Sustainable Investments in Cannabis

And How They Can Change the World

By Andrea Morhardt

Just as fast as new cannabis strains pop up, unique investment philosophies and strategies emerge every day. One such emerging system has investors weighing the financial returns an investment produces against a company’s consciousness about sustainability.

It’s called sustainable investing. And investors everywhere have their eye on the cannabis industry to be a significant player in this movement.

What is Sustainable Investing?

The strategy aims to encourage, support, and create momentum for companies who exhibit responsible environmental behaviors. Another part of the strategy, naturally, is profiting from these forward-looking, innovative behaviors.

But the most serious sustainable investors will accept lower financial returns in return for the peace of mind that comes from supporting companies with a moral compass aimed at environmental sustainability.

Why Sustainable Investing?

You may be wondering why an investor would do such a thing. Investors invest their hardearned money, and most companies are founded in hopes of generating profits — not to save the world — right?

Not so fast. According to the Circularity Gap Report 2020, only 8.6% of the global economy is currently circular. You might assume the answer is “yes.” But the answer is actually “not necessarily.”

Today’s investors and corporations are becoming more and more environmentally conscious and are finding new strategies that can be profitable and environmentally sound at the same time. looking at the status quo of the global economy and its traditional investment strategies. As a result, they’re feeling uncomfortable about putting their money behind businesses that — they believe — are damaging the earth.

Here’s what has sustainable investors concerned:

According to Accenture, by 2050, maintaining the current global economic structure, which is almost entirely linear and focused primarily on production, could result in overusing the earth’s capacity by more than 400%.

Although the world has operated with a “linear economy” focused only on production for centuries, this linear model produces incredible amounts of waste. Consider this information from the Ellen MacArthur Foundation: • Every second, the textile industry produces the equivalent of a garbage truck full of waste that ends up incinerated or in a landfill. • The food industry throws away enough perfectly edible food to fill six garbage trucks in that exact second.

Investors who feel outraged by these statistics — and countless others — are taking action. They are reallocating their portfolios to invest in innovative companies focused on moving the needle toward a circular economy.

This circular approach eliminates waste by creating a closed-loop system. Such a system keeps the production loop “closed,” so all materials produced stay inside — rather than having some funneled off to a landfill. The materials remain within the loop because the system is engineered to reuse byproducts as future inputs. sustainable, so sustainable investors are eager to invest in companies that adopt a more circular approach in their business models.

Are Sustainable Investors Really This Altruistic?

Not all investors putting their cash behind sustainability-focused companies are doing it for the “kumbaya” reasons you might think.

Sustainable investments can produce significant returns. The circular model ultimately minimizes labor and energy costs with strategies powered by renewable energy and innovatively recycled materials.

significant boost in their bottom line by driving profitability.

The cost savings from reusing and recycling, when compared against sourcing virgin materials, can be surprising. New research from Closed Loop Partners indicates a shift toward circular manufacturing will generate $2 trillion in annual U.S. revenues and $7 billion in new revenue opportunities.

The Cannabis Industry: A Perfect Case Study

Cannabis companies, whether in the planttouching segment of the industry or elsewhere, should be refocusing on reusing, repairing, and recycling materials rather than only making them.

Regennabis — an advisory, convening, and investment services company — is helping cannabis companies reimagine their approach to production. According to co-founder Geoff Trotter, by helping cannabis companies define and deliver a sustainability-focused continuous improvement plan, Regennabis accelerates existing relationships and opens doors for additional conversations with investors.

This production reimagination involves: • Collaborating with suppliers, customers, and consumer-facing organizations • Engaging these stakeholders in discussions that nurture sustainable behaviors • Demonstrating that social due diligence also delivers economic success

Smart and Sustainable Cannabis Solutions

According to various sources, today’s average investor is increasingly utilizing non-financial factors as they identify opportunities. Leaders in the cannabis industry recognize the challenges likely to arise and are investing in practices that proactively reduce their carbon footprint by improving the way they use water, soil, and even building materials.

Take AltoVerde, for example. After moving growing practices indoors for efficiency purposes, they kept an eye on sustainability by designing those indoor operations to recycle close to 100% of the water they use by capturing the perspiration from the plants.

Other cannabis organizations are looking closely at regenerative farming practices. Innovative cultivation methods ensure that the soil is fully replenished and repaired after each use.

Another solution involves farmers using harvested hemp to create building materials like hempcrete. Just like it sounds, hempcrete is concrete made from hemp.

Hempcrete has a negative carbon footprint. The production of the hemp used in hempcrete removes more carbon from the atmosphere than it ultimately produces.

Companies like Hempitecture are dedicating their entire value proposition to plant-based building materials. And it’s not just hempcrete. The company found that fiber batt insulation products like hemp wool are sustainable, highperforming, and easy to install.

Regennabis co-founder Geoff Trotter

Balancing Risk, Return, and the Right Intentions With Sustainable Investing

Consumers and investors alike now expect — and demand — more from today’s businesses. They want to buy from and invest in companies focused on sustainability and creating meaningful change that’s good for society and the planet as a whole.

However, sustainable investing is still an emerging concept. And although emerging markets are filled with growth opportunities and massive amounts of potential, these opportunities also come with their fair share of risk, so proper due diligence is critical.

