renewable energy sources, adopting a more sustainable business model and reducing its carbon footprint. Microsoft’s stock price has seen significant growth over the years.
However, its ambitions to be a sustainable and ethical stock are not the same reasons that generate its revenue. Therefore, analysing its core business will be important for ethical investors.
Microsoft’s cloud computing division is now the largest source of revenue and profit for the company and has helped to cement its status in the technology field even after being made famous for its PC, laptop and gaming computer hardware and software.
Why Invest in Ethical Shares UK?
Why would someone invest in ethical shares? One of the reasons for investing in ethical shares UK could be the unique opportunity this offers to build a portfolio that aligns with one's personal values. If you are passionate about climate change, then investing in ethical shares that help to combat climate change is a way to show support to companies taking active measures to become more sustainable.
There is more and more attention to the importance of reform in the way energy sources are being used. Investing in certain ethical shares or an ethical index fund consisting of ethical stocks can be a smart way and satisfying way of investing in the future.
However, investors should keep in mind that ethical investing does not always result in profits. It is important to also do your own research about the company’s profitability and future revenue growth prior to making any decisions about ethical stocks.
For example, it is important to be aware of greenwashing. This is a situation where a company makes unsubstantiated claims that its products or policies are environmentally friendly when they are not. Due to the rise in ethical and green investing, it is important to research the claims of a company and verify its results and claims.
Conclusion
Ethical investing has become increasingly popular in recent years as investors seek to align their investments with their personal values and beliefs. Ethical shares and stocks offer a unique way to build a sustainable portfolio while prioritising companies that are making great efforts towards reducing their environmental impact and finding solutions for shaping a greener future.
Just as with other stocks, the market can be volatile and experience upturns and downturns. A good place to start with trading ethical stocks could be a demo trading account. This can be used to practice and refine ethical investment strategies in a virtual environment until you are ready to go live.
FAQs on Ethical Shares UK
How do you know if a stock is ethical?
One way to know if a stock is ethical could be to examine a company’s environmental, social, and governance activities, programs, and goals. Look out for businesses with a proven, strong commitment to sustainability and social responsibility to determine if a stock is truly ethical. You can also search for a company's ESG score by index fund providers.
What are examples of ethical investments?
In general, stocks and shares of businesses that prioritise sustainability, reducing emissions, and social responsibility are examples of ethical investments. Examples would be companies that produce or invest in renewable energy or promote sustainable agriculture.
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