Fri. Feb 23rd, 2024

Semiconductor leader Applied Materials is the No. 2 stock on IBD’s 2023 list of the 100 Best ESG Companies.




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Semiconductors help reduce global carbon emissions. They enable electric cars, wind turbines and smart buildings to operate at peak efficiency. That’s the good news. But here’s the bad news: Chip manufacturing accounts for as much carbon dioxide output as half of American households.

For Applied Materials (AMAT), which finished second in IBD’s 2023 list of 100 Best ESG Companies, sustainability initiatives drive innovation. The Santa Clara, Calif.-based company provides materials engineering solutions used to produce most new chips and advanced displays.

Building With Renewables In Mind

With the market for semiconductors projected to double and hit $1 trillion in the coming decade, the need for lowering carbon emissions soars. Applied Materials aims to stay a step ahead in its carbon reduction efforts.

For starters, the company uses 100% renewable energy in the U.S. — and 70% globally — largely due to harnessing wind and solar power. Its new logistics center in Austin, Texas, will be the largest privately owned solar installation in Texas when it opens in 2024.

“We’ve built it with solar in mind,” said Chris Librie, senior director of ESG at Applied Materials. “It’s a huge warehouse. The roof has to be built so that it can support solar panels” and provide easy access to them.

Best ESG Companies: Lower Environmental Impact

The company’s ESG efforts involve extensive outreach and partnerships across the global electronics manufacturing and design supply chain. In November 2022, it was one of 65 founding members of the Semiconductor Climate Consortium, a group that seeks to decarbonize the semiconductor industry.

In July 2023, Applied Materials CEO Gary Dickerson outlined a “Net Zero 2040 Playbook ” to facilitate Applied’s collaboration with its suppliers and corporate customers. The focus expands beyond its own environmental footprint to encompass the carbon impact from its suppliers and customers, along with the impact of chips on a global scale given all the energy that smart, connected devices and data centers need.

Enabling Customers To Save On Energy

Collaboration has already paid off: Applied Materials partnered with a customer, Taiwan Semiconductor Manufacturing Co. (TSM), to build what they called the “iSystem” to save energy and boost manufacturing production efficiency.

“We’re all trying to solve for the same issue and make genuine emissions reductions,” Librie said. “These partnerships are starting to gain traction.”

Many companies in the semiconductor industry have announced net-zero emissions goals for the decades ahead. But by offering innovative solutions to help its customers cut their energy costs and reduce their products’ resource consumption and environmental impact, Applied Materials also sees a pathway to profit.

“There’s a real commercial opportunity for us to enable our customers” to save money on energy, Librie adds.

Best ESG Companies: Meet The Top 3

Topping the list this year is Microsoft (MSFT), followed by Applied Materials. In third place is Woodward (WWD). All 100 companies on our 2023 list ranked at the top of Dow Jones ESG scores and had an IBD Composite Rating of 81 or better (on a scale of 1 to 99), as of Aug. 25. These companies also met or beat the S&P 500 over the past five years. To check current stock ratings and charts visit IBD’s Stock Checkup page.

Verisk Analytics (VRSK) and Mastercard (MA) finished fourth and fifth respectively on this year’s IBD Best ESG Companies list.

Read Our Full Special Report On IBD’s 2023 100 Best ESG Companies, Our Feature Story On Green Patent Innovation And See The Full List Of Winners.

Teamwork Fosters Innovation At Applied Materials

Breakthroughs in artificial intelligence capabilities are driving innovation in chip manufacturing and design. But that growth spurs more energy usage.

“Semiconductors are the foundation of these incredible advances that can solve so many of the world’s big challenges,” Dickerson said in a recent speech. “Our industry really can make possible a better future for everyone. With this comes large responsibilities. This is really an imperative to drive energy-efficient computing. We can’t solve grand challenges, while creating other challenges at the same time. Advancing semiconductor technology is fundamental to global carbon reduction.”

Within the company, making strides in carbon reduction is a team effort, Librie says. In his three years running ESG for Applied Materials, he has seen internal collaboration across business units as a further sign of progress.
“It’s that teamwork I’m most proud of — in R&D, facilities, our supply chain expertise and many others — that’s all about building the glue so that we come together” and innovate to cut emissions.

Social, Human Capital And Leadership

Shifting from carbon emissions to the “S” in ESG — social factors — Applied Materials reports progress toward its DEI goals and has set new 2030 targets to increase the representation of women globally and underrepresented minorities in its U.S. workforce.

In addition to having superior stock ratings, Applied Materials ranked high in both industry categories (placing first in the semiconductor group), and in the sustainability dimension of leadership and governance.

Read our profiles and interviews on the other top-scoring companies:

How We Built The Best ESG Companies List

Public companies that made our 2023 100 Best ESG Companies list combine high Dow Jones sustainability scores with superior IBD technical and fundamental stock ratings. They are standouts for ESG investing. 

To build the 2023 100 Best ESG Companies list, we started with each company’s environmental, social and governance (ESG) sustainability score created by Dow Jones Newswires, an IBD affiliate. These scores capture a broad spectrum of information on the ESG profile of more than 6,000 global companies.

On Aug. 24, IBD asked Dow Jones for an ESG-scored list of all the U.S.-traded companies it tracks, a total of 2,067. We then cut the list to 1,559 companies on Aug. 25 by removing nonpublic companies and companies with stock prices below $10 a share. Then, we also removed any companies that lacked sufficient data to create an IBD Composite Rating.

The list was further qualified by removing those companies that did not meet or beat the S&P 500 in the past five years. We selected the 100 with the highest IBD Composite Rating — all with scores of 81 or better. To break any ties, we looked at companies’ Relative Strength Rating and then, if needed, their EPS Rating. Finally, we ranked the 100 companies by Dow Jones’ ESG score.

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