The Impact Investor | ESG Investing Blog

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Many big companies and industries worldwide get plenty of negative press for being wasteful where makes their shares a list of stocks to avoid. At the same time, there are also a lot of companies out there that produce eco-friendly products or, at the very least, operate their business in a way that is carbon neutral.

With eco-friendly companies taking center stage in the investment market these days, it is important to keep an eye out for the imposters among them. Being an ESG stock doesn’t automatically make it worth investing in.

As a matter of fact, some of the worst ESG stocks are those that happen to be trending at the moment.

Thanks to the recent trend that has pushed renewable energy, ESG companies, and other green programs to the forefront, it has become easier to access green stocks.

The current administration is also putting considerable weight behind various eco-focused initiatives.

Before you jump on the investment bandwagon, it is a good idea to consult with a seasoned financial advisor to make sure you can avoid wasting money on the worst ESG stocks currently making the rounds.

Meanwhile, we have put together a list of some of the worst ESG stocks on the market that may also derail your investment objectives.

The Least Eco-Friendly Stocks

Stocks Graph

Before we get into the worst ESG stocks on the market, let’s take a quick look at some not eco-friendly stocks despite being touted as such. Progress Energy was a powerhouse when the world needed power, but it is one of the worst companies in being environmentally conscious.

They are good at managing social issues and economic issues, and they even allow their customers to buy carbon offsets, but as a company and stock option, they are one of the least eco-minded on the Dow Jones.

AES is another company that has done a good job of green-washing its stocks, but they remain one of the top polluters in the world. The company did join the US Climate Action Partnership, but more for effect, it has as a shield rather than for true change.

Archer Daniels Midland is one of the biggest agricultural companies in the world. While the company does produce a range of biofuels and renewable fuels, it remains a big polluter itself.

In fact, despite offering ESG stocks, it is embroiled in litigation for vast amounts of pollution of several types, totaling hundreds of millions of dollars. PPL is an electric company that offers ESG stocks, but it is one of the larger sources of greenhouse emissions in the PA area.

To date, they have yet to put a plan in place to reduce greenhouse emissions, and instead of working towards a change, they blame the lack of regulation for not taking the initiative.

See Related: Benefit Corporation vs. B Corp

The Worst ESG Rated Stocks

Investors have long since ignored the negative effects that a high ESG score had on their stock choices.

However, with a recent turn towards sustainability, investors now understand how a high ESG risk equates to a decrease in shareholder value. If you want to avoid some of the pitfalls of bad business policies, it is important to skip over companies with the worst ESG stock scores when choosing where to invest.

Though one of the most cost-effective places for people to shop when on a budget, Walmart has one of the worst ESG scores on our list. They are plagued by fair trade issues, workplace and labor violations, safety violations, and even issues with government bribery. Wells Fargo & Co is one of the worst offenders on our list.

You may be wondering how a financial giant that has been around for almost a century is a bad ESG bet, but believe us when we tell you to avoid it at all cost.

They have consistently paid out their top brass outrageous amounts without ever reaching their performance targets. In addition, their auditing methods are dodgy, and they intentionally and actively discriminate against minorities in lending, display anti-competitive behavior, and are fraught with workplace violations.

Altria group is another company that makes our list. Tobacco production is always going to get bad scores.

Still, this stock and company are plagued with labor violations, poor governance, and several issues relating to financial mismanagement in the upper levels to make things worse.

See Related: History of Impact Investing

ESG Stocks to Avoid

Many companies have made changes to their business model to improve their ESG scores.

While most of them are sincere in their efforts, there are plenty that simply is doing it as a form of eyewash, or in this case, green-ESG washing.

Many overvalued names in the stock market may be profitable but are actually bad stocks for ESG ratings.

Instead of investing in simple ESG virtue-signaling companies, look for companies that are working towards real change instead. In this post, you won’t find a list of stocks to invest in, and we have several other blog posts for that.

However, we will tell you which ESG stocks to avoid if you want a truly diverse portfolio.

Twitter (TWTR) is one of the most used social media platforms, but it is not actually worth your ESG investment.

While it may not harm the environment like other corporations, it has a meager ethical and social rating from social sustainability.

The same is true for Facebook (FB), which has a nearly nonexistent ethical rating and places a huge drain on the earth’s energy reserves.

AT&T (T) and Comcast (CMCSA) are two communications companies with trash ESG ratings and are not worth your investment.

