In today's evolving investment landscape, there's a growing trend of aligning financial goals with environmental, social, and governance (ESG) principles. Investors are increasingly looking for opportunities that promise healthy returns and contribute positively to the world.

As ESG investing gains traction, the top performers in this space are becoming darlings among environmentally conscious investors and those seeking robust financial performance. Companies like Adobe Inc. (ADBE), Salesforce, Inc. (CRM), and NIKE, Inc. (NKE) are leading the way with their strong ESG practices without sacrificing financial performance.

Global ESG assets surpassed $30 trillion in 2022 and are projected to exceed $40 trillion by 2030, making up over 25% of the expected $140 trillion in assets under management, according to Bloomberg Intelligence.

Despite challenges and a slower growth rate, the ESG market is maturing and aligning with global regulations. Increased scrutiny and regulations are expected to enhance the credibility of ESG investments.

Younger investors, in particular, are attracted to ESG funds for their long-term benefits to the planet. They often choose investments based on sustainability and ethical impact. Meanwhile, a study by the Finra Foundation reveals there’s plenty of room for growth for individual investors, with only 28% currently aware of ESG strategies.

Companies with strong ESG ratings tend to invest in renewable energy and implement policies to reduce their environmental footprint, promising both ethical and financial gains. Moreover, The S&P 500 ESG Index has outperformed the S&P 500 by a cumulative 15.1% over five years.

With that in mind, let’s delve into the fundamentals of the above-mentioned ESG stocks, which are poised for success in the upcoming term.

Adobe Inc. (ADBE)

Computer software giant ADBE revolutionized the digital world with innovations like PDF and Photoshop, which have changed how we create, share, and verify digital documents, from social media posts to billion-dollar contracts. This shift from physical to digital has made Adobe a sustainability champion.

Every 1 million pages signed daily via Adobe Acrobat Sign saves over 27 million gallons of water, 1.5 million pounds of waste, and 23.4 million pounds of CO2 emissions. In 2023, customers opened 400 billion PDFs, and the company processed 8 billion electronic signatures, cutting costs by 90% and environmental impact by 95% compared to paper.

ADBE also focuses on internal efficiency, with LEED-certified offices and a commitment to 100% renewable energy by 2025. Their sustainability policy includes partnering with eco-conscious suppliers, raising stakeholder awareness, and continuous innovation.

The company prioritizes accessibility, offering many tools, like Adobe Express with AI features, for free. Moreover, its mission is to empower creators with easy-to-use, AI-driven tools, fostering ‘creativity for all’ and supporting sustainability efforts.

ADBE’s total revenues increased 10.2% year-over-year to $5.31 billion for the second quarter that ended May 31, 2024. The company’s gross profit grew 11% from the year-ago value to $4.71 billion. The non-GAAP operating income of $2.44 billion indicates growth of 11.9% from the prior year’s quarter. In addition, ADBE’s non-GAAP net income and non-GAAP EPS came in at $2.02 billion and $4.48, representing increases of 12.8% and 14.6% year-over-year, respectively.

Analysts expect ADBE’s revenue and EPS for the third quarter (ending August 2024) to increase 9.8% and 10.6% year-over-year to $5.37 billion and $4.53, respectively. Further, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters.

Shares of ADBE have surged 27.6% over the past month to close the last trading session at $567.71.

ADBE’s stance is apparent in its POWR Ratings. The stock has an A grade for Quality. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Within the Software - Application industry, ADBE is ranked #51 out of 132 stocks. Click here to see ADBE's other ratings for Growth, Value, Momentum, Stability, and Sentiment.

Salesforce, Inc. (CRM)

CRM provides Customer Relationship Management technology that that connects companies with customers globally. Its service includes sales to store data, monitor leads and progress, forecast opportunities, gain insights through analytics and AI, and deliver quotes, contracts, and invoices.

Regarding environmental and social responsibility, CRM has reduced carbon emissions through reforestation and universal renewable energy use. It also offers sustainability cloud solutions to help companies achieve net-zero carbon footprints by 2040. CRM promotes workplace equality, minority training, and AI governance reform for fairness and transparency.

In 2023, Salesforce prioritized sustainable AI development. Clara Shih, EVP & GM of Salesforce AI, emphasized the company's commitment to sustainability, “By developing right-sized models that run on efficient hardware in low-carbon data centers, we bring our customers cutting-edge technology while keeping the planet in mind.”

