Cannabis Investment

Advantage Capital Strategies identifies industries that have detrimental environmental, social, and economic effects and takes action to mitigate risk both through screening and advocating for change

Economic

New industry with room for growth

Social

Can be used for medicinal purposes

Environment

No significant factors

The Cannabis Industry Explained

The cannabis industry is composed of companies that grow and manufacture cannabis products for consumer and/or medicinal use.  There are not currently any cannabis companies on the S&P 500.

The Economic Rationale for Investment

The market for legal cannabis in Canada is new and relatively untested.  This is largely due to the fact that cannabis became legal in Canada on October 17, 2018. A report issued by Deloitte in 2016, prior to legalization, estimated that the Canadian cannabis market could be worth up to $22.6 billion [1]. Even prior to legalization, cannabis was the second most consumed substance in Canada, while alcohol was first [2]. With the continuing discussion of and movement towards legalization occurring in the United States, there is potential for the cannabis market to grow.

The majority of Canadians, 68%, are in favor of cannabis legalization [2]. Based on current popular sentiment, including the fact that the majority of Canadians support legalization, we do not view cannabis companies as being at risk of becoming stranded assets.

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The Social Rationale for Investment

Cannabis

The primary reason Advantage Canada SRI is not divesting from cannabis is because of the positive health effects of medicinal cannabis. An important difference between tobacco and cannabis is that cannabis can be used for medicinal purposes. Cannabidiol, or CBD, is the medicinal component of cannabis that can be used to treat pain in cancer patients, relieve epilepsy symptoms in children, and even help treat post-traumatic stress disorder (PTSD), for example. Unlike other pain medications such as opiates, it is impossible to overdose on cannabis, and it is also less addictive [3].

The legalization and regulation of cannabis also has important social repercussions. Legalization reduces the strain on the legal system to police substance use, meaning fewer incarcerated individuals and/or individuals with criminal records, and also that police priorities can be focused elsewhere. Legalization can also provide an additional source of tax revenue [2].

Furthermore, legalization is intended to reduce the ease with which teenagers can access cannabis, like with other regulated substances such as cigarettes and alcohol [4]. Prior to legalization, Canadian teens placed first among developed countries for use of marijuana, with a reported 28% having used cannabis illicitly [2]. One of the intents behind legalization is to reduce this number, which developed solely through the black market.

The Environmental Rationale for Investment

There are no significant environmental factors associated with the cannabis industry. Our primary drivers for investment are economic and social.

Citations

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