As companies like Canopy Growth Corp. (TSX:WEED) (OTC:TWMJF) and Aurora Cannabis Inc. (TSX:ACB) (OTC:ACBFF) prepare for the recreational legalization of cannabis in Canada, a massive New Zealand pension fund has decided that they will not be investing in any companies that get involved.
NZ Super Fund Blocks Recreational Cannabis Companies
The NZ Super Fund, a $37.4 billion NZD New Zealand Government sovereign wealth fund, announced yesterday that it would be excluding companies involved in the manufacturing and cultivation of cannabis for recreational use.
Beyond just manufacturers and cultivators, the NZ Super Fund will also be excluding companies that provide support services for the recreational use of cannabis.
With that said, the exclusion does not include companies involved with licensed and authorized medicinal cannabis.
Why Though?
Since it is the purpose of the NZ Super Fund to help pre-fund the future cost of retirement benefit payments to an aging population of New Zealanders, one would think that they'd seek to profit off of one of the fastest growing industries in the world.
Unfortunately, the Guardians’ Responsible Investment Framework decided to take precautionary action and exclude these companies from investment eligibility due to New Zealand law and international conventions to which New Zealand is a signatory.
Recreational use of marijuana is currently illegal in New Zealand under the Misuse of Drugs Act 1975, and is also contrary to New Zealand’s commitments to international drug conventions including the 1988 UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances.
Subject to Change
As stated above, this decision by the NZ Super Fund was a precautionary one, "as the NZ Super Fund does not currently hold any of the companies identified for exclusion." Going forward though, the fund will "continue to monitor the sector."
The release acknowledges that "the majority of publicly listed companies involved in the recreational cannabis industry are small in size, but further growth and the inclusion of the companies in market indices is anticipated."
Based on their reasoning, it seems that a major change in New Zealand's stance on cannabis or a major change in the UN's stance on cannabis could make those recreational cannabis companies eligible for investment again.
Conclusion
With assets under management equivalent to just over $26 billion USD, the NZ Super Fund could have made a serious splash in the up-and-coming recreational cannabis space.
While this decision to exclude such companies from investment eligibility is subject to change in the future, the recreational marijuana industry's development and acceptance will not slow down or wait.
Maybe some New Zealanders will take cannabis investments into their own hands!
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D/M/O
