Is the Pot Industry Socially Responsible?

The legalization and increasing acceptance of medical marijuana is driving a revolution. Giant images of pot leaves, growers, and the boldfaced word "MARIJUANA" can suddenly overtake your screen when you're looking for news. Apparently these days, there is no shame in weed.

As investors, it's hard to ignore the money-making possibilities in the increasing legalization trend. Right now, industry market researcher ArcView says the market for legal marijuana is $1.53 billion, and set to grow to $10.2 billion in the next five years.

Investors have good reason to salivate about nascent opportunities. However, many questions swirl around this space, and for those of us who consider ourselves socially responsible investors, there's even more to weigh than whether we could roll the dice and lose our shirts. Could we lose sleep at night, as well?

First and foremost, though, I'd like to stress that it's never responsible to gamble with your financial well-being and, as this "marijuana bubble" blows up, let's be careful and think twice before investing in pot-related schemes and penny stocks.

Getting weed down to a "T"
This article is about responsible investing and, given the fact that "gambling" is considered a dangerous vice, let's first touch on the downright speculative dangers of marijuana investing.

In one example of a perhaps more highly evolved marijuana play -- which makes for a tempting idea -- Canada's Tweed Marijuana has put a pot production plant in a former Hershey factory, and has other legitimizing aspects like a CEO, a CFO, and a "master grower."

Tweed has already gone public on the Toronto Exchange, but it's still troubling for investors. It's a penny stock -- a generally risky investment. It isn't subject to U.S. disclosure rules. The Ottawa Citizen covered its initial public offering, and such coverage is about the most in-depth we can get information-wise. Among the risks: Tweed Marijuana just started raking in sales last month. It also has a lot of capital expenditures in its future, including plans to quadruple production capacity and ramp up its staff.

There's a reason why nascent industries of all kinds are incredibly high risk. In one example, the Internet revolution resulted in far more corporate casualties than successes. Pot portfolios are still uncharted water.

Pot: Positive or not?
As the smoke clears, the area is no longer in the shadows, and marijuana stocks multiply, we can start wondering if it's a socially responsible industry. The arguments in favor of decriminalization have obscured all else. And the NIH's National Institute on Drug Abuse points out an interesting fact: There's been a diminishing awareness of marijuana's adverse effects during the last several years.

Like the tobacco industry and the entire "vice" stock area, certain risks pose a danger to returns, sooner or later. Public acceptance, health-care bills, and the possibility of labeling, strict regulation, and litigation related to adverse effects, are risks that still drag on benefits.

Marijuana use entails some of the same health risks as smoking cigarettes. Smoke inhalation is smoke inhalation. Respiratory and lung problems, "smokers cough," and high rates of illness are among those issues.

NIH's description of pot's "psychoactive" properties sounds dramatic, but "not being in one's right mind," to put it lightly, presents a safety risk. Like alcohol, it damages brain cells. Losing IQ points as a teenager is a major bummer in the game of life. Meanwhile, some mental illnesses can be triggered and exacerbated by mind-altering drugs.

The federal stance on marijuana, despite two states' OK for recreational use and 21 states' allowance of medicinal use, still considers it a Schedule I substance, "having no medicinal uses and high risk for abuse."

Despite the risks, the much-publicized benefits feel socially responsible. There is scientific evidence that marijuana can treat a large number of ailments.

Marijuana has been touted as easing the pain and nausea suffered by cancer, AIDS, and HIV patients. Some people even believe cannabis can treat cancer. Pediatric epilepsy treatment is an increasingly high-profile argument for legalization; many parents are left with no alternatives that can combat their children's seizures as effectively.

Still, many people don't believe marijuana's health benefits outweigh the risks.

High on life, not high on risk
As our world changes -- and the world never stops changing -- it makes perfect sense that, sometimes, we have to adjust our investing attitudes. Some of these adjustments can certainly rock our own opinions on many different industries. The marijuana industry is certainly disruptive, to say the least.

Like many people, despite some concerns, I don't have a huge problem with marijuana legalization. If it's an avenue for healing and even treating illnesses, people should have the right to take that path. On the recreational level, the substance isn't strikingly worse, and in some cases may be better, than alcohol and nicotine, both of which reside in the realm of vice stocks, but are perfectly legal.

Meanwhile, every day, people make their own decisions, and occasionally take risks in all kinds of ways. A world without choices would be a sad place to be.

But as a socially responsible investor, I'm already wondering how SRI will, overall, come down on this. Like many issues in socially responsible investing, it's quite possible many of us will simple want to self-direct our investments according to our feelings about the area, but awareness of the complexity will be a growing topic.

At its core, isn't this what responsible investing is all about? Generally, many of us want to reduce harm at societal levels, and even financial ones. Social acceptance, for some of us, may not always add up to socially responsible. In an area in which we contemplate if our investments add up to harm to ourselves and others, weighing the risks and the benefits is increasingly important.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.


