ESG stocks, as represented by the Kiplinger ESG 20, returned an average of 4.3% over the past year, significantly lower than the S&P 500’s 15.9% return. Only six of Kiplinger’s 15 stocks outperformed the index, with ESG investing facing hurdles due to social media pressure on companies to retreat from ESG objectives.

Morningstar reported that ESG stocks had their worst calendar year ever in 2023, underperforming regular stocks. Lagging performance, high interest rates, and supply chain disruptions were cited as reasons for the underperformance, despite facing the same challenges as other sectors.

Investors seeking high returns may need to reconsider ESG stocks, as issues with ESG criteria exclude high-growth stocks. AI stocks, known for their energy consumption, made their way onto the Kiplinger ESG 20 list, including Microsoft and Nvidia, with Microsoft aiming to be carbon negative and water positive by 2030, and Nvidia’s board and compensation practices justifying their inclusion.

Kiplinger’s inclusion of AI companies like Microsoft and Nvidia in the ESG 20 list raises questions about what defines an ESG stock. While ESG factors played a role in their selection, it’s unclear if ESG criteria were the primary drivers of their success. Nvidia’s success may not solely be attributed to ESG practices, as its board’s independence could have contributed significantly.

Read more at Yahoo Finance: Is ESG Investing Losing Its Shine? ESG Stocks Continue To Underperform The S&P 500