Two weeks ago, I wrote about a small sustainable plastic company, Metabolix, Inc. that had caught my attention in the previous months…but something happened that made their stock price jump up 5% in the past 24 hours. What exactly? The Target Corporation recently partnered with Metabolix to make their new gift cards out of sugar. As of today, Target uses them at 128 of it’s stores…a number that’s sure to rise in coming months. But still, I needed a few other reasons besides “Target Gift Cards” to really be impressed. There were a few reasons in particular that made me look twice at this little company with a single plant in Iowa, so here’s a few other nifty highlights:

• They’re sustainable. Instead of making petrol-based products (which would be a poor economic decision right about now), they’ve opted to use things like corn sugar, sugar cane, and vegetable oil. They currently hold over 90 patents.
• A national survey recently found that 72% of Americans DO NOT know that plastic is actually made from oil (a fact that isn’t very comforting to packaging companies and just about every consumer product known to man). Even more concerning, 10% of all that oil we import…is to make plastic! In the US alone, we’re spending over $300 billion a year….with only a tiny percentage being sustainable.
• The Economist wrote an article about them. Perhaps this isn’t on everyone’s list of indicators, but I put it on mine because those guys, simply put, don’t mess around. I look at it like this: typically if a company is praised in The Economist, odds are that actual economists and business leaders see it as making “business sense.” Other appearances: Fortune Magazine, The Boston Globe, Forbes
• Metabolix partnered with Archer-Daniels Midland (ADM), the largest ethanol producer in North America, to commericialize the production of the first ever bio-based “natural plastic” called “Mirel.” Construction on the world’s first “green” biorefinery, specifically for natural plastic production in Iowa is just about complete.
• ADM is in the process of expanding to Brazil, the world’s #1 sugar and ethanol producer. I’m a fan of global expansion.
• Metabolix’s “Mirel” is also completely bio-degradable…in every environment. This product doesn’t just reduce the overall waste of consumers (you can do home composting with their products too), but Mirel can also be used in industrial composting, septic systems, rivers, and oceans, and all types of soil. Translation? They’ll be cutting the amount of waste production per person if some of the “big boys” that make consumer products and foodstuffs catch on. Imagine if 1.3 billion people in Asia started using Metabolix’s biodegradable paper cups ( made from switchgrass). With increasing environmental regulations by the second, this doesn’t seem so outlandish anymore.
• Apparently the Target Corporation caught on. Yep, that’s right, your Target Gift Card…will now be made from fermented sugar. Metabolix is currently working with 50 other companies to develop more bio-degradable plastic products.
• Solid management team. In May, Metabolix got itself a new president, who, ironically, had been a staple on the petro-chemical scene at BP for years. The head honcho of Metabolix aside, supporting board members are stocked full of people from who used to run companies like Pepsi Co. and Frito-Lay. Scientists. Plastic geniuses. Even the economic advisor to the Commissioner of the Food & Drug Administration is on board. And, needless to say, with no shortage of financial gurus either, the company appears to be moving in the right direction.
• They make it easy to switch. Metabolix has made it so they’re products can be made on ANY type of plastic processing machine. So, those companies out there who are saying “going green” (in terms of plastic) “isn’t economically feasible right now” can kiss that excuse goodbye.

Editor’s note: As you’ll figure out from reading Christan’s posts, she watches the markets for clean technology and alternative fuels very closely. At the same time, though, she’s not a licensed financial advisor, so nothing in her posts should be taken as advice to buy, sell, or otherwise take action in the markets. She’s not trying to push anything here — just offering her observations.

Maybe you don’t read the NY Times religiously, but hey…you don’t have to be Warren Buffet to know oil is going up, or that America is in the midst of a corn frenzy. Food prices are rising faster than inflation. All of a sudden people are trading in their SUV’s for hybrids and Wal-Mart is going solar. Home Depot even just slapped it’s new "Eco-Option" labels on 60,000 of their products…and now they sell organic worm poop? Boy, times have changed.

 

The Ripple Effect

 

The bottom line is that you don’t have to be a genius to know that the market is shifting. All you have to do is look at your grocery bill. The cost for some of the most basic food items has literally skyrocketed over the past year, thanks to our new ethanol obsession and record-breaking corn prices. Cola-Cola is even looking for a corn-syrup alternative. The price of raw milk jumped by 23% and a gallon may even set you back $5 by September. The ethanol demand is not just driving the price of corn up….it’s also having a ripple effect on everything from cotton balls to cornflakes. So, maybe we’ll end up saving a few cents at the pump, but we can all count prices going up for 1300 other consumer products.

 

How to Start Investing in the Ethanol Rush?

 

Well, for starters, it’s definitely not with an ethanol producer! These companies are the epitome of volatile and super sensitive to both oil and corn prices. Why? Simply because U.S. ethanol is made from corn, and then transported by rail or truck, which both use oil.

