How Cannabis Companies Can Turn Valuation Discounts Into Transparency Premiums with ESG Frameworks


2021-08-02 20:53:00 Business Times


Many cannabis companies are working to understand Environmental, Social and Governance trends so that they may mitigate risks and establish compliant policies at the enterprise level. The growing impetus behind the current focus on ESG is not only to comply with new regulations and meet consumer and employee demand, but also to increase the capacity to attract capital as many investors are looking to invest in companies with ESG initiatives in place. Given increased demand for ESG action from businesses, many cannabis companies are uniquely positioned to benefit from highlighting their current ESG efforts and incorporating additional ESG practices. ESG is in the headlines, but it is more than just a fad. At its core, ESG is a process for evaluating longer-term environmental, social and governance risks that are often considered when implementing traditional risk management strategies. This evaluation includes everything from a company’s treatment of employees and contract labor to its potential unintended impacts on the communities in which it operates. This can encompass product safety and labelling, carbon emissions, water consumption, as well as a company’s adoption of meaningful diversity, equity and inclusion programs. The list is long, but it is also important and cannabis operators are poised to take advantage. Because the nascent legal cannabis industry often finds itself needing to overcome public and policymaker misperceptions and abide by strict regulations, many cannabis companies have already incorporated ESG-like policies and good governance into their business model. Growers already analyze their environmental impacts. Brands are required to know the sources of their ingredients and to track their quality. Cannabis product labels are scrutinized for misrepresentations. Because cannabis companies are typically less corporately established entities and because many have evolved from a non-traditional financial background, cannabis companies already also tend to be more diverse and concerned about social justice. By converting de facto ESG policies into express, well-formulated and executed ESG policies, allows companies to add value and position themselves for stronger growth in the marketplace. Many cannabis companies seem to simply be too busy. The fact that ESG reporting is itself still rapidly evolving makes ESG frameworks hard to adopt, but this challenge is not unique to the cannabis industry. Constrained access to capital and the industry’s general immaturity are both causes and effects of this lack of capacity. But if a cannabis company accurately markets its ESG framework, it can attract affordable capital or enter new markets that are looking for socially conscious businesses. Cannabis corporate leaders often prioritize alternative capital sources, such as family offices, hedge funds and individuals to attract investment, but many of these capital sources want to know that they are investing into businesses that are ESG-conscious. The cost-benefit analysis of embracing ESG in the cannabis industry, however, is rapidly shifting. In addition to consumers actively seeking out brands with meaningful sustainability and social responsibility ethos, as more private equity and hedge fund investors enter the space, and with institutional money starting to come off the sidelines,  (CITE) the companies with the best risk management systems will attract valuation premiums. And as more opportunities become available to compete for local licenses, those companies already boasting systematized and certified ESG disclosures will have a substantial competitive advantage. So, What’s Next? Like addressing your company’s cybersecurity and protecting your consumer’s privacy (a critical piece of ESG), the best time to start implementing an ESG program is yesterday, but the second best time is right now. Companies can start this process by making a board committee or high-level executive responsible for aggregating the information necessary to identify ESG risks and opportunities. This might entail polling key stakeholder groups and investigating opportunities to measure, report and communicate the company’s material ESG factors, risks and opportunities. Here are examples of existing operational practices or industry conditions that could be readily conformed to meet ESG metrics: Any cannabis company looking to adopt more formalized ESG measures should include the company’s general or outside counsel in the initial stages of this process. They are often uniquely able to articulate ESG risks and help adopt a framework for proper incorporation into the company’s corporate governance, including protocols and policies. Getting sued for making a misrepresentation or violating a consumer protection statute defeats the purpose of marketing ESG success. ESG-related public claims and statements (this includes marketing and labelling, anything related to environmental impacts or sustainability) should be carefully researched, documented and contain proper disclosures to inoculate companies from potential ESG-related risks. The focus on ESG is gaining momentum. Early adopters of ESG will need to be cautious as standards continue to develop, but they will likely be the first to reap the benefits of meeting increased consumer demand for ESG programs and attracting the attention of larger investors looking for entry points into the growing cannabis industry. As July comes to a close, we’ve got plenty of work to do in the cannabis space. Perhaps the biggest story of the month was the announcement of the Cannabis Administration and Opportunity Act, a fairly comprehensive legalization bill that actually stands a chance at making headway in Congress this year. It’s hard to say what that means to currently licensed cannabis business owners, except for the fact that change is coming. But you already knew that, right? That’s the name of the game. N.B.: Next month, we’ll be in Las Vegas for Cannabis Conference 2021. Check the full schedule of educational programming here—and make sure to register!  