We recently compiled a list of the 7 Best Ethical Companies To Invest In According to Reddit. In this article, we are going to take a look at where Waste Management, Inc. (NYSE:WM) stands against the other ethical companies to invest in.
Ethical investing involves choosing investments based on ethical principles, such as environmental, religious, or social values. Unlike socially conscious investing, which follows a specific set of guidelines, ethical investing is more individualized. Investors typically avoid being involved in gambling, alcohol, or firearms, and carefully research to make sure their investments align with their values.
Other stocks that are avoided by ethical investors include the shares of companies where employees are mistreated, have high gender parity, or discriminate against employees due to their race, religion, or sexual orientation. Environmentally conscious companies are also a huge part of ethical investing.
Is Ethical Investing the Future?
A 2022 report by Stamford University noted that the younger generation considers ethical investing quite crucial. A 2022 survey of 2,470 individual investors, conducted by Stanford University’s Rock Center for Corporate Governance, found significant differences in Environmental, Social, and Governance (ESG) preferences based on age and wealth. Younger and wealthier investors are more likely to support ESG initiatives, even at the expense of returns, while older and less wealthy investors are generally opposed.
Over recent years, support for ESG proposals has surged, with average support among S&P 500 companies increasing from 18% in 2012 to 35% in 2021, and the number of proposals passed rising from 0 to 28. The survey found that 70% of young investors (18-41 years old) are very concerned about environmental issues, compared to only 35% of older investors (58+ years old). Similarly, 65% of young investors are very concerned about social issues, versus 30% of older investors. When it comes to governance, 64% of younger investors express significant concern, while only 28% of older investors do.
Moreover, 86% of older investors would not give up any or only a trivial amount of returns for carbon emission reductions, while 64% of younger investors would give up moderate or large amounts. Additionally, 91% of older investors are unwilling to sacrifice returns for workplace diversity improvements, compared to 62% of younger investors who are willing to do so.
The survey also found that investor attitudes towards ESG differ across fund companies. Investors in State Street and Invesco funds exhibit nearly twice the concern for environmental issues compared to those in Fidelity funds. A significant percentage of investors in Fidelity (40-45%) and Vanguard funds are unwilling to forfeit returns for ESG, while a smaller percentage in American Funds and BlackRock (25-30%) share this reluctance.
Despite these differences, 83% of investors across all demographics believe that fund managers should consider their views when voting on ESG issues. The results suggest that fund managers might need to allocate votes on a proportional basis to reflect the diverse preferences of their investor base.
Our Methodology
For this article, we scoured through several threads to discover which companies were considered ethical according to the users. We narrowed down the list to 7 stocks that were most widely mentioned and used the hedge fund sentiment of each stock as a tie-breaker. The companies are listed in ascending order of the number of hedge fund holders as of the second quarter of 2024. The hedge fund data was taken from our database of over 900 elite hedge funds.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Aerial view of a Waste Management Transfer Station, highlighting the scale of its operations.
Waste Management, Inc. (NYSE:WM)
Number of Hedge Fund Holders: 49
Waste Management, Inc. (NYSE:WM) stands as a prominent figure in the North American waste management and environmental services sector. Over the years, the company has evolved into a comprehensive waste management company with a vast operational footprint.
Collection operations are the primary revenue driver for Waste Management (NYSE:WM), which involves the pickup and transport of waste to transfer stations, material recovery facilities, or landfills. Approximately 70% of collected waste is processed at its landfills. It is among our best ethical companies to invest in.
According to its latest sustainability report, in 2023, Waste Management (NYSE:WM) recovered over 15 million tons of material, with a significant increase in recovery capacity and a 3% boost in material recovery compared to the previous year. Key initiatives included opening or upgrading eight recycling facilities and adding nine organics processing sites, which expanded its network to 102 recycling and 49 organics facilities. It is one of the best ethical companies to invest in.
The company is making efforts to enhance recycling, including leveraging advanced technologies and expanding access through new facilities and digital tools. It is investing over $1.4 billion in new and upgraded recycling infrastructure by 2026 and is aiming to add 2.8 million tons of capacity annually. The company’s focus on consumer education through the Recycle Right program and initiatives like textile sorting and collaboration with brands like REPREVE highlight its commitment to sustainability.
The company is also working to grow domestic markets for recycled commodities and improve recycling streams. With new facilities and enhanced technologies, the company plans to broaden access to recycling services and support community sustainability goals.
In the second quarter, 49 hedge funds had stakes worth $8.7 billion in Waste Management (NYSE:WM). Bill & Melinda Gates Foundation Trust is the company’s largest shareholder with 35.23 million shares worth $7.5 billion, as of the second quarter.
Overall WM ranks 5th on our list of best ethical companies to invest in. While we acknowledge the potential of WM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than WM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.