Expensive + Expensive Oil = Skimpy Net Profits…and that doesn’t make a very sexy balance sheet. Then, when some of America’s largest ethanol producers started fetching stock prices lower than their IPO’s, Wall Street started to lose interest, and investors began looking for other ways to profit from America’s ethanol binge. Where exactly are investors looking now? Outside of the "ethanol box", that’s for sure…

 

4 Ways to Profit from the Ethanol Rush

 

1) Corn-Related Farm Products

Fertilizer, soil conditioners, agricultural machinery, genetically engineered seeds that can increase crop yields, etc. are gaining popularity with farmers. Because of the stress being put on increasing output, companies that can provide products that will enhance yields while reducing input costs will increase in demand.

Why Now?

Farmers are feelin’ good and making more loot than ever. With pressure to be even more productive, they don’t want just any kind of corn-seed, they want really “special” seeds (AKA: "genetically modified"). In addition, with climate change making weather conditions unpredictable, seeds that grow drought & disease resistant crops will be ideal.

Hot Picks:

Monsanto. They’re the largest corn-seed producer in the world, genetically modified seeds are their specialty and US farmers are flocking to them for supplies. DuPont has some pretty hot kernels too, but they produce all sorts of agricultural products, allowing Monsanto the company of choice for the entire farming sector. More corn to grow = More seeds to plant.

2) Agricultural Machinery

Why Now?

This year, farmers planted 90.5 million acres of corn, the largest crop since WWII. Within just 5 years, we can expect to see ethanol production triple. It’s sure going to take a lot more corn to produce all that ethanol! With more corn to grow, farmers are forced to extend their acreage. With more land to farm, incentive to produce, and farmers making more money per bushel…farmers are demanding more agricultural machinery.

Hot pick:

Deere & Co., the world’s largest maker of farm equipment takes the cake. If you bought this company this time last year, you’re probably one happy clam right now. BusinessWeek is calling them a "Revolution on Wheels" because it’s not just U.S. corn farmers who are scrambling to buy its products, either: farmers in developing countries are demanding Deere quality too. Other farm equipment and agro-processing companies like Agco Corp, CNH Global NV, and Bunge are typically in a position to gain momentum when commodities are hot.

3) Capitalize on Soft Commodities

Why Now?

It’s no mystery corn’s pretty pricey right now. But with the biofuel boom, oil prices high, and 1.4 billion people in China that don’t plan to stop eating any time soon, analysts are predicting that prices for a slew of other crops are expected to skyrocket, just like corn. For instance, we can already seen this with sugar. Sure, that sweet goodness seems super cheap right now, but it’s actually at 24-year high. Then, factor in Asia’s rising sweet tooth and the fact that 60% of the world’s ethanol is produced from sugar….and we’ve got one big "sugar high" on our hands. Bottom-line: as we begin divert our food crops to fuel, supplies will decrease, giving way to rising demand for raw materials.

Hot Pick:

The Rogers International Commodity Index is a favorite amongst anyone wanting to benefit from commodities. It’s created and managed by the investment guru, Jim Rogers. The other “edge” that investors like about this this index is that it contains 35 different commodities (weighted according to their importance in international commerce), making it much more diversified than the other indices. Another easy option is to buy "Rogers TRAKRS," which allow investors to gain exposure to agricultural, energy and metal commodities with just one transaction. There’s no minimum, and it’s similar to buying a share on a stock exchange. It’s that easy. More information can be found here.

Other Commodity Index Funds:

• Oppenheimer Real Asset Fund
• PIMCO Commodity Real Return Strategy
• Goldman Sachs Commodities Index
• Deutsche Bank Liquid Commodities Index
• Dow Jones AIG Commodities Index

*You can also buy other ETC’s and ETF’s (“Exchange Traded Funds”) that invest in a particular index. The fees are minuscule, and you can take your investment out at anytime.

4) Profit from the Packaging

The price of raw materials is on the rise, and a way for commercial retailers to cut costs is by using affordable, eco-friendly packaging. Something biodegradable, and made from something ridiculously cheap and NOT petrol-based will help maximize profits. Keep an eye out for anything recycled too.

Why Now?

For starters, commodities like sugar, coffee, soybeans, corn, wheat, oil etc. are all hitting record highs, meaning more expensive grocery bills for consumers. As a result, the efficient, low-cost packaging just became incredibly important.

Hot Pick:

Metabolix (MLBX), the maker of a biodegradable sugar-based plastics has developed over 60 different types of applications for consumer products, agricultural products, and packaging. They also just partnered with ADM, the biggest ethanol producer in the United States. As environmental regulations continue to gain momentum, major corporations will be looking to "green" packaging companies to help increase their profits.

Editor's note: Please welcome our newest writer, Christan Wasniewski. Based in St. Louis, Christan has worked in the world of international finance, and is now in the process of starting up the non-profit International Poverty Solutions, Inc., which will incubate and support businesses focused on alleviating international poverty, and finding market-based solutions to environmental challenges.

When was the last time we saw so many major companies make a mad dash to become more "eco-friendly"? From oil companies to banks, "green" is becoming pretty hot these days. And it's not just another "consumer trend" either…the financial sector is paying close attention too. "Going Green" is not just about changing your lightbulbs anymore; it's something that has managed to trickle over to the financial market, attracting major investment dollars as well some of the world's most sophisticated investors.

