7 Best ESG Stock Screeners: Tools to Filter Ratings & Metrics

In 2020, ESG asset management strategies netted a 42 percent increase, from $12 trillion in 2018 to $17.1 trillion by the beginning of the year.

These figures come from the US SIF Foundation and the Forum for Sustainable and Responsible Investment. ESG investing is a type of socially and environmentally responsible investing concerned with how a company positively impacts the planet, society, and its shareholders, as well as potential investment returns.

Other terms for ESG investing include impact investing, socially responsible investing, and sustainable investing. Learn about ESG stock screeners as you continue to read.

What Are ESG Stocks?

ESG stands for environmental, social, and (corporate) governance. ESG stocks are stocks provided by publicly traded companies that hold these values in high standing and seek to deliver results without compromising their ideals.

The environmental part of ESGs demonstrates how a company impacts the planet differently.

Recycling and disposal practices
“Green” technologies, infrastructure, products, and services.
Climate change policies
Carbon footprint
Waste disposal policies
Water usage and conservation
Renewable energy utilization
Greenhouse gas emissions

There might be more environmental criteria like employee incentives promoting bicycles, public transport, and carpooling.

It could also examine what kind of relationship the company has with the Environmental Protection Agency or other environmental organizations, both public and private.

The social part of ESG showcases the kinds of social issues that consumers, customers, employees, and local communities might face.

How well a company scores on social factors depends on how it handles these issues and how its policies affect various groups.

The social components of a company’s culture include various social issues.

Public stance on social justice issues
Lobbying efforts toward social justice issues
Employee satisfaction and compensation
Inclusive, diverse hiring practices
Consumer protections (regulatory penalties, lawsuits, recalls, etc.)
Employee development and training standards
Employee turnover rates
Ethical supply sourcing
Community engagement
Sexual harrasment prevention

The governance portion of ESG stocks deals with the quality of corporate leadership, ethical considerations, and the board of directors’ independence. Some of the topics under the governance umbrella include:

Quality of relationship with the US Securities Exchange (or other regulatory bodies)
Presence of ethical business policies and how they enforce them
The separation between CEO and Chairman roles
Structure of board vote decisions
Prevalence of shareholder lawsuits
Transparency with shareholders
Term limits among board members
Conflict of interest potential
Executive compensation rates
Diversity on the management team and board of directors
Shareholder involvement in board nominations

Evaluating the ESG performance of any given corporation can be a complicated process, as the criteria listed above vary based on how you track a company’s ESG performance. Companies regularly practice in-house corporate reporting and publish ESG goals and their progress in achieving them.

Any corporate reporting should follow the ESG standards set by the Global Reporting Initiative. Alternatively, you could use the United Nations Principles for Responsible Investment as a rubric.

ESG stock screeners are another valuable tool for ethical investors who want to make a profit while making a positive difference in the world.

What Are Stock Screeners?

Man Screening at a Laptop with Stock Data on Screen

Using a stock screener allows investors to sort through a large number of stocks and exchange-traded funds (EFTs) based on their specific criteria.

They are ideal for finding eligible ESG stocks because they let you browse curated stocks based on your idea of what makes an asset valuable. ESG stock screeners can help you better recognize trading opportunities as a short-term trader.

With a stock screener, you can narrow down your financial investment search by selecting your parameters and defining your unique requirements.

Investors of all stripes use stock screeners for different ends. For example, technical traders might be more interested in the Relative Strength Index (RSI) than ESG reporting. On the other hand, a fundamental investor might be more concerned with analyst recommendations or Earnings Per Share (EPS).

Stock screeners generally offer tools for all investors, and anyone interested in tailoring their stock portfolio should use this financial tool to their benefit.

Before you try and find the best stock screener for you, it’s essential to pin down exactly what sort of investor you want to be. If ethical investing is a priority for you, then you need to find a suitable ESG screener.