On May 22, 2024, CRM expanded its Einstein Copilot capabilities by introducing new features for marketers and merchants. These features complement the existing functionalities for sales and service, assisting businesses with daily marketing and merchandising tasks.

CRM also revealed new tools for unifying business and commerce data, along with a new AI-powered personalization decision engine that helps companies personalize customer interactions at every touchpoint using data from any source.

For the fiscal first quarter that ended April 30, 2024, CRM’s total revenues increased 10.7% year-over-year to $9.13 billion. Its non-GAAP income from operations rose 28.7% from the year-ago value to $2.93 billion.

The company’s non-GAAP net income stood at $2.41 billion and $2.44 per share, up 43.8% and 44.4% from the prior-year quarter, respectively. Also, its free cash flow for the quarter stood at $6.08 billion, up 43.2% year-over-year.

The consensus revenue estimate of $9.24 billion for the fiscal second quarter (ending July 31, 2024) represents a 7.4% increase year-over-year. The consensus EPS estimate of $2.36 for the current quarter indicates an 11.2% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.

Moreover, the stock has gained 26.3% over the past nine months to close the last trading session at $256.19.

CRM’s POWR Ratings reflect its robust prospects. It has an overall B rating, which equates to a Buy in our proprietary rating system.

CRM has a B grade for Quality. It is ranked #24 out of 132 stocks in the Software – Application industry. Click here to see the additional ratings for CRM (Growth, Value, Momentum, Stability, and Sentiment ratings).

NIKE, Inc. (NKE)

Global sportswear giant NKE aims to cut carbon emissions across its entire business and supply chain. In 2023, 96% of Nike’s energy came from renewable sources, a huge jump from 48% in 2020. They've also slashed their Scope 1 and 2 emissions by 69%, down from 225,644 tons of CO2 in 2020 to just 70,723 tons last year. Plus, Nike diverted 100% of waste from landfills in its extended supply chain, recycling 80% into new products.

The company has ambitious goals, aiming for a 65% reduction in Scope 1 and 2 emissions and a 30% reduction in Scope 3 emissions by 2030, based on a 2015 baseline. They've also set 2025 carbon targets to speed up their progress, continuously adjusting their practices based on the latest scientific data.

Part of NKE's strategy includes switching to more eco-friendly materials like recycled polyester and nylon, sustainable cotton, and innovative products like Nike Flyknit and Nike Flyleather. They're committed to recycling 80% of their manufacturing waste into new products, ensuring that leftover scrap doesn't end up in landfills.

Moreover, the company is also working to reduce its carbon footprint by supporting suppliers’ transition to renewable energy, cutting down on air freight, and investing in clean energy for its own operations. Despite a 3% rise in Scope 3 emissions due to business growth and the use of high-carbon materials, Nike is offsetting these increases through renewable energy, recycled materials, and waste reduction.

On May 2, 2024, NKE announced a quarterly dividend of $0.370 per share on the company’s outstanding Class A and Class B Common Stock, payable on July 1, 2024. The company pays $1.48 annually, which translates to a yield of 1.95% on the prevailing price level, higher than its four-year average dividend yield of 1.02%.

The company has raised its dividend payouts at CAGRs of 10.7% and 11% over the past three and five years, respectively. Moreover, NKE boasts an 11-year record for consecutive dividend growth.

During the fourth quarter, which ended May 31, 2024, NKE’s revenues amounted to $12.61 billion, while its gross profit rose marginally year-over-year to $5.63 billion. The company’s net income and EPS increased by 45.5% and 50% from the year-ago quarter to $1.50 billion and $0.99, respectively.

Street expects NKE’s revenue and EPS to decline by 10% and 42.8% year-over-year to $11.65 billion and $0.54, respectively, for the first quarter ending August 2024. Nonetheless, the company’s revenue and EPS are estimated to rise 6.3% and 15.9% year-over-year to $52.06 billion and $3.71, respectively, in the fiscal year ending May 2026.

However, NKE’s stock has declined 16.4% over the past three months to close the last trading session at $76.04.

NKE’s POWR Ratings reflect these prospects. The stock has a B grade for Quality and is ranked #12 out of 34 stocks in the Athletics & Recreation industry.

In addition to the POWR Rating stated above, one can access NKE’s Growth, Value, Momentum, Stability, and Sentiment ratings here.

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ADBE shares were trading at $568.27 per share on Wednesday afternoon, up $0.56 (+0.10%). Year-to-date, ADBE has declined -4.75%, versus a 16.64% rise in the benchmark S&P 500 index during the same period.

Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.

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