Cannabis faces significant ESG risks

The industry would be wise to adopt sustainable practices from the beginning

Jon Hale 17 October, 2019 | 9:58AM

Cannabis plant

It's not often that an entirely new legal industry springs up practically overnight after having been mostly illegal for decades, but that's what is happening with cannabis today. Unlike most emergent industries, for which long-term survival cannot be assured, cannabis already has a long-established consumer base for both recreational and medical uses, making the question not so much whether legal cannabis will catch on with consumers, but how fast and how big the industry will grow.

The developing cannabis industry, however, faces significant sustainability risks that could put a dent in growth and potentially threaten its still-tenuous social license to operate. Investors should consider these risks as they evaluate public companies that are exposed to cannabis as well as those that are pure plays. Cannabis companies should pay attention to their environmental, social, and governance risks and take steps to mitigate them early on. Doing so could result in operational and reputational benefits accruing to early adopters and improve public perceptions of the industry as a whole. Better for legal cannabis to be seen as sustainable than as just another "sin stock."

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

About Author

Jon Hale

Jon Hale  Jon Hale, Ph.D., CFA, is the head of sustainability research for Morningstar.

© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies