Merrill Lynch (NYSE:MER) is showing off its new shade of green. And, no, this doesn't have anything to do with the firm's recent profitability -- that's still very red.

Instead, Merrill is sporting that fashionable environmental green, the shade that's ever so hot now. (No pun intended.) It's not the only bank cozying up to Mother Earth; Credit Suisse (NYSE:CS) launched a "Global Warming Index" in August, while Citigroup (NYSE:C) has been trumpeting the green efforts of its businesses. Wall Street, meanwhile, has lavished attention on companies directly involved in green energy, like Suntech Power (NYSE:STP) and Verasun Energy (NYSE:VSE).

The report touted on Merrill's website today, "Investing in a Greener Future," certainly has its share of warm and cuddly thoughts about a creating a healthier world. In addition to outlining Merrill's efforts to make its own buildings more environmentally friendly, it's also liberally sprinkled with granola-flavored language, including this choice morsel:

As one of the world's preeminent financial services firms, we have both an opportunity and an obligation to play a significant role in the formulation of public policy and in the allocation of substantial capital to new and existing enterprises.

The report helps to emphasize the opportunity that green efforts create for financial-services companies like Merrill and competitors like Goldman Sachs (NYSE:GS) or Credit Suisse. Witness the burgeoning cap-and-trade market, where companies can buy and sell allowances to release certain greenhouse gases. Merrill thinks this is a great idea, noting in its paper:

Merrill Lynch believes that governmentally mandated, enterprise-specific caps on [greenhouse gas] emissions with tradable permits ... most effectively marries public policy with the beneficial effects of free market mechanisms.

And why wouldn't it? Guess who facilitates trading in these carbon-credit markets -- and gets paid commissions for its efforts? And let's not underestimate the potential massive market in derivatives on these credits, to boot.

It's not just the carbon-credit market, either. The major investment banking firms are seeing plenty of action elsewhere, from providing research on green-related issues, to facilitating the financing of green-related companies, to trading publicly held eco-friendly companies.

The point here isn't that Merrill Lynch and others are leeches who stand to profit by promoting certain environmental programs -- though you could probably argue that. As fluffy as Merrill's report may seem, a greener world could mean more greenbacks for many financial firms.

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