They are still behind in implementing renewable energy programs in their production and service centers, and their labor divisions have been rife with problems that have remained unaddressed for decades.

Disney (DIS) is a company that is known for creating dreams and filling our lives with wonder.

However, they do it at a cost that the planet can no longer pay. Their business is one of the largest consumers of land, energy, and resources on the planet. They also generate more waste per person than in most small countries.

See Related: The Procter & Gamble Company ESG Profile (PG): Is It Sustainable?

The Worst ESG Companies

Investing in ESG stocks is currently trending, and for all of the right reasons. That being said, there are still many inaccuracies and discrepancies in a company’s ESG score.

Some that have an average score are really not that great, while others that have low scores, no scores, or in some cases, high scores are actually the worst ESG stocks around.

There is a lot of green-washing and faking of ESG credentials going around, which can really give the good guys a bad name. Thankfully, we have a few signs that can help you determine if a stock is an ESG imposter:

  • Using green keywords like ethical or green without a clear explanation of their meaning.
  • Setting targets with unrealistic or open-ended endpoints.
  • Avoiding the use of ESG terms and investments in the right context.
  • Excessive use of carbon and other fossil resources.

In addition to the above red flags, we have put together a simple list of some of the worst ESG companies making the rounds today.

See Related: How to Measure Social Impact

EchoStar Corp

The main reason for the low ESG rating of this stock is that they have a big problem with disclosure. They don’t report on employee health and safety, product responsibility, carbon, or emissions, among many other things.

This, of course, doesn’t mean that internally they are not eco-aware, but it simply means they actively make a point of not advertising their ESG programs.

Though they volunteered to reduce the energy usage of their set-top boxes, they have yet to speak about any other efforts since then.

As a result, they have one of the lowest ESG ratings of any stock in the US today.

See Related: Awesome Impact Investing Examples to Know

Rex Minerals Ltd

It makes sense that a mining and mineral company will have a lower ESG score than other industries, but this one takes the cake. It refuses to disclose as much information as other companies in the same field, which leads the market to believe that it is either hiding something or unable to perform ESG surveys in general.

One thing to note is that they are transparent about their processes and operations. They also work with an independent consolation board that helps them get feedback from the communities they plan to work.

However, this is nowhere near enough in a world where comprehensive ESG analysis is becoming the norm.

See Related: How to Invest in Wind Energy?

Xerox

Another of the worst ESG stocks on the market comes from Xerox. Despite the innovations that have come out of the company and the general lack of controversies, they are a poor choice for ESG investment.

Being that they are not in the spotlight, they have been able to avoid making decisions that are socially aware.

Their governance is also lacking, and the company has been rated as among the worst places to work as recently as 2019. Poor work conditions and declining job satisfaction are the main issues surrounding workplace issues.

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Fox

Politics aside, Fox News is not only controversial. It is one of the worst companies to invest in if you care about ESG ratings.

Everything about the company is based on denying facts, unethical behaviors, and poor workplace conditions that would make even dictators blush.

As a company, they are one of the main violators of ESG investing principles, making it a bad stock pick for your portfolio.

See Related: How to Invest to Electric Vehicle Charging Stations

Tencent

It is pretty easy to have poor ESG investing principles, but this is mainly because the focus on ESG is still in its infancy.

However, some companies are simply salacious and would land on this list regardless of how long a standard has been around. Tencent is one such company.

The most well-known holdings of this company are WeChat, which is used for money transfers and messaging.

It is on the bad ESG stocks list because it actively collects and stores user information.

Not only are those in China at risk, but those who travel from other places are still tracked through the app and often punished for what to most people is normal behavior. The human rights and privacy violations are enough to keep this company on the list for an eternity.

See Related: The Estée Lauder Companies Inc. ESG Profile (EL): Is It Sustainable?

Nornickel

It is nearly impossible for companies that participate in mining to have a good or even neutral ESG score.

Nornickel is even worse than most mining companies, and that is saying a lot. They have been known to pollute water supplies so seriously that rivers have turned red, turning a whole city into one of the most polluted in the world.

They are also big names in the palladium and platinum production industry.

Both extremely rare and minimal companies are directly responsible for negative health impacts, pollution, and modern-day slavery conditions in the mines they operate.

No matter how valuable their products maybe, this is one stock you should avoid at all costs.

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