Remember those times when environmental management and sustainable development were primarily the domain of government policy makers and activists in the mold of Greenpeace? It’s now no more, and forward-looking investors can now reap benefits from stakes in companies adept at managing the natural capital risks expounded in a new study of The Economics of Ecosystems & Biodiversity (TEEB).
This study indicated that there are gains for the taking for those companies providing systems and technologies to better manage the impact of business on the environment. The research was released this mid-April at the New Delhi Business for the Environment summit of the TEEB for Business Coalition. Notably, this gathering carries the economic clout of the Group of Eight and the UN Environmental Program. The coalition’s members include the World Business for Sustainable Development, the World Wildlife Fund, and the Institute of Chartered Accountants in England and Wales.
The global economy, the research showed, incurs about $4.7 trillion annually in terms of environmental-impact costs associated with greenhouse-gas emissions, climate change, loss of natural resources and nature-based services, and air pollution-related health issues.
Among the challenges, according to the report, titled “Natural Capital at Risk—The Top 100 Externalities of Business,” are an understanding of the value of the natural systems upon which the global economy rely on and the adoption of the approaches on managing these systems. The multi-trillion dollar natural capital risk identified has underscored the urgency for the world’s transition to a green economy, the TEEB emphasized.
Air and water patrols
If you’re a stock investor keen on profiting from this transition, here are some promising equities for you. One is CECO Environmental Corp. (NASDAQ:CECE) , which certainly has the competencies in managing natural capital risks from which it draws shareholder value.
This Cincinnati-based firm supplies air-pollution control technology products and services. Its primary markets are the U.S., Canada, and China. Its principal customers are in diverse industries. The sectors it serves include food, automotive, chemicals, pharmaceuticals, ethanol, glass, steel, metalworking, metal plating, brick, cement, ceramics, foundries, woodworking, printing, paper, aerospace, utilities, and refining companies.
Stock positions on equities tied with making sustainable approaches on natural capital can likewise be had via Fuel Tech Inc. (NASDAQ:FTEK) . This Warrenville, Ill.- based company not only provides air pollution reduction and control solutions, but also those systems on boiler optimization and efficiency improvement for utility and industrial customers worldwide.
For environmental issues addressing both air and water, Calgon Carbon Corporation (NYSE:CCC) offers the services and the solutions. Its systems and technologies are applied in food, beverage, and industrial process streams mainly in the U.S., Europe, and Japan. It has three operating segments: activated carbon and service, equipment, and consumer.
How the sentinels measure up:
|Selected metrics||CECO Environmental||Fuel-Tech||Calgon Carbon|
|Quarterly earnings growth (y/y)||11.3%||-5%||84.2%|
|Quarterly revenue growth (y/y)||-9.1%||-5%||2.6%|
|Return on assets||12%||2.9%||5.6%|
|P/E ratio (ttm)||17.1||34.5||40|
From the above metrics, CECO Environmental Corp. (NASDAQ:CECE) appears more attractive than its two peers, notwithstanding a drop in its quarterly revenue growth. The company has a bigger industry footprint, and its presence in China stands as another bull factor.
This considering a recent report from Beijing indicating that more stringent anti-pollution policies are likely to be introduced soon following a sharp deterioration of air quality in over 30 cities around the country. Notably, investors and stock analysts in China have recently expressed bullish sentiments on the equities of Chinese companies manufacturing environmental and air-filtering products.