Friday, April 25, 2008

Eco-Finance

Remember when commerce first found the Internet? It was dot-this and dot-that. We have a new phenomenon underway in the world economy - ecology. Now it is eco-this and eco-that.

The Internet revolutionized world commerce and business relationships with a frilly, frothy boom. Enterprises large and small had a new toy and there were no bounds to the fun. There is much less joy in this revolution - the eco-lution if you will. The world’s citizens are alarmed by the prospect of global warming.

So it is not surprising that we should witness the rise of eco-finance. Carbon credits have been a topic of previous posts. These financial constructs are also man-made, representing one ton of carbon dioxide (CO2) emissions for each credit. My view is that carbon credits are the best available method to make a financial accounting for emissions and otherwise value the clean-up effort.

Investors have jumped on the so-called “green” stocks of companies with alternative energy technology. Quite a few from the Crystal Equity Research Green Index are mentioned in posts right here. Eco-finance goes much deeper than that. What about all the companies that are simply trying to weave a more ecologically responsible thread through their everyday operations?

Crystal Equity Research reports now include a new section on Environmental Sustainability. Our initial report on eHealth, Inc. (EHTH: Nasdaq) was the first report featuring our “sustainability chart” with an assessment of the company’s environmental impact, remediation efforts and ecological risk future earnings. eHealth, with its Internet-commerce business model, fairs well because its insurance brokerage operations are mostly electronic and save millions compared to conventional paper-based insurance operations.

It has yet to be determined if there is any value in the “eco-friendly” operation of eHealth beyond fatter profit margins relative to other insurance brokerages. If there is to be a way to monetize eHealth’s CO2 reduction, it might be eco-financiers like EcoSecurities Group, PLC (ECO: LON) who will find it. Ireland-based EcoSecurities aspires to be the exchange of choice for carbon credits and the go-to guys for eco-financial advisory.

EcoSecurities is not yet making any money with its business model, but that is another story. Most important is the tug of war these new age eco-financiers are having with the United Nations Clean Development Mechanism (CDM). The CDM was set up to put at least some oversight into what is fast shaping up to be a free-for-all to capitalize on the carbon credit bonanza. Carbon credit exchanges like EcoSecurities needs CDM approval for its credit-generating projects.

During the last earnings conference call, EcoSecurities management promised a faster pace in project approvals and better results in 2009. Even if this proves to be aggressive guidance, the bumps ECO shareholders take are the required ticket to ride on the eco-finance train.


Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. Crystal Equity Research has a Buy rating on EHTH shares.

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