We’ve rounded up some of the key cannabis headlines from the week right here. Ohio is making a run at adult-use legalization. Will it work? Read more  “Colorado has created the Cannabis Business Office to promote social equity and provide financial and technical assistance to entrepreneurs in the industry.” Read more  Speaking of Colorado, the state’s latest biennial reports puts some long-standing misconceptions around youth cannabis use and impaired driving to rest. Read more  “The Illinois Department of Financial and Professional Regulation (IDFPR) awarded 55 cannabis retail licenses to 53 firms on July 29 in the first of three licensing lotteries aimed at improving social equity in the state’s adult-use market.” Read more From Assistant Editor Andriana Ruscitto: “Jushi Chief Creative Director Andreas Neumann describes how the brand is leveraging non-cannabis sales to boost its core cannabis business.” Read more  And elsewhere on the web, here are the stories we’ve been reading this week: KOB4: “New Mexico is eight months out from legal marijuana sales, and the state is already anticipating all shops will be completely sold out of cannabis within the first two weeks.” Read more  Yahoo! Finance: “Tilray CEO Irwin Simon expects marijuana legalization in the U.S. to happen within the next two years.” Read more  Modesto Bee: The city of Modesto launched a new cannabis education and tourism campaign. Read more  41NBC: In Georgia: “Macon-Bibb County will be getting a GMP-certified medical cannabis cultivation and production facility, on which construction should begin shortly.” Read more  Times-Union: A proposed ban on cannabis retail garnered little support in upstate New York. Read more  A pair of Ohio lawmakers officially put their plans into action July 30 by formally filing adult-use cannabis legislation in the state’s House—the first of its kind in the state. Democratic Reps. Casey Weinstein and Terrence Upchurch, both representing Northeast Ohio districts, first introduced their 180-page bill two weeks ago, which includes four major components: decriminalization, a cannabis excise tax, commerce and licensing, and medical cannabis. More specifically, the Ohio Medical Marijuana Control program would remain intact, and licensed operators could pursue additional licenses to enter the adult-use market. According to a memo Weinstein and Upchurch sent to fellow House members two weeks ago, the bill would enable municipalities to restrict the type and number of cannabis establishments operating within their jurisdictions and require the Department of Commerce to adopt rules related to the licensure of cannabis businesses. And the bill would impose restrictions on the cultivation, processing, transportation and sale of cannabis. Also, the legislation would allow adults 21 and older to buy and possess up to 5 ounces of cannabis and grow as many as 12 plants for personal use. “It’s time to lead Ohio forward,” Weinstein said in a joint press release issued Friday. “This is a big step for criminal justice reform, for our veterans, for economic opportunity, and for our individual liberties.” On the map, Ohio’s neighbor to the northwest, Michigan began commercial sales of adult-use cannabis in December 2019 and has attracted Ohioans’ business since. Meanwhile, Pennsylvania state lawmakers are knocking on legalization’s door to the east. As for criminal justice reform, Ohio’s jails and prisons incarcerated 68,528 people in 2019. As of 2014, Blacks (1,625 per 100,000) were 5.6 times more likely to be locked up than white Ohioans (289 per 100,000), according to the U.S. Bureau of Justice Statistics. In states that have already reformed cannabis prohibition, incarceration rates, especially for non-violent criminals, such as those who possess cannabis, have decreased dramatically. In Colorado, cannabis arrests plummeted 68% from 2012 to 2019. The Ohio legislation would allow for adult cultivation and possession of cannabis and would allow for the expungement of conviction records for previous cultivation and possession offenses. “This bill is much needed in Ohio, and it’s time for Ohio to become a national leader in marijuana decriminalization and legalization,” Upchurch said in the release. “This bill is more than just about legalization; it’s about economic and workforce development; it’s about decriminalization; and it’s about health care. The time is now, and I look forward to getting this done in a bipartisan fashion.” The bill would also levy an 10% cannabis excise tax on retailers and microbusiness, with the revenue aimed to be distributed, in part, to secondary education and road infrastructure, as well as up to $20 million annually for two years to be used for clinical trials researching the efficacy of cannabis in treating medical conditions of veterans and preventing veteran suicide, according to the release.  With the Ohio Legislature in session through the end of the year, the bill now awaits committee assignment.