Read/Post Comments (13) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 11, 2014, at 11:29 AM, RandyDandyMandy wrote:

    I have finally signed up for the Motley Fool Board. I am so motivated to post that I am afraid that they will remove this post as it will shine a light on the absurd and patently false claims that this writer makes without any proof or substance.

    ----

    Please give us links and footnotes, point us to the sources of your information of the harm that Cannabis causes. Please do not refer me to 'Reefer Madness', which is obviously the source of your article. I have not read such nonsense in a long time and I realize now why others have such a low view the Motley Fool.

    ---

    Lastly, Alyce Lomax, the author must be posting a picture that was taken over 40 years ago because her perspective and false knowledge make her a dinosaur peddling the old propaganda.

  • Report this Comment On June 11, 2014, at 12:39 PM, TMFLomax wrote:

    This article is fact checked with sources such as NIH (which is National Institutes of Health, not Reefer Madness -- last I heard, NIH is a well respected source of health information).

    No one will remove your post, because we welcome divergent opinions here and discussion. However, I'd like to clarify.

    I think I've fairly weighed the pros and cons, mentioning both in detail, so with all due respect, I'm not sure why you believe this is about "patently false claims," nor did I ever say it should be illegal or that people should not make the choice, nor did I ever say I didn't believe those who feel strongly about the health benefits.

    (Actually this is all in the article.)

    Best,

    Alyce

  • Report this Comment On June 11, 2014, at 4:04 PM, Tpov420 wrote:

    I had to sign up as well but not for the same reasons as Randy. I found no comparison to RM(reefer madness) what so ever. Alyce, i believe, is looking at this from an investment standpoint where Randy is just looking at another "misinformed hater". I have avoided the fool in the past as I know nothing about investing yet that is how I secured my families financial future. This subject is WELL known to me and I understand Rand'y angst but I believe it has blinded him in this regard. The crux of this article IMO rests on an investors personal feelings toward what they are investing in not what MJ(marijuana) has to do with society or it's benefits/detriments to society as a whole. Personally I am a big fan of mj. I have been diagnosed as bi-polar and have been on one pill after another trying to find relief without side effects that are worse than the original "problem". I won't tell you that it's the best thing ever man, it will open up your mind and rock your world. That is similar BS to the RM defense. It is not for everyone and has it's hazards same as everything in life. Water, the most seemingly benign thing in life can also kill you if you over do it. Personal responsibility is the key. I have been diagnosed with COPD and have a couple inhalers to cope with the condition. Yes, I still smoke MJ but now I take an equal time off of MJ to "restore balance" IMO. Jeez this is turning into another thesis so I will get back on point. I collected antiques and when Ebay first started I thought to myself that this was a way I could provide for my family and stay at home. IMO ebay was a phenomenon and when I heard it was going public I went on a campaign to put EVERYTHING i could get my hands on into this opening. My brother in law was really into investing at this time but wasn't having much success. I desperately tried to get him on board but we were far too similar in our convictions to get him to agree. I went for it and he declined. I feel I was extremely LUCKY and made the right move. I sold out when I was satisfied I would have enough to provide for the rest of my life and have never considered another stock since until now. While I am as involved in MJ as I was Ebay I get the feeling that this is just not as sure of a thing so I am going to pass. Again I am not some "wizard of wall street" or mark cuban. I just saw an opportunity and was fortunate enough to capitalize on it. To think that I could do it again, at will, would be the living definition of insanity. In conclusion(finally) I was thoroughly impressed at your response Alyce and pleased to see civil discourse on the net.

  • Report this Comment On June 12, 2014, at 8:26 AM, TMFLomax wrote:

    Tpov420,

    Thanks for posting... yes, this is definitely simply about the investing side as this industry starts to take off, as it seems to be. Someone asked me recently what I thought about it in terms of social responsible investing, and I was stumped; I literally hadn't thought about it at all since it's so new. So I thought it was an interesting thing to think about and discuss.

    Thanks for your astute observations on the topic. I'm glad to hear that you have been able to find something that works for you, since I know that treatment can be challenging.

    And, I'm glad to hear that during the crazy Internet boom you were able to secure your future with eBay! That was definitely a crazy time and a lot of companies didn't make it, even some that were such good ideas but too early. I'm glad that turned out well for you!

    Obviously you know what it's like to jump into new investing areas, and what the risks are!

    If you are interested in thinking about stocks again, we have a lot of information, analysis, and investment ideas here on Fool.com. For example, here is a beginner's primer:

    http://www.fool.com/how-to-invest/thirteen-steps/index.aspx

    Thanks again for posting!

