Medicine or vice? Socially screened funds struggle to define cannabis industry

(New York) Is marijuana a medicine or a vice?

The $8 trillion U.S. socially responsible investment industry is grappling with that question as more states approve the recreational use of marijuana, pushing consumption closer to “sin” stocks like alcohol and tobacco that ethically focused investors avoid.

Ten U.S. states and the District of Columbia have legalized the recreational use of marijuana for adults over the age of 21, and New Jersey lawmakers on Monday proposed legalizing it.

In the United States, publicly traded companies do not sell marijuana directly, but Canadian producers such as Tilray Inc and Canopy Growth Corp. are trading in the United States. In mid-October, Canada legalizes marijuana for entertainment purposes. He cherishes fund managers and their clients and decides whether they can easily invest in cannabisfor medical purposes.

READ MORE: Jeffrey Vinik thinks cannabis stocks are a bad idea: ‘Nobody’s going to make money’

Marijuana is used to treat a range of conditions from epilepsy to migraines.

“There’s a lot of mixed feelings about marijuana, whereas with tobacco there’s a lot of consensus that tobacco is not safe in any amount,” said Jennifer Sireklove, director of responsible investing at Parametric Portfolio Associates, which oversees $220 billion in assets under management.

Faith-based investors, such as donations from Christian University, are likely to avoid marijuana altogether, while other socially-focused clients are avoiding companies that produce marijuana.

“If there’s a standardized product you can find at a corner store, you may not want to eliminate big parts of the investment universe when marijuana is a small part of a company’s revenues,” she said.

Funds that do not pass ESG (environmental, social and corporate governance) screens like those by index providers such as MSCI Inc will have a narrower list of potential investors, potentially leaving their stock trading at lower price-to-earnings multiples. Tilray, for instance, has already been a target of investors betting its stock price will fall because of its high valuation.

INDEX INVESTING

The marijuana problem highlights the broad investment philosophy in the rapidly growing sector of ESG factors. Almost all ESG investors avoid industries that may be harmful to society, such as guns, gambling, pornography and tobacco, but some companies invest in companies that sell alcohol.

Neither Parnassus Investments nor Calvert Funds, the two largest companies with ESG alone, are not in the current position in marijuana companies. Calvert is a subsidiary of Eatonbans.

However, companies such as MSCI, which keep a sorted list of companies that have met certain ESG standards, now claim to include cannabis companies in an exhaustive list of ESG-compliant companies. However, when large tobacco companies such as Altria Group Inc and Philip Morris International Inc acquire Tinley and other cannabis producing companies or enter the cannabis market, the situation may change.

MSCI ESG Research Vice President Joseph Williams said institutional investors who pay to create their own list of excluded businesses still have the option of avoiding marijuana .

“Some clients take a zero tolerance with marijuana regardless of the use case, while others are more nuanced and only want to restrict companies that are focused on the recreational use market,” he said in a recent interview.

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Since ESG investors are focusing on the social impact of marijuana, Jordan Waldrep, a US $ 164 million mutual fund manager investing specifically in companies that ESG funds are avoiding, I do wholesale Paris.

“Marijuana puts a growth potential on alcohol and tobacco companies that hasn’t existed in a long time for them,” he said.

In the hemp businesses themselves, he focused on companies like Canopy Growth, which started creating their own brands rather than relying on pure producers. For example, Canopy’s range of brands ranges from Tweed, a fashion lifestyle department to its high-end, award-winning DNA.

“The recreational market will be all about brands,” Waldrep said. “The opportunity for growth is just too strong.”

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