united kingdomen
Cannabis – controversial plant comes full-circle

Cannabis – controversial plant comes full-circle

25-05-2021 | Insight
Cannabis is making a comeback and enjoying popularity and acceptance it hasn’t seen in thousands of years – but caution is advised.
  • Peter van der Werf
    Peter
    van der Werf
    Engagement Specialist

Speed read

  • Cannabis has been legalized in a number of developed countries across the globe
  • Robeco takes a positive view of investments in cannabis as a carefully controlled medical therapy
  • Robeco exclusion policy will limit investments in recreational cannabis producers and retailers

Commercial history and legal comeback

Cannabis is no stranger to medicine or commerce. Its origins date as far back as 8000 BC when hemp (a part of the Cannabis plant) was first documented as a domesticated plant. Since then, its fibers have been used for rope and within textiles and its seeds as a source of nutrition and food. The ancients were also quick to recognize its medicinal properties. It has been used throughout the centuries for treating pain and inflammation as well as diarrhea and other digestive issues.

In modern times, cannabis, or its alternate alias, marijuana, has been more closely associated with recreational drug use, but its medicinal properties are also increasingly recognized and its medical use on the rise. Even before Canada became the first industrialized country to legalize adult-use of cannabis back in 2018, cannabis was enjoying a strong run. Many US states began to legalize medical marijuana use already in the 1990s and were joined by many other US states and EU countries in the decades that followed. Cannabis is now legal in 33 US states and most EU countries allow or are considering the medical use of chemical compounds called cannabinoids derived from cannabis plants.

Climate Series – don’t miss a thing
Climate Series – don’t miss a thing
Subscribe

Medical use and business markets

When medically prescribed, cannabis is most commonly used to control pain as well as a myriad of other therapies including epilepsy, multiple sclerosis, Parkinson’s disease, depression, diabetes and a host of other neurological and digestive tract disorders. Adverse side effects include dependence, neurological impairment, and other chronic diseases, but research suggests that health risks are much less than those associated with other legal substances like alcohol and opiates.

Given its medical efficacy, pharmaceutical companies are taking advantage of a more relaxed legal environment to conduct research into cannabis-related treatments that can be easily swallowed, rubbed or inhaled rather than smoked. Moreover, given a growing perception that cannabis consumption is safer than alcohol, the beverage industry is also taking note and partnering with cannabis producers to develop drinks especially for more health-conscious market segments.

Legal marijuana sales exceeded USD 21 billion globally in 2020 according to BDSA, a US-based cannabis data analytics provider1. And the US cannabis beverage market is expected to expand ten-fold to USD 374 million by 2022. Cannabis companies have also entered the financial mainstream. Wall Street welcomed its first marijuana IPO by a Canadian cannabis producer already in 2018. Moreover, according to Viridian, a financial advisory firm, in the first quarter of 2021 cannabis companies raised nearly USD 4.3 billion in debt and equity2.

Medical promise and recreational risks

Given the growing medical evidence, legislative approval, and social acceptance of cannabis as a treatment tool, Robeco is predominantly positive towards the development of cannabis-related medical products. However, given existing uncertainties surrounding adverse health effects of cannabis use in unmonitored settings, it cautions investments in companies that generate revenues of 5% or more from recreational cannabis production as well as companies that generate revenues of 10% or more from recreational cannabis retail products.

Moreover, Robeco’s Active Ownership Team will engage with individual companies to address and monitor potential sustainability risks and their impact on performance.

1 “Cannabis reignites corporate interests as it edges towards mainstream.” Financial Times, April 4, 2021. https://www.ft.com/content/f52b8bd9-867a-46ad-9808-d5d3afce739e
2 “Wall Street welcomes first marijuana IPO.” Financial Times, July 19, 2018. https://www.ft.com/content/0e19b2a6-8b28-11e8-bf9e-8771d5404543

Logo

Disclaimer

Please read this important information before proceeding further. It contains legal and regulatory notices relevant to the information contained on this website.

The information contained in the Website is NOT FOR RETAIL CLIENTS - The information contained in the Website is solely intended for professional investors, defined as investors which (1) qualify as professional clients within the meaning of the Markets in Financial Instruments Directive (MiFID), (2) have requested to be treated as professional clients within the meaning of the MiFID or (3) are authorized to receive such information under any other applicable laws. The value of the investments may fluctuate. Past performance is no guarantee of future results. Investors may not get back the amount originally invested. Neither Robeco Institutional Asset Management B.V. nor any of its affiliates guarantees the performance or the future returns of any investments. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency.

In the UK, Robeco Institutional Asset Management B.V. (“ROBECO”) only markets its funds to institutional clients and professional investors. Private investors seeking information about ROBECO should visit our corporate website www.robeco.com or contact their financial adviser. ROBECO will not be liable for any damages or losses suffered by private investors accessing these areas.

In the UK, ROBECO Funds has marketing approval for the funds listed on this website, all of which are UCITS funds. ROBECO is authorized by the AFM and subject to limited regulation by the Financial Conduct Authority. Details about the extent of our regulation by the Financial Conduct Authority are available from us on request.

Many of the protections provided by the United Kingdom regulatory framework may not apply to investments in ROBECO Funds, including access to the Financial Services Compensation Scheme and the Financial Ombudsman Service. No representation, warranty or undertaking is given as to the accuracy or completeness of the information on this website.

If you are not an institutional client or professional investor you should therefore not proceed. By proceeding please note that we will be treating you as a professional client for regulatory purposes and you agree to be bound by our terms and conditions.

If you do not accept these terms and conditions, as well as the terms of use of the website, please do not continue to use or access any pages on this website.

I Disagree