    Alyce

  • Report this Comment On June 15, 2014, at 5:20 PM, TMFBlacknGold wrote:

    Alyce,

    There was a good documentary on marijuana called "Weed" by Dr. Sanjay Gupta in which he traveled the world and saw the effects first hand, both good and bad. Some of his findings and thoughts:

    http://www.cnn.com/2013/08/08/health/gupta-changed-mind-mari...

    I wonder if people (and regulators) would think differently about it if we could produce cannabinoids through fermentation with an engineered microbe? It would be much easier from a quality control standpoint and, therefore, easier to regulate. Additionally, you could produce larger volumes in shorter times and decentralize production. To my knowledge, there are some in the synthetic biology community tinkering with transferring the pathway from plants to yeast. Stay tuned, it may just be the future!

    Maxxwell

  • Report this Comment On June 16, 2014, at 9:50 AM, LittleBluestem wrote:

    Hiya Maxxwell!

    While that is an interesting idea from a QC standpoint, it is one that actually increases my level of nervousness. I have very mixed feelings about that sort of bioengineering - removing the whole process further and further from Momma Nature's own designs. I do hear where you're coming from and read with interest your pieces on SZYM. In fact, I do have a very small position in that company's stock. But, again, it was one that I tossed and turned about for a significant period before biting. I also realize that much of this is not all that new, things like using other organisms to manufacture human insulin. Yet that pesky "law" of unintended consequences is always niggling the back of my brain. It just seems to me that we expend quite a bit of our resources combatting past efforts at accelerating things: moving ourselves and plants and products around the globe, along with hitch-hiking invaders we don't realize until too late and so many similar leaps forward which then have us scrambling to pick up the pieces later on. Try taking a tally of the various weeds you battle in your yard each summer, then go research how they came to be in the New World. Many of them were brought here deliberately, many more accidentally.

    LittleBluestem

  • Report this Comment On June 16, 2014, at 12:37 PM, AkaThePerfessor wrote:

    It's strange that we would ask the "pot industry" to be "socially responsible", when we barely ask that, most of the time, for ANY OTHER industries--we mostly only ask for profits for shareholders, unless the big, evil federal government intervenes and says your cars can't explode, your food can't contain poison, your drilling or mining can't make tap water flammable or poisoned, etc.

  • Report this Comment On June 16, 2014, at 2:56 PM, TMFBlacknGold wrote:

    Alyce,

    I understand. We'll have to continue this conversation at the writer's conference this year. Our speaker might be able to change your mind ;)

    Maxxwell

  • Report this Comment On June 16, 2014, at 4:36 PM, gskinner75006 wrote:

    The industry is as socially responsible as Anheuser-Busch or the Altria company.

  • Report this Comment On June 16, 2014, at 4:39 PM, gskinner75006 wrote:

    The Fool should really consider turning over the comments section of the web site over to your betters such as Disqus. Conversations are hard to follow and many posts are lost. Probably as this one will be.

  • Report this Comment On June 16, 2014, at 4:41 PM, eddietheinvestor wrote:

    As the father of a teenage drug addict and alcoholic, I can tell you that there is nothing socially responsible about pot. My son got hooked from friends who were ruining their lives and enjoy the challenge of recruiting others and ruining their lives as well. My son says that pot must be fine because there are websites that say it is and because Colorado legalized it. His grades have fallen, his memory is cloudy, he no longer cares about going to college or even graduating from high school. He is addicted to pot, which led him into Zanax, pills, cocaine, etc. Pot is a gateway drug. My son sometimes disappears for a week or two at a time, with my wife and I having no idea where he is, only that he is doing pot, other drugs, and alcohol with his friends. My son is currently in rehab, and last week I attended classes at the clinic so that I could be a better parent to him and more informed when he gets out in a few days. The lecturer, a doctor specializing in addictions, told us horrifying facts about pot that news outlets won't cover. It's very sad. I will never invest in a drug that has greatly harmed my son and--by extension--my whole family.

  • Report this Comment On June 16, 2014, at 6:16 PM, Robinson wrote:

    There ought to be limits to how one is willing to make profits. I do not buy stocks that make or deal with products or services that I know are not consistent with my values, such as tobacco. If there is a medical value to pot and doctors say so then I will invest in the pharmaceutical company that produces it. "Medical marijuana" as an excuse to sell dope is really too thinly veiled to fool an investor with a thinking fool's cap. The "industry" as it appears to me today is not socially responsible.

  • Report this Comment On June 16, 2014, at 7:36 PM, hbofbyu wrote:

    Alyce,

    I can support legitimate medical uses such as Multiple Sclerosis or Epilepsy. But after walking this earth for many many moons, I have never seen an otherwise healthy individual's life improve through recreational marijuana use. Never. I can say the same thing about alcohol and cigarettes. Investing in marijuana (as with alcohol, tobacco and gaming) is socially irresponsible.

    If we are honest with ourselves we know that 99% of all the use out there is recreational with much in the guise of some kind of "therapy" or medicine.

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