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Brace for Impact: Industries on the Verge of CBD Disruption

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The following content is sponsored by CannaInsider.

CBD Market Disruption

Brace for Impact: Industries on the Verge of CBD Disruption

It seems as though cannabis is on everyone’s lips these days.

More specifically, the conversation centers around a major chemical compound found inside the plant—cannabidiol, or more widely known as CBD.

CBD’s far-reaching therapeutic benefits are propelling the global CBD market, which could hit $20 billion by 2024. However, industries like alcohol and pharmaceuticals are being directly threatened by this rapid rise.

Today’s infographic from CannaInsider explores how CBD is disrupting these industries, and the latter’s strategies to curb this effect.

Who will emerge unscathed?

CBD Market Spreading like Wildfire

A growing stream of robust research highlights CBD’s benefits in combating certain health conditions, such as:

  • Epilepsy
  • Anxiety
  • Insomnia
  • Chronic pain
  • Arthritis
    • Nearly every product segment, from pet health to beverages, is experiencing a CBD infusion to take advantage of these therapeutic effects.

      This surge in popularity presents significant opportunities to create an entirely new consumer base. Emerging consumers seek CBD products for various applications, such as self-care, socializing, and fitness.

      Going Head to Head with Big Players

      The alcohol, tobacco, and pharmaceutical industries are bracing for impact, as the new variety in CBD products and formats threaten their market share.

      Alcohol

      The percentage of alcohol consumers has dropped by 4.6% since 2000, with changing tastes at the center of this cultural shift.

      New research that tracked behavioural change from 2018 to 2019 found similar results. The percentage of alcohol consumers consuming cannabis has increased from 36% to 45%, while the percentage of cannabis consumers who consume alcohol has decreased from 72% to 65%.

      These behavioural shifts have influenced a significant number of alcohol industry titans to partner with cannabis companies. For example, Molson Coors is entering the cannabis space with HEXO Corp to launch CBD-infused beverages.

      Tobacco

      Similarly, declining smoking rates continue to negatively impact tobacco sales. As many tobacco giants pivot to reduced-risk-products (RRPs) such as vapes, cannabis is also catching their eye.

      Most notably, Altria invested $1.8 billion for a 45% stake in global cannabis company Cronos, potentially signalling the start of many partnerships between the two industries.

      Pharmaceuticals

      The pharma industry is particularly interested in CBD’s therapeutic properties. Medical cannabis sales for 2019 will reach $5.9 billion—poaching $4 billion from Big Pharma’s bottom line.

      This is triggering multinational companies to collaborate with cannabis companies at a furious pace. Partnerships—such as Novartis and Tilray—could unlock more international distribution of medical cannabis, and new pharmaceutical growth opportunities.

      Continuous CBD innovations will not only impact these industries—they could enhance human capabilities and unleash our full potential.

      Civilization 2.0

      A tsunami is unlocking new CBD sub-segments all over the world, with many offering solutions for mood and performance enhancement for both people and animals.

      • CBD for fitness: Incorporating CBD into a workout routine can boost performance, endurance, and recovery. Product types include pre-workout coffee, supplements, and post-workout smoothies.
      • CBD for pets: Proven benefits such as anti-inflammatory properties are driving sales of CBD treatments for pet health. By 2022, this market could be worth over $1 billion.
        • The Unknown Potential

          Applications that will allow a personalized cannabis experience are also on the horizon:

          • DNA-specific strains: Companies are testing people’s saliva to recommend specific strains that are tailored to their specific needs.
          • Odorless cannabis: More pure, less harsh odorless cannabis will soon be available, allowing consumers to smoke in stealth mode.
          • Grow your own: Cannabis consumers can cultivate their own plants at home, and even control the process from their smartphone.
            • As CBD consumption grows, many industries will need to decide to disrupt, or be disrupted.

              Several other cannabinoids have also been discovered, but they have yet to be researched in depth—which means the investment potential of CBD could be just the beginning.

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An Introduction to MSCI ESG Indexes

With an extensive suite of ESG indexes on offer, MSCI aims to support investors as they build a more personalized and resilient portfolio.

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An Introduction to MSCI ESG Indexes

There are various portfolio objectives within the realm of sustainable investing.

For example, some investors may want to build a portfolio that reflects their personal values. Others may see environmental, social, and governance (ESG) criteria as a tool for improving long-term returns, or as a way to create positive impact. A combination of all three of these motivations is also possible.

To support investors as they embark on their sustainable journey, our sponsor, MSCI, offers over 1,500 purpose-built ESG indexes. In this infographic, we’ll take a holistic view at what these indexes are designed to achieve.

An Extensive Suite of ESG & Climate Indexes

Below, we’ll summarize the four overarching objectives that MSCI’s ESG & climate indexes are designed to support.

Objective 1: Integrate a broad set of ESG issues

Investors with this objective believe that incorporating ESG criteria can improve their long-term risk-adjusted returns.

The MSCI ESG Leaders indexes are designed to support these investors by targeting companies that have the highest ESG-rated performance from each sector of the parent index.

