Imagine a future where the stock market serves everyone and becomes a system that’s held accountable for its effects on people and the planet. Imagine if finance could play a critical role in solving the social and environmental problems we face, like poverty, inequality, and climate change.
That’s what socially responsible investing (SRI) is all about. In this imagined future, investors incorporate social responsibility into all investment decisions.
By backing companies that are building a more inclusive and equitable economic world, investors can use their dollars to drive systemic change. Socially responsible investors question and push back against the profit-only and stockholder-first attitudes of many corporations.
One industry where socially responsible investors are putting those dollars is, of course, cannabis. But before assuming that investing in cannabis is a socially responsible decision, most people opt to do some checking.
Cannabis, SRI, and profitable investing: Can they coexist?
The first step in examining socially responsible cannabis investing involves deciding if socially responsible investing is possible in the first place. After all, the goal of the traditional investor has historically been to generate a profit for your investment portfolio. But many of today’s investors have little in common with those traditional investors.
Cannabis industry consultant, Andrew DeAngelo, knows this first hand. “Long term, it’s really the only strategy that makes sense if you want to capture the younger generations coming up,” he said. “The kids will blow you up if you are not authentic.”
Today’s investors have lived through quite a bit of uncertainty — a recession, a dysfunctional housing market, and of course, a pandemic. But one thing is certain: today’s investors are curious about cannabis.
Although the outlook for investing in the cannabis sector is mixed, cannabis sales are expected to grow exponentially. According to Reuters, U.S. cannabis sales grew 38% in 2021, and that momentum is expected to carry through strong in 2022. This optimistic growth is, in part, due to SRI.
As part of their due diligence process, socially responsible investors learn about how companies treat people — not just stakeholders and stockholders — but all people. Socially responsible investing takes a holistic look at how a company treats employees, suppliers, and the community at large.
While other investors who focus solely on gains tend to watch the ups and downs of the market, socially responsible investors prioritize seeking out companies that support environmental and societal progress and hope for investment growth at the same time.
So, is it possible to find socially responsible companies that still turn a profit?
With the right due diligence, CEO and Founder of Gladbrook Investments Warren Blesofsky thinks so. Gladbrook is on a mission to connect investors with early-stage, socially-responsible cannabis businesses. Finding companies with exceptional leadership and management teams is the key.
“When I say strong leadership, I mean founders that are clearly on the same page regarding their commitments to core values. That core value might be knowing their supply chain all the way back to the source to ensure that modern labor standards are being met,” Blesofsky said. “Another consideration is whether the company was created with a socially responsible mission in mind or did they add those guidelines later.”
Socially responsible companies are innovative companies
Here’s the thing: Socially responsible investing is not just about taking the moral high ground. When a company pursues solutions for societal problems, a natural by-product occurs. They begin developing innovative processes that drive profitability.
SRI can protect a portfolio from investing in companies making the wrong decisions. By establishing the proper criteria, investors can avoid companies that ignore social injustice or climate change, two decisions that can crush a company’s brand and bottom line.
That’s why BlackRock, the world’s largest asset manager, is adopting this type of impact investment strategy as the company’s “new standard” for investing. BlackRock has noticed that “climate change has become a defining factor” in their companies’ long-term prospects.
A commitment to social responsibility can be an indicator of a strong management team that leans into long-term thinking and strategizing for the future. A team like this — that considers how the business model and core values impact the world — demonstrates holistic and creative thinking. This kind of mindset can unlock a significant competitive advantage in the marketplace.
But just because a company claims to be socially responsible doesn’t negate the need for due diligence research when considering investment options. Investors can take a page from Blesofsky’s investment playbook. “Our approach is to look for companies that value social responsibility and then take a look under the hood to see if actions align with the stated values,” he said.
Socially Responsible Cannabis Companies: What to Look For
Answering this question involves reviewing how the company in question addresses specific societal concerns. Many of today’s investors want to feel good about the investment decisions they make. Getting rich by investing in a dishonest company feels awful. Plus, growing awareness of climate change and societal injustice makes socially responsible investment options even more attractive.
A company is more than its products or services. There are people involved throughout the pipeline. How well a company treats those people — everyone from its employees, its customers, its partners — and whether the company complies with health, safety, and hiring practices can help investors evaluate the true degree of commitment to social responsibility.
Look for certified B Corporations
B Corporations are companies that meet high social, environmental performance, accountability, and transparency standards. Some B Corps are small. Some are multinationals. Some focus on reducing poverty. Others focus on restoring the environment. Each is harnessing the power of business to benefit the global good — not just the company’s bottom line.
One company that’s earned Certified B corporation status is Firelands Scientific, a medical cannabis company that combines nature, science, and technology to provide patients with “quality, natural, sun-grown medicine.”
B Certification involves a “B Impact Assessment” where the company is scored on a combination of factors, including treatment of customers, workers, the environment, and the community at large. Firelands Scientific earned a score of 103. The median score for similar businesses is 50.9 and a score of 80 is required to qualify for B Certification.
Ask the right questions
Here are a few questions investors can ask about cannabis companies before investing:
- Is the company helping marginalized groups of people?
- What steps are being taken to promote economic inclusion?
- Does the company have initiatives to revitalize distressed farming communities?
- How does the company manage its carbon footprint?
- If the company claims to promote responsible cannabis use, how are they walking the walk?
The key is to find companies that haven’t treated SRI as an afterthought. There are plenty of cannabis companies out there that have genuinely dedicated themselves to making the industry regenerative, equitable, and fair. Those are the companies that can make investors feel good about supporting them as they support others.