Cannabis industry stakeholders are in favor of the $3 trillion pandemic relief bill passed by the U.S. House of Representatives on Friday because it throws a financial lifeline to the struggling sector amid the economic downturn.
The Health and Economic Recovery Omnibus Emergency Solutions Act, or HEROES Act, was unveiled by House Speaker Nancy Pelosi with majority Democratic support in mid-May. The bill, which includes $1 trillion for state and local governments and another round of direct payments to individuals and families to lessen the sting of the COVID-19 pandemic, also contains provisions that would shield banks from legal penalties for lending to cannabis businesses.
It is unclear whether the bill has enough support to pass the Senate where some Republican lawmakers have criticized the bill’s cannabis provisions or if it could survive a threatened veto from President Trump.
Still, cannabis businesses including growers and dispensaries have been hurt by the U.S. economic downturn brought on by the coronavirus. Stakeholders such as Sumit Mehta, the chief executive officer at the investment firm Mazakali, view the relief bill positively.
“It certainly helps that cannabis is viewed as essential,” Mehta told Karma. “It also helps that governments will soon be looking to shore up tax revenue to effectively fill their dwindling coffers. And cannabis is both politically popular and has meaningful tax implications.”
The sale and use of cannabis is prohibited by federal law, but 33 U.S. states allow its consumption for medicinal purposes with a doctor’s prescription, while 11 states allow the recreational use of the substance for people above the age of 21.
Barclays estimates the U.S. cannabis market could be worth as much as $28 billion if fully legalized, according to Marketwatch. The market could grow to $41 billion in the next decade.
Hemp, another type of cannabis plant, was legalized in 2018 and since then the market for cannabidiol, or CBD, has raked in $2.1 billion in consumer sales for 2020.
Mehta’s firm has been investing in the cannabis industry since 2014. He declined to disclose how much capital the firm has deployed.
He views cannabis as a viable ESG asset class because of its medicinal properties and because, like all plants, it removes carbon dioxide from the atmosphere. The greenhouse gas has been linked to climate change. Hemp can also be used as a biodegradable alternative for clothing and paper manufacturing.
The firm views investing in complementary cannabis enterprises as a good option.
“For every dollar that is spent on cannabis, two dollars are spent around it, which effectively allows us to conclude that the ancillary space is twice as large as the [cannabis] space,” Mehta said. ”It is not illegal under any laws to make lighting, to make fertilizers, to make glass jars. So investing in that sector of cannabis has zero limitations.”
By Neanda Salvaterra