See Related: Best Green Companies to Invest in 2023

ESG Stock Screeners

While industrious investors might enjoy spending hours poring over stock data to find the right stocks for them, the time and effort required are undeniable.

Socially responsible investing might ease your conscience, but without the right tools, it can eat into your schedule. ESG screening allows you to quickly assess a company’s views on social and environmental issues.

It also helps you gauge their commitment to implementing ESG policies in their business.

They can provide a priceless peek into what factors might make them incompatible, like potential health risks, bad labor practices, carbon footprint, or consumer safety concerns. Every individual ESG stock screener will have a different definition of what constitutes socially and environmentally responsible corporate behavior.

As the demand for ESG investment options grows, more companies are offering various tools, like ESG stock screeners, to help pinpoint the perfect investment strategy.

Why Should You Invest in ESG Stocks?

The ideal ESG investors want to support ethical, responsible corporations and see healthy financial returns. If that’s not enough incentive for you, several other benefits come with buying and selling ESG stocks.

High Return Rate

Research shows that ESG stocks can generate the same or better financial results as their non-ESG counterparts. What’s more, companies that practice good ESG standards consistently outperform those that do not.

Companies that exhibit numerous nonfinancial quality indicators tend to perform better on the market than those evaluated using accounting-based metrics.

It’s much more likely that you will get a higher profit with ESG stocks than without.

Measurable Leadership Strength

There is no clear-cut answer to why ESG companies perform better than their non-ESG peers, but there are a few theories. One of those theories posits that a company cannot succeed as an ESG corporation without exemplary leadership.

Your typical ESG initiative is a long-term process, and without capable leadership that can foresee long-term outcomes, ESG-friendly strategies simply don’t work. This makes ESG standards doubly important as a metric of success and investment possibility.

Reduce Portfolio Risk

Understanding the basics of ESG stocks, it shouldn’t surprise you that the stock prices of ESG companies tend to be less volatile. This is because social, environmental, and governance issues will always pose risks to profits, no matter what industry you invest in.

Companies with ESG-centric cultures avoid many issues stemming from unethical governance and social and environmental policy. This mitigates risks for investors and shareholders.

Corporations that actively work to address and avoid those risks will see less disruption and are sure to experience stable financial results over time. In this way, ESG investing offers a lower downside risk when compared to traditional funds, no matter the asset class.

During turbulent economic periods, traditional stocks will experience a much larger downside deviation than ESG stocks, opening up a much larger potential for loss when the market gets shaken up.

Even during the COVID-19 pandemic, many ESG funds outperformed comparable funds throughout the first quarter 2020.

Though the world continues to recover from the pandemic’s global impact, the rate of ESG adoption by investors has stayed near its peak in 2020.

In a world that has continued to see-saw in an uneven recovery from the impact of the COVID-19 pandemic, ESG adoption by global institutional investors this year has remained close to its peak level of last year, according to the 2021 RBC Global Asset Management Responsible Investment Survey.

Best ESG Stock Screeners

Though finding the right ESG screener can be daunting, we’ve provided a handy list of the best ones available in 2021.

While this list is a great starting point for any potential ESG investors, it’s essential to supplement it with your own research as well.

Read on to learn more about the best ESG stock screeners on the market so you can decide where to start your ESG journey.

1. Best Overall Stock Screener: Morningstar ESG Screener

Morningstar Inc. is a financial service firm based in Chicago, Illinois. It was founded in 1984 to provide the general public with a wide range of investment management and research services.

Morningstar Inc. has operations in 29 countries. Their financial recommendations and research continue to be the most influential in the asset management industry.

A positive recommendation from Morningstar’s analysts can make or break a fund’s financial future. Beyond its ESG screening services, Morningstar Inc. provides data platforms and software options for a wide range of investors. It has been known as the best stock screener for both retail and institutional investors.

Morningstar’s sustainability rating and screening are done in four simple steps, using proven identification strategies to demonstrate whether an ESG fund is a good investment for you.