For those who do not wish to deviate from the parent index, the MSCI ESG Universal indexes may be better suited. This family of indexes will adjust weights according to ESG performance to maintain the broadest possible universe.

Objective 2: Generate social or environmental benefits

A common challenge that impact investors face is measuring their non-financial results.

Consider an asset owner who wishes to support gender diversity through their portfolios. In order to gauge their success, they would need to regularly filter the entire investment universe for updates regarding corporate diversity and related initiatives.

In this scenario, linking their portfolios to an MSCI Women’s Leadership Index would negate much of this groundwork. Relative to a parent index, these indexes aim to include companies which lead their respective countries in terms of female representation.

Objective 3: Exclude controversial activities

Many institutional investors have mandates that require them to avoid certain sectors or industries. For example, approximately $14.6 trillion in institutional capital is in the process of divesting from fossil fuels.

To support these efforts, MSCI offers indexes that either:

  • Exclude individual sectors such as fossil fuels, tobacco, or weapons;
  • Exclude companies from a combination of these sectors; or
  • Exclude companies that are not compatible with certain religious values.

Objective 4: Identify climate risks and opportunities

Climate change poses a number of wide-reaching risks and opportunities for investors, making it difficult to tailor a portfolio accordingly.

With MSCI’s climate indexes, asset owners gain the tools they need to build a more resilient portfolio. The MSCI Climate Change indexes, for example, reduce exposure to stranded assets, increase exposure to solution providers, and target a minimum 30% reduction in emissions.

An Index for Every Objective

Regardless of your motivation for pursuing sustainable investment, the need for an appropriate benchmark is something that everyone shares.

With an extensive suite of ESG indexes designed specifically for sustainability and climate change, MSCI aims to support asset owners as they build a more unique and personalized portfolio.

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Tracked: The U.S. Utilities ESG Report Card

This graphic acts as an ESG report card that tracks the ESG metrics reported by different utilities in the U.S.—what gets left out?

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NPUC Utilities ESG Report Card Share

Tracked: The U.S. Utilities ESG Report Card

As emissions reductions and sustainable practices become more important for electrical utilities, environmental, social, and governance (ESG) reporting is coming under increased scrutiny.

Once seen as optional by most companies, ESG reports and sustainability plans have become commonplace in the power industry. In addition to reporting what’s needed by regulatory state laws, many utilities utilize reporting frameworks like the Edison Electric Institute’s (EEI) ESG Initiative or the Global Reporting Initiative (GRI) Standards.

But inconsistent regulations, mixed definitions, and perceived importance levels have led some utilities to report significantly more environmental metrics than others.

How do U.S. utilities’ ESG reports stack up? This infographic from the National Public Utilities Council tracks the ESG metrics reported by 50 different U.S. based investor-owned utilities (IOUs).

What’s Consistent Across ESG Reports

To complete the assessment of U.S. utilities, ESG reports, sustainability plans, and company websites were examined. A metric was considered tracked if it had concrete numbers provided, so vague wording or non-detailed projections weren’t included.

Of the 50 IOU parent companies analyzed, 46 have headquarters in the U.S. while four are foreign-owned, but all are regulated by the states in which they operate.

For a few of the most agreed-upon and regulated measures, U.S. utilities tracked them almost across the board. These included direct scope 1 emissions from generated electricity, the utility’s current fuel mix, and water and waste treatment.

Another commonly reported metric was scope 2 emissions, which include electricity emissions purchased by the utility companies for company consumption. However, a majority of the reporting utilities labeled all purchased electricity emissions as scope 2, even though purchased electricity for downstream consumers are traditionally considered scope 3 or value-chain emissions:

  • Scope 1: Direct (owned) emissions.
  • Scope 2: Indirect electricity emissions from internal electricity consumption. Includes purchased power for internal company usage (heat, electrical).
  • Scope 3: Indirect value-chain emissions, including purchased goods/services (including electricity for non-internal use), business travel, and waste.

ESG Inconsistencies, Confusion, and Unimportance

Even putting aside mixed definitions and labeling, there were many inconsistencies and question marks arising from utility ESG reports.

For example, some utilities reported scope 3 emissions as business travel only, without including other value chain emissions. Others included future energy mixes that weren’t separated by fuel and instead grouped into “renewable” and “non-renewable.”

The biggest discrepancies, however, were between what each utility is required to report, as well as what they choose to. That means that metrics like internal energy consumption didn’t need to be reported by the vast majority.

Likewise, some companies didn’t need to report waste generation or emissions because of “minimal hazardous waste generation” that fell under a certain threshold. Other metrics like internal vehicle electrification were only checked if the company decided to make a detailed commitment and unveil its plans.

As pressure for the electricity sector to decarbonize continues to increase at the federal level, however, many of these inconsistencies are roadblocks to clear and direct measurements and reduction strategies.

National Public Utilities Council is the go-to resource for all things decarbonization in the utilities industry. Learn more.

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