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By Jay Gershman, Retirement Visions LLC, West Hartford
Like early internet stocks, biotech, and bitcoin, the latest investment hot topic, cannabis, is causing quite the stir among investors. But what makes it even more interesting than its hot and hip predecessors is its categorization as a socially responsible investment.
Let’s start at the beginning. Socially Responsible Investing (SRI) was started to actually avoid controversial investments such as alcohol, gambling, weapons, fossil fuel, and military-related products. Not long after this introduction, some funds took the idea further by avoiding companies that produced products related to contraception or abortion because they were not in line with certain religious beliefs. As time passed, SRI has grown to include “green” investing, focusing on companies that reduce the world’s dependence on carbon-based energy.
When green investing took hold, the term “Environmental, Social and Governance” or ESG was coined which offered criteria for companies to follow and investors to understand. ESG investing led to greater activism and we saw a rise in investors using their voting power to influence boards, creating more of a balance between social responsibility and profit. This influence led to the term “Impact Investing” which today translates to the desire for conscious creation of social impact when investing. What began as a movement to screen out what was viewed as negative has evolved into an $8 trillion SRI market designed to affect change through impact.
So how does cannabis play into SRI? As legal marijuana use has grown, publicly traded companies such as Tilray Inc. and Canopy Growth have caught many investor’s eyes. In some cases, the same investors who spurned investments based on controversial or religious factors have looked at cannabis differently.
Meanwhile, SRI-based funds have had to decide whether marijuana should be categorized as a medicine or a drug and how to treat companies who have a small percentage of their overall business in the cannabis game. According to the November 2018 issue of Wealth Magazine, MSCI, one of the largest index providers in the world, included cannabis in their ESG compliant list. Meanwhile, the two largest ESG fund complexes, Calvert and Parnassus, have avoided companies related to cannabis.
So why is this such a big and confusing issue? For many reasons, it’s taking time for the medical world and the government to recognize the benefits of a “drug” previously associated with the likes of Cheech and Chong. As a pharmacist’s son, I can only say that if aspirin can come from the bark of a tree and penicillin from moldy bread, we may just be in for an exciting ride.
Jay Gershman is the Owner and Founder of Retirement Visions LLC, a West Hartford-based financial planning firm that focuses on comprehensive life planning and financial management. For more information, visit www.allset2retire.com. Information and advice are for guidance only and opinions expressed belong solely to the author. Securities offered through Securities Service Network, LLC. Member FINRA/SIPC. Fee-based services are offered through SSN Advisory, Inc., a registered investment advisor.
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