James B. Francis, CFA
Chief Research Officer, CRB Monitor
Faith-based institutions have been conducting investment programs for decades, and many have adopted investment policies that exclude from their holdings companies in "high risk” industries. These industries are excluded because investing in them runs counter to various faith-based institutions’ ideologies; historically, common industries such as alcohol, tobacco, weapons manufacturers and fossil fuel companies have been excluded from religious institutions’ investments.
Fast forward to 2022, and cannabis has been added by faith-based investors as a prohibited industry, because 1) marijuana is still illegal in the eyes of the US Federal Government; and 2) in the eyes of some it is a moral issue - a societal problem. As such, it is important for these investors to do a thorough screening to ensure that they haven’t used their clients’ assets to inadvertently invest in a company that derives its revenues from cannabis, either directly or indirectly.
Marijuana has been legalized in 35 states plus the District of Columbia, Puerto Rico, Guam and Northern Mariana Islands and across Canada; however, according to the US federal government, marijuana is still considered a schedule 1 narcotic, which places it in the same category as LSD, heroin and ecstasy. As long as it remains in schedule 1, any activity in marijuana is considered illegal at the federal level, and therefore companies that derive revenue from the sale of cannabis are engaging in money laundering, an illegal activity. Furthermore, several studies have concluded that long-term cannabis usage can likely lead to diminished brain function and societal problems as well.
Many Christian investors, or any organization that relies on committees for decision making, have policies that were established in the past and don't necessarily name cannabis explicitly. When these policies require a board vote for amendment, time can pass without closing a loophole inconsistent with the church’s values. Every church’s administration is a little bit different, so each has to determine the unique scope of their investment policy and come up with rules to write this policy to exclude cannabis.
While the implementation of a cannabis policy can be relatively simple, the steps leading up to adding cannabis to a global exclusion list are not. Unlike alcohol, tobacco and weapons manufacturers, cannabis cannot be identified by selecting from a published list of industries, because that list is not publicly available. A faith-based institution must take the following steps to ensure that its investments are fully aligned with its specific ideology:
- Agree on the definition of a Cannabis-Related Business (CRB), including understanding and delineating between marijuana, hemp, CBD, etc.
- Determine the methodology for exclusion (Risk Tier, License Type, Sector, etc.)
- Write a cannabis policy that satisfies Faith/SRI-based investment goals and investor ideals
- Find a reliable source of data to determine which companies are “in scope.”
CRB Monitor provides institutions with a complete set of tools to do all of the above. The global, rules-based CRB Monitor securities database 1) identifies issuers as “cannabis -related businesses,” 2) separates the cannabis securities universe into several essential groups, and 3) generates a customized list of restricted CRBs that meets the unique objectives of each institution.
CRB Monitor differentiates medical cannabis from recreational cannabis, and plant-touching companies from companies that provide goods and services to plant-touching companies, to those that have only incidental revenue coming from the cannabis space. We also identify companies that are CBD-only, which might be allowable in a portfolio, versus companies that produce and sell products that contain THC.
Perhaps most important is CRB Monitor’s proprietary Cannabis Risk Tier framework, which has become an essential component for institutions that integrate cannabis screening into their investment policies:
CRB Monitor serves the faith-based and socially-responsible investment community by providing the tools to establish and implement a flexible, rules-based framework for cannabis that removes any guesswork from the process.
If your church is establishing or updating an investment policy and would like to mindfully exclude cannabis related businesses from your investment portfolio, please contact us today to discuss how CRB Monitor can help.
About CRB Monitor
CRB Monitor tracks ~ 1,400 publicly-traded, Cannabis-Related Businesses (CRBs) globally, which have ~1,600 traded securities. We categorize CRBs into our proprietary cannabis risk tier framework and cannabis-linked (CLS) sectors. In addition, CRB Monitor unravels and maintains complex corporate structures, linking publicly-traded parent companies to their underlying operational plant-touching subsidiaries. Custodian banks, broker/dealers, and asset managers find our data essential for pre-trade compliance, risk management, index construction, and portfolio analytics.