Rosy outlook for green

Global warming has become a key investment theme.

7 January 08 18:42, Elah Alkalay

For many years, Al Gore has warned about dangers of climate change, and within the past year global warming has become a key theme in the investment world. Concepts such as cleantech, carbon emissions trading, alternative energy, and the Sustainability Index are daily rolling off the tongues of analysts.

A cynic can always say that it is no coincidence that, just when the price oil has zoomed to $100 a barrel and the number of cars in China is expected to double and triple, the world has woken up. This year, cleantech will become the third largest area of venture capital investment.

The new fashion is cut from different cloths. The most prominent is investment in alternative or renewable energy companies such as Ormat Industries Ltd. (TASE: ORMT), which has unquestionably been a top investment in recent years. Words cannot describe the possibilities of generating electricity from renewable sources, whether photovoltaic solar panels, the conversion of solar energy into thermal energy, wind turbines, geothermal power, methane from landfills, sea waves, anaerobic sludge facilities, biomass, and so forth.

Ormat was joined on the Tel Aviv Stock Exchange (TASE) this year by Evogene. Although it has not yet generated a particularly handsome return of late, if biofuels continue to heat up, the share could yet pull a surprise.

A similar long list of companies can be made of water purification companies. Most of these companies are still in the early stages and appear to be far from ready for the capital market. We can only hope that the planned flotation of seawater desalination company IDE Technologies Ltd. by Delek Group Ltd. (TASE: DLEKG) and Israel Chemicals Ltd. (TASE: CHIM) will do for the Israeli water industry what Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) has done for the country's life sciences, but in a shorter timeframe.

The trade in greenhouse gases emissions is only just beginning, but it's possible that the quotas agreed to at the UN Climate Change Conference in Bali in December 2007 will expedite the development of the market. There is an Israeli candidate: the wind turbines on the Golan, which until now have only generated revenue from the sale of electricity, could in future receive grants for exploiting a renewable energy source that does not emit greenhouse gases. Ormat's geothermal power stations could also benefit when the US introduces a trading scheme for greenhouse gases.

Another rapidly growing sector is ethical investment. An Israel example is the Maalah Socially Responsible Investing (SRI) Index . Maala - Business for Social Responsibility does not limit itself to environmental issues, but like similar indices elsewhere in the world, employs a broad definition of the word "ethical".

The Maala SRI Index has been listed on the TASE since February 2005. In 2007, it had a considerably better return than its international peers. The Dow Jones World Sustainability Index and the FTSE4Good Global Index returned around 5%; the Maala SRI Index had a return of over 10%.

It is worthwhile paying attention to companies, which in addition to a high ethical score, have a core business which is environmentally related. "Globes" recommendations in this list include Ormat, which is in the hot sector of renewable energy; Elron Electronic Industries Ltd. (Nasdaq: ELRN; TASE: ELRN), which invests in environment technology companies that target huge markets; Aqwise Water Technologies Ltd., which is developing improved sewage treatment solutions; and Atlantium Ltd., which uses ultraviolet light to purify water instead of the problematic chlorine, which is in widespread use today.

Published by Globes [online], Israel business news - www.globes-online.com - on January 7, 2008

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