The global shifts toward sustainability and social equity have – perhaps after much too long – gripped the cannabis industry alongside innumerable other markets, and investors are paying attention. Don’t get us wrong, this certainly has to do with financial opportunity. But more and more individual investors are interested in their valuable funds going toward environmental, social, and governmental (ESG) -minded companies.
The cannabis industry is, of course, closely aligned with all three of those considerations. But it isn’t just the cannabis industry that young investors in particular are keeping an eye on. Those young investors seem to be actively interested in social change, which has blossomed into an avoidance of industries that are remaining stagnant or worsening the issues.
As more investors pour their funds into sustainably-minded companies, we can’t help but ask, “Why?” Sustainability isn’t generally thought of as an ultra-lucrative business move, even in the age of electric cars and biodegradable packaging. But when investing in an industry like cannabis that relies heavily on water and power to thrive, focusing on sustainability-minded businesses could be the ultra-lucrative move to make when you consider the effect on returns.
Investors are clearly on it as can be seen from a Coller Capital poll of their limited partners. Per the results, almost 50% of those polled believe companies with strong ESG policies will positively affect their PE returns. Where investing in sustainability used to be a nice thing to do for the planet, it’s now becoming a key factor in investors’ return outlooks and interests.
While many have been clamoring for social equity in the business sector for what seems like forever, the movement has finally gained some real traction and public attention, as well as investors’ attention. One industry that’s seeing a gigantic push toward social equality – especially for women and people of color who were and still are negatively affected by the War on Drugs – is the burgeoning world of cannabis.
New York State, for instance, has implemented a promising social equity program ahead of its recreational cannabis market launch. But even though some have referred to it as “the strongest bill we’ve seen among all the states taking social equity into consideration,” many are worried the program will fall short of its promises just as many others have.
Even so, those young investors interested in social change are keen on the idea of these programs working out. Increasing diversity has been found, through multiple studies and polls, to increase both productivity and financial performance. Like sustainability, it would be nice if investors were focused on the ideas of inclusion and equity in general over the promise of earnings. But if the notion of those things at a company promises lucrative returns, it works out for both parties that the investors pour their money into diversity- and equity-focused companies.