Regulatory pressure on companies regarding ESG is increasing by the day. In this environment, ESG has become a critical factor determining the future direction of business. Which American companies truly understand this reality and have prepared themselves to flexibly respond to future low-carbon policies?
Since 2019, IBD (Investor's Business Daily, a media outlet providing US stock market information) has been publishing its annual list of the 100 Best ESG Companies. The IBD 100 Best ESG Companies list is known to be created by combining the Dow Jones* Sustainability scores with IBD's sophisticated technical and fundamental stock evaluation. Companies included in this list can be regarded as having achieved outstanding scores in ESG-related investment criteria and as being worthy of investment consideration.
*Dow Jones: A company that provides the Dow Jones indices (industrial average) for tracking US stock market trends
How IBD Selects the 100 Best ESG Companies
Let us follow the process IBD used to select its top 100 companies. First, IBD collected ESG information on over 6,000 global companies by measuring the "ESG Sustainability Scores" compiled by its affiliate, Dow Jones Newswires*. Both officially available corporate information and media coverage analysis for each company were utilized. IBD also leveraged scores derived from thousands of English-language data sources collected through Factiva, Dow Jones's comprehensive media data and business intelligence platform.
*Dow Jones Newswires: A news agency operated by Dow Jones that primarily distributes breaking news and press release-style articles.
/ Five-Step Selection Process for the 2023 ESG 100 1. Narrow down an initial pool of 2,067 companies. 2. Exclude privately held companies and those with stock prices below $10. Also exclude companies lacking sufficient information for IBD's comprehensive evaluation. This process leaves 1,559 companies as the second-round candidates. 3. Remove companies that have not been included in the S&P 500, the benchmark for blue-chip companies, over the past five years. 4. Among companies scoring 81 or above on the IBD Composite Rating, designate those scoring 100 as the top 20% of companies. For companies with tied scores, apply the Relative Strength Rating to rank them, and use the Earnings Per Share Rating if necessary. 5. Finally, rank the 100 Best Companies according to their Dow Jones ESG scores. Companies with tied scores are ranked using the IBD Composite Rating. |
Microsoft Takes the Top Spot Among ESG Stocks
As of August 25 last year, the company claiming the number one spot on the ESG 100 list based on these criteria was Microsoft. Second place went to Applied Materials (semiconductor and display equipment), third to Woodward (design and manufacturing of industrial engines and control systems for aircraft and other applications), fourth to Verisk Analytics (data analytics), and fifth to Mastercard.
The metrics used to rank the companies are shown in the table below. To view the full list of the 100 Best ESG Companies, visit the IBD page.
[2023 ESG Top 5 Companies Scorecard ©IBD]