Cannabis: To Impact From Vice
Impact investing is characterized by the intentional deployment of capital to generate social and environmental impact alongside financial return. Cannabis has immense potential for medicinal, agricultural, societal and environmental impact, and shifting attitudes towards this ancient superfood lead it squarely towards the crosshairs of this investment style. While propaganda and prohibition have certainly influenced people’s views on cannabis as a vice, rapidly shifting attitudes allow us to view this plant in light of its impact on our plants, people, planet & profit.
Another noticeable viewpoint shift is the long-held view that social and environmental issues are to be addressed by philanthropic donations while financial returns remain the exclusive driver of investment markets. A growing mindset that desires social impactalongside investment returns explains the growth of impact AUM to over $100 Billion in the US today. The legal cannabis market already exceeds $10 Billion and is growing at a torrid 27% annual pace. The overlap between these is undeniable, as cannabis investments make it possible to do well while also doing good.
Humanity is better served by wealth than ruled by it
The basic goal of impact investing is to help reduce the negative effect of business activity on the social environment:
With nearly 700 recorded medical uses, cannabis may be the most important plant for the maintenance of human health. Health benefits range from a reduction in opioid usage toto rare disease cures that have no other known solution. This ancient medicine has been used for millennia around the world, and is shifting from its moniker of a ‘gateway’ drug toone of an ‘exit’ drug – driven by its positive impact on societal alcohol and opioid consumption. Long understood and newly researched ideas are driving this shift, as laws and money both move with increasing speed into this industry.
The large and consistent rise in public demand for legal cannabis along with the growth in cultivation sophistication correlates to the increasing need for cost reduction as the race towards normalized agricultural margins intensifies. High current margins accommodate large investments in agricultural technology that offers scalable margin impact, and current investment trends towards cultivation facilities offer a glimpse into future demand for such technology. Advances in this technology are revolutionizing the way cultivators interact with their plants, and these advances have tremendous positive implications for the broader global agricultural market.
700,000 cannabis arrests a year imply governmental interference with a human-plant relationship every 49 seconds. While the U.S. is home to less than 5% of the world’s people, it has the distinction of being the world’s largest jailer with over 20% of the global prison population. Of the 8.2 million cannabis arrests between 2001 and 2010, 88% were for simple possession. Despite roughly equal usage rates, African-Americans are 3.73 times more likely than Caucasians to be arrested for a plant that has been used by humans for ~10,000 years.
Cannabis has large potential to change the way we innovate and operate as we shift our focus to its wellness impact and away from its intoxicating properties. A meaningful reduction in alcohol and opioid consumption in mature legal markets is accompanied by a reduction in domestic abuse, workplace absenteeism and fatalities from drinking and driving. The correlations here have driven us to explore the relationship between cannabis consumption and marital longevity.
With over 50,000 uses, hemp has the unique ability to impact food, personal care, plastics, paper, textiles, construction materials and the environment. One example: Cotton is grown on 2.4% of agricultural land, yet uses 24% of global pesticides. An acre of hemp provides more paper than 4.1 acres of cotton; the word ‘canvas’ is itself a derivative of the word ‘cannabis’. Hemp fiber is stronger and softer than cotton, lasts twice as long, and will not mildew.
Full federal legalization of the cannabis plant is inevitable and driven by voter support for it having quintupled to over 60% since 1970. The legal cannabis industry is the fastest growing industry in America – one with the unique ability to attract the interest of financial and impact investors alike. Diversified capital sources will undoubtedly have diversified impact, and we remain optimistic about a world poised to benefit from both. A well-diversified cannabis portfolio has impact well beyond its investment return, a wonderful outcome of business leading social change in this sphere.