You can learn where companies rank in Morningstar’s globe rating system, which ranks sustainable funds according to their ESG ratings.

With Morningstar’s ESG screener, you can search for stocks based on your ESG preferences and define your search with laser-focused intention.

Morningstar’s Low Carbon Designation and Sustainability Rating is a great place to begin if you’re still trying to find your ideological footing.

2. Sustainalytics ESG Screening Solutions

In April 2020, Sustainalytics, a global leader in ESG research and ratings, was acquired by Morningstar Inc. The two companies first teamed up in 2016, and since the merger, Sustainalytics has continued to provide ESG services to investors and companies.

When you choose Sustainalytics, you choose 25 years of industry experience in providing ESG-tailored solutions that enable you to understand and manage your ethically responsible portfolio.

Sustainalytics ESG screening solutions provide you with a host of ESG tools to ensure your investment portfolio complies with whatever ethical parameters you decide on as well as regulatory requirements.

These tools include controversies research and screening, norms-based screening, defense research, sustainable products screening, and a human rights radar.

Sustainalytics also provides an optional managed screening service. This includes a comprehensive screening service based on their pre-selected criteria.

3. Isometrix ESG Reporting

IsoMetrix is a global leader in software solution development designed for integrated risk management. Isometrix aims to help its customers invest in sustainable, ethical companies that do the most good and still turn considerable profits.

The company seeks to offer a complete solution for ESG management. Their intuitive system combines different features of Environmental, Health, and Safety software, Environmental Sustainability software, and Social Sustainability software.

With Isometrix ESG reporting, you can collect diverse data from multiple sources, proactively manage business risk, and report on ESG standards.

This integrated approach saves priceless amounts of time and effort and makes standardizing ESG information a breeze. With Isometrix, you can effectively analyze ESG data across different business units and spot hidden trends early on.

4. MSCI ESG Research

MSCI stands for Morgan Stanley Capital International, and its ESG research division includes support tools and services for investors worldwide. With Morgan Stanley’s 5 decades of experience in data, research, and technology, you can feel secure making investment decisions by analyzing risk factors and sustainable investment returns.

MSCI ESG Research provides exceptional transparency in financial markets that allows you to make profitable, responsible investment decisions that improve the world.

It measures model ESG risk factors and performance while providing value for clients and offering thorough coverage of global data and financial analytics.

Stay on top of evolving markets, all while keeping abreast of the most up-to-date ESG data and standards for ethically minded investors.

The MSCI ESG rating measures a company’s performance in the face of long-term ESG risks. It uses rules-based methods to pinpoint the best and worst ESG stocks on the market. In addition to its ESG ratings, MSCI also rates fixed-income securities, mutual funds, equity, and ETFs.

See Related: Best Climate Change Mutual Funds

5. Charles Schwab SRI Screening

There are a few Charles Schwab brokerages that provide information about ESG strategies as a tool for investors. Customers will get some of these solutions, while others, such as Charles Schwab, will offer search tools that anybody can use.

Schwab’s ESG-style investment approach was created to help investors discover ESG and socially responsible funds and ETFs. When looking at a fund’s profile, clients can assess its social impact. You may compare five SRIs at once and select one that best matches your financial needs.

6. ETF.com ESG Ratings

ETF.com is a website that provides rating information for various ETFs, including carbon emissions, sustainability impacts, and governance risks.

The ETF.com ESG rating is 10 out of 10, meaning that the ETF is considered to be very good at managing risks associated with environmental, social, and governance factors.

The ETF has a low management fee and is well-diversified, making it a good choice for investors who are looking to invest in an ETF that considers environmental, social, and governance factors.

The ETF is also highly liquid, so it can be easily bought and sold on the open market. Overall, the ETF.com ESG rating makes it a good choice for investors who are looking for screening solutions in the ESG investing space.