Making the shift toward a circular global economy won’t be easy, but it is vital for the planet’s health. Early adopters and their investors will ultimately see a moral and financial return on that investment by focusing on reusing, repairing, and recycling materials rather than only making them.

Which return is more important? We’ll leave that question up to you. ❖

Cannabis Legalization Up For Debate in Congress

But How Close Are We?

By Rachelle Gordon

It’s been more than 50 years since the Controlled Substances Act was signed into law, designating cannabis as a Schedule I illegal narcotic “with no currently accepted medical use and a high potential for abuse.” In that time, millions of Americans were arrested and imprisoned for non-violent crimes related to the criminalization of the plant, ruining lives and ripping families apart.

Now, congressional leaders are hoping to make amends.

In July, Senate Majority Leader Chuck Schumer, along with Senators Cory Booker and Ron Wyden, introduced the Cannabis Administration & Opportunity Act (CAOA), which would remove marijuana from the Schedule I list, effectively legalizing it nationwide. The bill allows states to set their own policies regarding cannabis, but federal regulations would also be implemented.

While the bill is indeed groundbreaking, and a symbol that legalization is closer than ever before, the CAOA faces an uphill battle. Additionally, many industry professionals and advocates are concerned with certain components and wonder if passage would set operators up to fail.

“It’s an incredibly strong indicator of a paradigm shift with regards to attitudes toward cannabis,” said NORML and SSDP board member Evan Nison, founder of NisonCo PR. “While the bill may not get the votes it needs to pass this time around, it’s a clear sign that legalization is imminent.”

But how exactly will the bill affect the industry and what do professionals in the space have to say? Cannabis & Tech Today breaks the CAOA debate down.

The Big Picture

The Cannabis Administration & Opportunity Act is the most comprehensive piece of cannabis reform legislation to date. In addition to the elimination of the federal prohibition on the plant and its derivatives, the 163-page bill touches on everything from interstate commerce to social equity.

Here are some key takeaways:

Federal Sales Tax Implementation – The CAOA stipulates a federal sales tax on the sale of cannabis products on top of state-imposed taxes. The initial tax would be 10% for companies meeting an annual sales threshold, gradually moving up to 25% within five years.

Expungement of Criminal Records – Under the CAOA, thousands of Americans would be eligible to have nonviolent cannabis-related convictions expunged. Federal penalties would also be eliminated.

Increased Research – Peer-reviewed studies into the cannabis plant and its effects have remained extremely limited due to criminalization. The CAOA directs funding toward research, specifically calling out brain health as one area to focus on.

Restorative Justice – The bill calls for the establishment of three unique grant programs designed to support communities most affected by the war on drugs. This includes funds for job training and other re-entry services for formerly incarcerated cannabis offenders.

280E Relief – One of the biggest challenges facing marijuana operators has been 280E, a section of the tax code that forbids planttouching companies from deducting business expenses. The CAOA would rectify this, allowing cannabis companies to gain access to tax credits they currently do not qualify for.

Industry Response Mixed, With Many Calling For Changes to Initial Draft

By the public comment deadline of September 1, a large number of advocates, non-profits, and industry trade organizations weighed in on the bill. A wide array of comments and suggestions poured in, offering recommendations for revisions on everything from consumer rights to barriers to entry for new operators.

The National Cannabis Industry Association (NCIA), one of the largest trade groups in the space, submitted a nearly 30-page letter to bill sponsors after reviewing feedback from its members.

“The CAOA is a good starting point for a conversation in the Senate about how to best end prohibition, repair the harms it has caused, and effectively regulate the substance at the federal level,” said Morgan Fox, NCIA’s media relations director. “As a bill, it still needs a lot of work.”

Fox noted the organization’s members took issue with the proposed taxation model outlined in the CAOA, arguing the current structure is not viable.

“The tax components of the draft language would be worse than the status quo in most cases, undermining the viability and potential of the regulated cannabis market,” he explained. “This tax structure would disproportionately hurt small businesses and would incentivize the unregulated market.”

Consumer advocacy groups pushed for more language protecting cannabis users, particularly medical patients. Americans For Safe Access called for legislators to address housing assistance barriers for medicinal users as well as increased education on medical cannabis for federal officials. NORML also called for a focus on restorative justice while also maintaining the integrity of existing marketplaces and operators.

Sponsors of the bill will examine submitted comments and introduce a formal version to the Senate in the near future.

Outlook Hazy on CAOA, But Reform is Nigh

Despite Senate Majority Leader Schumer’s enthusiasm regarding marijuana reform, it remains to be seen whether the Cannabis Administration & Opportunity Act will achieve the 60 votes necessary to pass. This, compounded by President Joe Biden’s lukewarm attitude toward cannabis, may spell disaster for the bill — at least for now.

That’s not to say federal legalization isn’t coming. Industry professionals and analysts believe it’s not a matter of if but when.

“90% of Americans believe cannabis should be legal, and politicians tend to listen to their constituents,” Nison said. “This has become a mainstream issue and quite an important one at that.

“I’d bet on seeing federal reform within the next four or five years.” ❖