许多大麻公司正在努力了解环境、社会和治理趋势,以便在企业一级减轻风险并制定合规政策。 当前对ESG的关注背后的日益增长的动力不仅是为了遵守新的法规,满足消费者和员工的需求,而且是为了提高吸引资本的能力,因为许多投资者希望投资于实施ESG举措的公司。鉴于企业对环境、社会和治理行动的需求增加,许多大麻公司处于独特的地位,可以从突出其当前的环境、社会和治理努力以及纳入更多的环境、社会和治理做法中受益。 ESG是头条新闻,但它不仅仅是一种时尚。 ESG的核心是评估长期环境、社会和治理风险的过程,在实施传统风险管理战略时经常考虑这些风险。这种评估包括从公司对员工和合同工的待遇到其对其运营所在社区的潜在意外影响的一切。这可能包括产品安全和标签、碳排放、水消耗,以及公司采用有意义的多样性、公平和包容方案。名单很长,但也很重要,大麻经营者准备利用这一点。 由于新生的合法大麻产业往往发现自己需要克服公众和决策者的误解并遵守严格的条例,许多大麻公司已经将类似环境、社会和性别平等的政策和善治纳入其商业模式。 种植者已经分析了他们对环境的影响。品牌必须知道其成分的来源,并跟踪其质量。大麻产品标签被仔细检查是否有虚假陈述。由于大麻公司通常是公司化程度较低的实体,而且由于许多公司是从非传统的财务背景演变而来的,大麻公司也往往更加多样化,更加关注社会正义。通过将事实上的ESG政策转化为明确、精心制定和执行的ESG政策,使公司能够增加价值,并为自己在市场上的更强劲增长定位。 许多大麻公司似乎只是太忙了。环境、社会和治理报告本身仍在迅速发展,这一事实使环境、社会和治理框架难以采用,但这一挑战并非大麻行业所独有。 资本获取受限和行业普遍不成熟既是这种能力缺乏的原因,也是这种能力缺乏的影响。但如果一家大麻公司准确地营销其ESG框架,它可以吸引负担得起的资本或进入寻找社会意识企业的新市场。大麻企业领导人通常优先考虑替代资本来源,如家族办公室、对冲基金和个人来吸引投资,但这些资本来源中的许多人希望知道他们正在投资于具有ESG意识的企业。 然而,在大麻行业采用环境、社会和文化管理的成本效益分析正在迅速转变。除了消费者积极寻找具有有意义的可持续性和社会责任精神的品牌之外,随着更多的私人股本和对冲基金投资者进入这一领域,以及机构资金开始退出,风险管理系统最好的公司将吸引估值溢价。随着更多竞争本地牌照的机会出现,那些已经拥有系统化和认证ESG披露的公司将拥有巨大的竞争优势。 那么,接下来是什么? 就像解决你公司的网络安全和保护你消费者的隐私(ESG的一个关键部分)一样,开始实施ESG计划的最佳时间是昨天,但第二个最佳时间是现在。 公司可以通过让董事会委员会或高级行政人员负责收集必要的信息来识别ESG的风险和机会来启动这一进程。这可能需要对关键的利益相关者群体进行投票,并调查衡量、报告和交流公司的重大ESG因素、风险和机会的机会。 以下是现有操作实践或行业条件的示例,这些示例可以很容易地符合ESG指标: 任何希望采取更正式的环境、社会和治理措施的大麻公司都应在这一进程的初始阶段包括该公司的总顾问或外部顾问。他们通常独特地能够阐明ESG风险,并帮助采用一个框架,将其适当纳入公司的公司治理,包括协议和政策。因虚假陈述或违反消费者保护法规而被起诉违背了ESG成功营销的目的。与ESG相关的公开声明和声明(包括营销和标签、任何与环境影响或可持续性相关的内容)应仔细研究、记录并包含适当的披露,以使公司免受与ESG相关的潜在风险。 对ESG的关注正蓄势待发。随着标准的继续发展,早期采用ESG的人将需要谨慎,但他们可能会首先获得满足消费者对ESG方案日益增长的需求的好处,并吸引寻找进入日益增长的大麻行业的切入点的较大投资者的注意。 随着7月的结束,我们在大麻领域有大量的工作要做。也许本月最大的新闻是《大麻管理和机会法案》的宣布,这是一项相当全面的合法化法案,今年实际上有机会在国会取得进展。 很难说这对目前有执照的大麻企业主意味着什么,除了变革即将到来的事实。