7. Refinitiv ESG Scores

Refinitiv is part of the London Stock Exchange Group, which provides financial market information and multiple filters for finding new investment opportunities. This information includes ESG company data. Refinitiv’s data processing and analytics business includes e-learning modules that help businesses improve their efficiency and productivity.

The majority of Refinitiv’s company analyses are based on the 186 industries that have comparable 186 standards. Refinitiv is a trustworthy source for businesses to obtain in-depth knowledge about their sectors and how they compare to similar firms.

Refinitiv’s stock screener and information are vital for businesses to have in order to make well-informed decisions about their futures. Refinitiv provides this useful service to firms so that they may make well-informed judgments about their sectors and futures.

See Related: Most Ethical Credit Cards to Apply For

What is an ESG Score?

An ESG score is a number that represents a company’s performance in terms of environmental, social, and governance factors. The higher the score, the better the company’s performance in these factors.

You can then use ESG tools to find the best opportunities for sustainable investment in areas that meet your financial metrics and the ESG metrics you care about.

What should I look for in stock screeners?

Often, the search for a company’s ideal stock begins with an overwhelming and complicated process. However, if you have good inventory screening software, it becomes much easier to find the right stocks.

A stock screener has filters that you can use to find stocks that meet your needs. Examples of these needs can include how much money you want to invest or how much time you want to spend on this investment. You can also choose to use these filters to find stocks that best match your ethical and socially responsible investing (SRI) values.

You should also research different stock screening tools that best suit your investing needs. Some are good for trading stocks daily, while others are better long-term investment choices. Most of these devices follow the US stock market, but there are many that are global.

How do I find an ESG rating for a company?

There are a few ways to find an ESG rating for a company. One way is to look up the company on a website that provides ratings, such as MSCI ESG Research or ETF.com. Another way is to look up the company in an investment database, such as Morningstar or Bloomberg.

Does stock screening work?

Stock screens are most often used by investors and trading professionals to sort through millions of businesses for the finest possible stocks, but they have certain drawbacks. A stock screener helps investors determine the values of stocks based on their fundamentals.

They are unwilling or unable to account for issues that are significantly important to stock performance, such as managerial changes, significant litigation, labor difficulties, and industry competition.

Stock screeners not utilizing real-time data might provide incorrect or faulty information at the wrong time.

FAQ

What is ESG screening?

The ESG screen is designed to remove certain businesses, industries, or nations based on ESG criteria. There are two methods of performing an ESG screening: standalone and in conjunction with different styles, such as investment themes or integration of ESG throughout investment processes.

What are ESG tools?

ESG stands for environmental, social, and governmental. It is also used to describe a company’s ethics. Tools that use ESG information are typically used to monitor performance by analyzing business financial data as well as social and environmental metrics (e.g., carbon emissions, hours of work per day, etc.).

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The Impact Investor

Kyle Kroeger, esteemed Purdue University alum and accomplished finance professional, brings a decade of invaluable experience from diverse finance roles in both small and large firms. An astute investor himself, Kyle adeptly navigates the spheres of corporate and client-side finance, always guiding with a principal investor’s sharp acumen.

Hailing from a lineage of industrious Midwestern entrepreneurs and creatives, his business instincts are deeply ingrained. This background fuels his entrepreneurial spirit and underpins his commitment to responsible investment. As the Founder and Owner of The Impact Investor, Kyle fervently advocates for increased awareness of ethically invested funds, empowering individuals to make judicious investment decisions.

Striving to marry financial prudence with positive societal impact, Kyle imparts practical strategies for saving and investing, underlined by a robust ethos of conscientious capitalism. His ambition transcends personal gain, aiming instead to spark transformative global change through the power of responsible investment.

When not immersed in finance, he’s continually captivated by the cultural richness of new cities, relishing the opportunity to learn from diverse societies. This passion for travel is eloquently documented on his site, ViaTravelers.com, where you can delve into his unique experiences via his author profile. Read more about Kyle’s portfolio of projects.