It seems that energy saving alternatives for just about everything are springing up these days. There's always a more 'eco-friendly' version of this, an organic version of that, for nearly every consumer product known to man. So, what about investing? Is there a way to make your investment dollars….greener?

There are plenty of ways for the average investor to start greening their nest-egg now, in a rather more profitable & secure way you might think.

So, where to start? Depending on your investment objectives, you'll probably want to have a little chat with your financial advisor first. If you don't have one already, and investment bankers creep you out, you can find someone that suits your style at SocialFunds.com.

Green Banking

When it comes to choosing the right bank, there are tons of options. All of them are scrambling to offset their emissions and throwing money at climate change, so which are bluffing? Which ones have a widest range of investment tools and financial products? If you're looking for an eco-friendly 'one stop shop' (banking, advising, investing, etc.) you might want to look into the following:

• HSBC - Committed $90 billion to environmental initiatives. HSBC will also help you green your accounts, go paperless for everything, give discounts on eco-friendly products. Bonus: If you pay 3 bills online, they'll even give you a free "Green Kit"!
• Citibank - Just committed $50 billion to fight climate change; $30 billion of that is specifically for financing investments in geothermal, solar, wind and other renewable energy projects and technologies (guess they had to try and top Bank of America)
• Bank of America - Committed $20 Billion to make green loans to "eco-preneurs" with environmentally friendly/sustainable businesses and finance environmental projects around the world. They also recently unveiled plans for a new online carbon trading program. Bonus: Employees get a $3,000 incentive towards the purchase of a new hybrid

I'll give Wells Fargo an honorable mention. This bank has topped it's fair share of 'Eco-Friendly Lists' lately, seeing as 40% of the company runs on renewable energy. As far as services & products for consumers, there is no doubt that Wells Fargo is competitive, however, they like to play hard-ball with fees.

Need Solar Financing?

Besides Bank of America and Citibank briefly touching on this topic, here a few other smaller green lenders that will help you go solar:

• Wainwright Bank -Some green banks will give you loans to slap solar panels on your house at low rates (which helps you save some green for the future)

• New Resource Bank - Get solar just by paying your monthly utility bill

Greener Returns

If you're not skilled trader, odds are you're probably leaning towards a broader, more diversified group of investments. For many American's, this means stocks. Yet again, prepare to be overwhelmed with choices. The most typical, and easiest way to get started, are usually index funds, mutual funds, and exchange traded funds (EFTs). Before you dive in head first and throw money into an investment vehicle, make sure you have a nice, long chat with your financial advisor first. If you don't already have one, you can find one at SocialFunds.com

Just how profitable is this new wave of socially conscious investing? Well, according to an article found in Newsweek, the returns have proved to be rather hefty:

"Wall Street's own change in climate is nothing less than astonishing. "Save-the-planet" investing has suddenly, well, heated up. Four major investment banks - Citigroup, Goldman Sachs, Lehman Brothers and UBS - have recently issued fat global-warming reports looking at stocks and industries likely to gain or lose. Investments in clean energy have more than doubled, to $70.9 billion worldwide, in just three years. In just six years, assets in U.S. "green" mutual funds have soared by 695 percent."
Read more: Newsweek

 

Determining Investment Objectives

Are you looking for something high growth? Or do you prefer security & risk management with a smaller, more conservative return? Small-cap or large-cap? Do you want fund that is entirely "green" or one that just focuses on alternative energy? Do you just want to avoid investing in cigarettes and alcohol, or do you want stocks that are environmentally sustainable and produce 'fair trade' products? The list of criteria you can apply are endless…Need something to narrow your search? Try the Social Investment Forum.

There's a great research firm called Innovest Strategic Value Advisors. They're an independent third party that just objectively analyzes and ranks companies according to various eco-friendly, social criteria. They've even made a list of the top 100 Most Sustainable Companies in the World.

Environmentally Sustainable Indexes:

• Dow Jones Sustainability Indexes - Includes 300-400 companies said to represent the top 10% of leading companies committed to sustainable practices worldwide.
• ABN AMRO Climate & Environment Total Return Index
• Claymore/LGA Green (GRN) - Claymore tracks an index of 225 large stocks in all the major industries…yes, even mining and oil, but they choose only the "greenest" companies.
• KLD Indexes - Constructs indexes for investors who integrate environmental, social and governance factors into their investment decisions. KLD's indexes are designed to be transparent, representative and investable
• Next-Generation Energy (NGE) Index - Fuel cells, solar power, alternative fuels, energy storage and other supporting technologies

Social Investment Funds

• Winslow Green Investment Funds - Out-performed the S&P 500 and the Russell 2000 for 5 years in a row
• Calvert Social Investment Equity - has outperformed both the typical large-cap blend and the S&P 500)
• Vanguard Calvert Social Index - growth-orientated fund
• TIAA-CREF's Social Choice Equity - mid to large cap fund
• Domini Social Index Portfolio - oldest and largest
• Green Century Funds
• The Spectra Green Fund