A January 2023 report from, the Canadian Centre on Substance Use and Addiction (CCSA) has brought one of our divestment areas at ACS Group into focus. The CCSA was created in 1988 by an Act of Federal Parliament to provide national guidance on substance use.

The CCSA has released new guidelines on what constitutes low-risk alcohol consumption.  The new guidelines say that low or moderate risk drinking is no more than six alcoholic beverages a week for both men and women.  This is roughly half the amount of alcohol from prior guidance. The study points to increased risk in cancer and stroke from the consumption of alcohol as rationale for the change. 

There has been a fair amount of coverage of the change in guidelines, in large part because alcohol consumption is very common among Canadians.  As of 2021, roughly 2/3 of Canadians aged 15 or older report consuming alcohol within the past 30 days (that’s 21 million people).  The decision to follow the new guidelines clearly will affect many Canadians.

Yes, but how does this impact investment decision making?

The assessment investors need to make comes in a couple different ways.  Firstly, would a wide spread change in public health guidance advocating for a reduction in alcohol consumption change consumer behaviours? The likely answer is that consumer behaviours do change as a result of forceful public policy.  We’ve seen this in terms of cigarette consumption in many Western Nations.  However, in the short term, we can speculate that global alcohol consumption is not going to be affected by a change in Canadian guidelines.  Perhaps the neighbourhood craft brewer around the corner in Canada will be impacted if Canadian behaviour changes, but global giants like Heineken likely won’t notice.

Secondly, investors should ask it they are comfortable being owners of companies that produce a product associated with increasing evidence of negative health outcomes?  In the ACS Responsible Beta Funds, we have made the decision since the outset of the funds to divest from alcohol makers.  This decision was not a clear cut one.  On the positive side, alcohol consumption for most people is a choice and in moderation is not particularly detrimental.  On the negative side, alcohol is not accepted in many cultures, medical guidance increasingly points to negative health outcomes and there are concerns around substance use disorders.

This is illustrative of how Socially Responsible Investing (SRI) can be used as an investment decision making tool. 

In this instance, we identified a social concern with alcohol that would preclude making an investment.  As such, we made an investment decision based on SRI principles. 
What has subsequently happened is that the social/health risks of alcohol are being identified by policymakers and new guidelines on moderation have been released. As a result, government policy is beginning to pose a greater negative risk to the alcohol industry and its business model.  While it is early days yet, there is a scenario where alcohol faces the same threats as the cigarette industry, which we would view as a major detriment to stock performance.

By using an SRI lens, we have got out in front of an investment decision that would be based solely on a threat to a business model.  This shows how SRI can be used as a tool to effectively identify and manage risks before they transpire in a company and an industry.

ACS Group-Divestment from Alcohol