但你已经知道了,对吧?这就是游戏的名字。 注:下个月,我们将在拉斯维加斯参加2021年大麻会议。在这里查看教育节目的完整时间表--并确保注册! 我们在这里收集了本周的一些关键大麻头条新闻。 俄亥俄州正在努力实现成人使用合法化。行得通吗?阅读更多 “科罗拉多州成立了大麻商业办公室,以促进社会公平,并为该行业的企业家提供财政和技术援助。”阅读更多 说到科罗拉多州,该州最新的两年期报告消除了一些长期以来关于青少年大麻使用和驾驶障碍的误解。阅读更多 “伊利诺伊州金融和专业监管部(IDFPR)于7月29日向53家公司颁发了55张大麻零售许可证,这是旨在改善该州成人使用市场社会公平的三张许可证彩票中的第一张。”阅读更多 助理编辑Andriana Ruscitto:“巨石首席创意总监Andreas Neumann描述了该品牌如何利用非大麻销售来推动其核心大麻业务。”阅读更多 在网络的其他地方,以下是我们本周读到的故事: KOB4:“新墨西哥州离合法大麻销售还有八个月,该州已经预计所有商店的大麻将在头两周内完全售罄。”阅读更多 雅虎!财经:“蒂尔雷首席执行官欧文·西蒙预计美国大麻合法化将在未来两年内实现。”阅读更多 莫德斯托蜜蜂:莫德斯托市发起了一项新的大麻教育和旅游运动。阅读更多 41NBC:在佐治亚州:“梅肯-比布县将获得一个GMP认证的医用大麻种植和生产设施,该设施将很快开始建设。”阅读更多 时报联盟:一项禁止大麻零售的提议在纽约北部几乎没有得到支持。阅读更多 俄亥俄州的两名议员于7月30日正式将他们的计划付诸行动,在该州众议院正式提交了成人使用大麻的立法--这是该州第一次此类立法。 两周前,代表俄亥俄州东北部地区的民主党众议员凯西·韦恩斯坦(Casey Weinstein)和特伦斯·厄普丘奇(Terrence Upchurch)首次提出了他们180页的法案,其中包括四个主要组成部分:非刑罪化、大麻消费税、商业和许可以及医用大麻。 更具体地说,俄亥俄州医用大麻控制计划将保持不变,有执照的经营者可以寻求额外的执照进入成人使用市场。 根据韦恩斯坦和厄普丘奇两周前发给众议院议员的一份备忘录,该法案将使市政当局能够限制在其管辖范围内经营的大麻机构的类型和数量,并要求商务部通过与大麻业务许可有关的规则。该法案将对大麻的种植、加工、运输和销售实施限制。 此外,该立法将允许21岁及以上的成年人购买和拥有多达5盎司的大麻,并种植多达12株植物供个人使用。 温斯坦在周五发布的联合新闻稿中说:“是时候带领俄亥俄州前进了。”“这是刑事司法改革、退伍军人、经济机会和个人自由的一大步。” 在地图上,俄亥俄州西北部的邻居密歇根州于2019年12月开始商业销售成人用大麻,此后一直吸引着俄亥俄州人的生意。与此同时,宾夕法尼亚州的立法者正在敲开东部合法化的大门。 至于刑事司法改革,2019年俄亥俄州的监狱和监狱监禁了68,528人。根据美国司法统计局的数据,截至2014年,黑人(每10万人中有1625人)被关押的可能性是俄亥俄州白人(每10万人中有289人)的5.6倍。 在已经改革大麻禁令的国家,监禁率,特别是非暴力罪犯,如拥有大麻的罪犯的监禁率大幅下降。在科罗拉多州,2012年至2019年,大麻逮捕人数骤降68%。 俄亥俄州的立法将允许成年人种植和拥有大麻,并允许删除以前种植和拥有大麻罪的定罪记录。 厄普丘奇在新闻稿中说:“俄亥俄州非常需要这项法案,是时候让俄亥俄州成为大麻非刑罪化和合法化的全国领导者了。”“这项法案不仅仅是关于合法化;这是关于经济和劳动力发展;这是关于非刑罪化;而且是关于医疗保健的。现在是时候了,我期待着以两党合作的方式完成这项工作。“ 根据新闻稿,该法案还将对零售商和微型企业征收10%的大麻消费税,收入的一部分将分配给中等教育和道路基础设施,并在两年内每年最多2000万美元用于临床试验,研究大麻在治疗退伍军人疾病和防止退伍军人自杀方面的功效。 随着俄亥俄州立法机构在年底开会,该法案现在等待委员会的分配。