SIX, the Swiss data and services provider owned by 127 banks, has lanched a service covering some 30,000 securities it has identified as having links to Marijuana Related Businesses (MRBs).
It has come about to aid investors dealing with an evolving legal landscape around marijuana, in which, for example, it is leagal in certain US states, but still criminal at the US federal level. In some US states it is therefore possible to raise capital for MRBs by issuing securities through capital markets.
However, MRBs can cross over different sectors, such as pharmaceuticals, recreation, transport and retail, which means it may not be straighforward developing portfolio exposure to the plant and its various uses, SIX suggests.
In Europe, the examples of MRBs suggest that it is risky for investors to construct portfolios, as it gives rise to legal risk, with some countries in the region still linking money laundering to MRBs. Investors need to know what level of exposure they have to MRBs should a regulator demand the information, SIX adds.
Its MRB service is built on the same model as its Sanctioned Securities Monitoring Service, and identifies and lists securities that are directly or indirectly issued by listed MRB entities; this includes any related structured products, options and warrants.
Oliver Bodmer, senior product managers at SIX, said: "As MRB becomes increasingly linked to the capital markets, our clients have been asking us how to best guard against any risk of portfolio exposure. This isn't just from a legal perspective, as ESG becomes more and more prominent in investment strategies, some investors are against their money being used for buying any securities tainted by "sin" stocks such as alcohol, tobacco and marijuana. As the regulatory landscape remains uncertain, we're pleased to be able to guide our clients through any portfolio exposure risk."
The service launched by SIX follows recent news from Morningstar, which predicts in a recent Basic Materials Observer report that the US cannabis market will be 10 times larger in 2030 than it is today.
The report expects US recreational cannabis sales to grow at 25% on a CAGR rate, with US medicinal cannabis sales growing at 15% CAGR.