Is marijuana a ‘good’ investment?

A September article in Investor’s Business Daily described the current opportunities and risks regarding investments in companies involved in the production and sale of cannabis, or marijuana.

“Cannabis companies that sell both medicinal weed and recreational pot. Marijuana stocks to buy and watch. Marijuana mergers and acquisitions. Dispensary data analytics. Upcoming marijuana IPOs,” began the article. “Those phrases have become increasingly common as marijuana legalization spreads across U.S. states and Canada. And investor interest in the industry continues to rise as leading pot players continue to chew away at legal barriers, where the federal government still outlaws cannabis.”

A paragraph or two later, after describing a couple of pot-producing firms that experienced impressive initial public offerings in recent months, the journal offered this cautionary note: “Still, the industry remains volatile, and inconsistent regulations could make expansion difficult.”

That aptly summarizes the present state of cannabis investing from a strictly profit-minded perspective. But what of the moral perspective, especially for Catholic investors who wish to make “clean” investments in keeping with sound Catholic ethical principles?

When faith drives one’s investment choices — as well it should — profit considerations necessarily move to the back seat. 

ECCLESIAL GUIDELINES

Official statements of the Catholic Church characterize cannabis investments as something to be avoided. 

Mensuram Bonam (“A Good Measure”), a 2022 document issued by the Pontifical Academy of Social Sciences and subtitled “Faith-Based Measures for Catholic Investors,” provides an overview of issues and principles to be considered by Catholic investors. Among its 24 “categories of concern or prohibition” for investment, it lists “addictive substances and services” under the category “avoiding destructive behaviors” (MB 43). 

This exclusionary list is recommended for the management of institutional Church assets, but it also expressly identifies issues “for investors which require discernment from faith.” Mensuram Bonam, the document points out, “speaks to all Catholic investors” (MB 31).

The U.S. Conference of Catholic Bishops, in the current version of their Socially Responsible Investment Guidelines updated in 2021, resonates closely with Mensuram Bonam. Its own investment policy states: “The USCCB will not invest in companies whose primary purpose is to derive revenue from gambling or the production of tobacco or the recreational use of cannabis” (Policy III.3). It follows that prohibition with an action statement: “The USCCB will encourage companies through corporate dialogues, proxy voting, and support of shareholder resolutions to move away from the production, marketing, or distribution of addictive or other harmful materials” (Policy III.4). 

Although these are stated guidelines for the USCCB and are not strictly binding on the faithful, the document’s introduction expresses hope that they will guide others “who wish to be both ethical and responsible to the common good in the investments they make.”

MORAL QUESTIONS

Although these official statements fall short of an absolute restriction — possibly because of the complexities of investment decisions and their relative moral impacts — the ethical analysis for corporate and individual investors can be broken down to simpler terms.

In a blog published in the National Catholic Register a few years ago, moral theologian E. Christian Brugger answered a question from a reader who was considering whether it would be moral to buy cannabis stocks, even though she didn’t support cannabis use.

“[I]f you judge [cannabis use] to be wrong, then it’s not only wrong for you, but for others like you,” Brugger replied. “And as it would be wrong for you to consent to it, so too it would be wrong for you to will others to consent to it.”

Investing in a company means wanting the company to make money, he explained. “So to make money, [the company] must do what you judge to be immoral — namely, to facilitate and encourage recreational pot smoking,” explained Brugger. “And for you to invest in it to make money means you must agree that it does these immoral things, for if it doesn’t do them, and do them successfully, you will not make any money.”

In Catholic teaching, he went on, to contribute to another’s evildoing in this way constitutes “formal cooperation” with evil, which is always morally wrong. 

And since recreational use of cannabis is itself morally wrong (see “Cannabis and Catholics: Lighting up the moral perspective,” Legatus magazine, September 2023), investing in companies involved in recreational cannabis production and distribution is also wrong.

BUT WHAT ABOUT…

The USCCB guidelines as well as the passage in the Catechism of the Catholic Church prohibiting drug use (2291), however, both are careful to allow cannabis products for legitimate medical or therapeutic use. 

Brugger also framed his response accordingly, leaving aside consideration of a company that might “limit itself to selling cannabis for strictly therapeutic reasons.” The possibility exists: in Colorado, for example, one of the U.S. states with the most liberal marijuana laws, companies involved in medical cannabis are licensed separately from those that deal in recreational cannabis. Does that theoretical distinction make a difference in investing options?

Such medical-cannabis-only companies, if they deal in no other exclusionary products or practices, might constitute a licit faith-based investment akin to legitimate pharmaceutical companies. But the reality is far more complex than that. Vigilance is required of the investor to ensure the firm remains legitimately “medical only” in its production and that its products are distributed and retailed solely for legitimate medical use (see article, p. 24).

Another possible exception involves mutual funds, which may have a diverse portfolio and where companies and individuals invest in the fund rather than its individual stocks and securities. If a “significant portion” of a mutual fund’s investments is in companies that profit from immoral products and practices — including recreational cannabis — then a Catholic ought not invest in that fund. 

However, as Brugger explained, “[I]f the fund’s holdings are widely diversified, it could be licit for you to purchase shares in the mutual fund with the intention to generate income from the morally clean businesses and accepting as an unintentional side effect that a small proportion of the fund’s profits come from tainted income.”

Given these bits of advice and guidelines, it’s clear that investors must do their homework — or ensure that their brokerage or investments firm understands and respects their moral and ethical principles. Even when a fund is presented as “Catholic values” or “faith-based,” investors should ask questions to verify that the specific priorities and exclusions of the fund and its manager line up with their own — and thereby value Catholic morals and ethics above profits.