One of the most important trends in the cannabis sector is related to environmental, social, and governance (ESG) concerns. During the last month, we have seen a significant increase in the number of companies that are focused on addressing these concerns. Going forward, we expect the ESG trend to become more significant and will monitor how these types of initiatives help the businesses that are focused on it.
To better explain the ESG theme, we want to highlight what each letter stands for as well as the importance of it.
- Environmental concerns are related to the energy that a company uses as well as the waste that is associated with it. These concerns are related to how companies are affected by the environment and includes carbon emissions as well as climate change
- Social concerns are related to the relationships that a company has as well as the reputation it has with people and institutions in the markets that it operates in. These concerns include labor relations, diversity, and inclusion for a company
- Governance concerns are related to a company’s internal system of practices, controls, and procedures that are implemented so the business can govern itself, make effective decisions, comply with the law, and meet the needs of external stakeholders.
One of the most important aspect of the ESG trend is related to how each component is intertwined. For example, the social criteria overlap with both the environmental and governance criteria as companies work to comply with environmental laws as well as broader concerns about sustainability.
According to McKinsey, there has been an incremental increase in ESG investing and reported that there is more than $30 trillion focused on global sustainable investment initiatives. The amount of capital that is focused on ESG initiatives has increased 68% since 2014 and tenfold since 2004 (source is Global Sustainable Investment Review 2018, Global Sustainable Investment Alliance, 2018, gsi-alliance.org.).
The firm attributes the increase to heightened social, governmental, and consumer attention on the broader impact that corporations have on the global economy. According to the research that was conducted by McKinsey, companies that are highly focused on ESG initiatives do not experience a drag on value creation. The firm found that companies which have a strong ESG proposition have a positive correlation with higher equity returns and we find this to be of significance.
The research suggests that a strong focus on ESG will benefit a company through the following: facilitating top-line growth; lowering costs; minimizing regulatory and legal interventions and risks; increasing employee productivity; and optimizing investment and capital expenditures.
Khiron Life Sciences is Executing on Key ESG Concerns
We believe the ESG investing strategy has played an important role in the cannabis sector and expect the trend to become more significant in the back half of the year. Khiron Life Sciences Corp. (TSXV: KHRN) (OTCMKTS: KHRNF) is a cannabis company that is executing on the ESG initiative, and we are favorable on how the management team has made this theme an important aspect of the story on a going forward basis.
Since inception, Khiron has been considered a leading Latin American cannabis operator and we are bullish on how the story has advanced since late 2020. The ESG initiatives the company is focused on are centered around improving people’s quality of life, while strengthening it commitment to implementing sustainable management practices.
To promote the sustainable growth of its business, Khiron’s management team is committed to creating value for investors, acting with the highest level of ethical standards and transparency, inspiring trust, ensuring the quality of its products and services, maximizing the generation of shared value, and minimizing the negative impacts derived that are associated with making operations more sustainable.
Khiron has identified 9 key stakeholders that play an active and fundamental role that will influence (directly or indirectly) operations and these stakeholders include 3 internal factors and 6 external factors. The internal factors are collaborators, the governing body, and owners. The external factors include shareholders, governments, patents, suppliers, customers and communities.
Another key factor that is related to Khiron’s commitment to sustainability is related to how such factors align with the United Nations Sustainable Development Goals. These commitments are highlighted in graphic below and we find this to be an important aspect of the story.
A Company of Firsts
Khiron’s corporate culture aligns with key ESG concerns and we are favorable on the management team’s focus on this theme. Over the next year, we expect to see additional cannabis companies follow Khiron’s lead and will monitor how the story advances from here.
Since inception, Khiron has been the first company to accomplish several important milestones and we are bullish on the advantage that this provides the business over the long-term. We believe the company has been executing on a differentiated growth strategy and believe the market is discounting the growth prospects that are associated with the platform.
At current levels, we believe Khiron has a compelling valuation and a favorable risk-reward profile. The management team has been executing on a multi-national growth strategy and we are favorable on the markets that is has been focusing on. From the European Union to South America, the company has reported several major developments and we are excited about the markets the business is levered to.
If you are interested in learning more about Khiron Life Sciences, please send an email to firstname.lastname@example.org with the subject “Khiron Life Sciences” to be added to our distribution list.
For the fastest access to data on Khiron Life Sciences, sign up for our free newsletter!
Pursuant to an agreement between StoneBridge Partners LLC and Khiron Life Sciences Inc. (KHRN) we have been hired for a period of 90 days beginning May 5, 2021 and ending August 5, 2021 to publicly disseminate information about (KHRN) including on the Website and other media including Facebook and Twitter. We are being paid $6,000 per month (KHRN) for or were paid “0” shares of restricted common shares. We own zero shares of (KHRN), which we purchased in the open market. We plan to sell the “ZERO” shares of (KHRN) that we hold during the time the Website and/or Facebook and Twitter Information recommends that investors or visitors to the website purchase without further notice to you. We may buy or sell additional shares of (KHRN) in the open market at any time, including before, during or after the Website and Information, provide public dissemination of favorable Information.