Can We Reduce The Environmental Impact Of Cultivating Cannabis?

Without interstate commerce, the need to produce cannabis indoors is having a growing impact on the environment...

Welcome to Four PM — a newsletter that provides cannabis industry news & insights from cannabis industry leaders.


In Today’s Issue 💬

→ The Environmental Impact Of Cannabis.

→ Bernie vs Biden On U.S Cannabis Policy.

→ The $8 Billion Gaint Investing In Cannabis.

Reducing The Environmental Impact From Cannabis

Can the cannabis industry reduce its environmental impact by adopting new technologies?

Cannabis has never been more popular in the United States.

Additionally, the carbon emissions of cannabis have never been higher.

The Supply Chain…

In theory, we could cultivate cannabis in the regions where growing cannabis is perfectly suited to the region's climate.

With cannabis being illegal at a federal level, supply chains are prevented from operating this way as cannabis cannot be brought across state lines.

As such, the regions that are perfectly suited to cultivate cannabis can only supply cannabis to their own State.

The Cost Of Indoor Cannabis?

Some 80% of cannabis is said to be cultivated indoors as per Politico.

"For being such a 'green' industry, there are some skeletons in the closet," said Kaitlin Urso, an environmental consultant with the Colorado Department of Public Health and Environment.

From a capital markets standpoint, this may cause problems for the cannabis industry as companies who cannot demonstrate Environmental, Social, & Governance (ESG) compliance will likely have access to less capital.

The Challenge…

The cannabis industry provides some 321,000 full-time jobs, and is legal for adult-use purposes in 18 states and medical in a total of 37 states.

That said, not all licensing is the same in every State.

More than 50% of the 26 counties in California that have so far awarded cultivation licenses for growing cannabis have only issued indoor or greenhouse grow licenses as per MJ Biz Daily.

Indoor vs Outdoor…

Growing cannabis outdoors is much more energy-efficient, using 2.5% of the electricity vs the average indoor operation.

Consequently, there is much effort to make indoor cultivation facilities more energy efficient.

Technologies like LED lights can reduce energy consumption by upwards of 75% vs traditional sodium-based lamps that are commonly used today

Progress…

Solving this problem helps both the companies and the environment.

With these incentives, the average energy consumption of indoor cannabis producers declined by more than 20% in the last two years.

A clear sign of progress.

Our Take

Until interstate commerce is permitted, we will continue to see custom facilities being built wherever they are needed, however, it’s not clear if these cannabis facilities will retain value long term.

If we see a similar supply chain for cannabis as we do for fruits, then these facilities will likely be worth a whole lot less.

Scotts Miracle-Gro Is Betting Big On Cannabis

In an effort to become one of the leading companies in the cannabis industry, Scotts Miracle-Gro is investing $150 million into RIV Capital.

One of the largest companies in the world servicing the cannabis industry today is Scotts Miracle-Gro — valued at some $8.88 billion USD.

Founded in 1868 by Orlando Scott, Scotts Miracle Grow’s initial focus was providing premium seeds to the U.S. agricultural industry.

  • By 1940 → they reached $1 million USD in annual sales.

  • By 2020 → they reached $4 billion USD in annual sales.

Focusing On Cannabis…

With such a strong focus on the indoor cultivation of cannabis, producers are currently spending millions of dollars to purchase this necessary equipment.

As one of the largest suppliers of this equipment in the United States, Scotts Miracle-Gro has been working with cannabis companies for many years.

Now they see an even bigger opportunity.

To capitalize on this opportunity, they are partnering with Riv Capital, formerly Canopy Rivers.

Canopy Rivers…

Canopy Rivers was founded as the venture-capital arm of Canopy Growth.

Flush with cash after receiving some $4 billion dollars from Constellation Brands — Canopy sought to expand outside of producing cannabis by investing in other cannabis companies.

In order to do so, they created Canopy Rivers and appointed Narbé Alexandrian, formerly of OMERS Ventures to lead the company.

Breaking Up With Canopy

Following the firing of Bruce Linton, the former CEO of Canopy Growth — Constellation Brands made big changes at Canopy.

As part of these changes, Canopy Growth would no longer have a VC arm, which resulted in the following breakup:

Canopy Rivers gave Canopy Growth shares + warrants of TerrAscend which offers Canopy permission to buy more shares at a predetermined price — allowing them to increase their stake in the company from 13% to 21%.

Canopy Growth also received shares of Quebec-based Les Serres Vert Cannabis, increasing their stake in the company from 41% to 67%.

Canopy Rivers received $92 million USD in cash and 3.75 million Canopy Growth common shares — worth close to $87 million USD today.

Afterward, Canopy Rivers was rebranded to Riv Capital.

The Hawthorne Collective…

The Hawthorne Collective which is a wholly-owned subsidiary of Scotts Miracle-Gro confirmed a $150 million USD investment into Riv Capital.

The investment comes in the form of a six-year, $150 million convertible note, which will provide Scotts Miracle-Gro with the means to own approximately 42% of RIV Capital.

This allows them to get into the “plant-touching” side of the cannabis industry which has previously been off-limits as a result of Scotts Miracle-Gro’s listing on the New York Stock Exchange.

Our Take

I have no doubt this will be viewed as VERY wise by Scotts Miracle-Gro in the coming years.

When federal legalization occurs there will be an influx of capital coming into cannabis which will increase the valuations of cannabis companies.

Bernie Sanders Calls Out Joe Biden On Cannabis

The former presidential candidate is calling out president Joe Biden for not fulfilling his campaign promises on cannabis.

Despite 68% of Americans supporting the legalization of cannabis — cannabis remains a Schedule I drug.

During the last presidential election, cannabis became a very contentious issue as the political candidates seeking to win the White House shared their vision of how cannabis should be regulated.

For Joe Biden, he emphasized that cannabis should be decriminalized, whereas for candidates such as Bernie Sanders he was seeking additional progress in the form of legalizing cannabis in the U.S.

A Clash Of Viewpoints…

In an interview with Krystal Ball of Breaking Points, Sen. Sanders highlighted that legalizing cannabis at a federal level is well within reach for Biden.

Additionally, Sen. Sanders emphasized that he and Joe Biden have “different opinions” when it comes to cannabis — suggesting that it’s Sen. Sander’s impression that the current president-elect is NOT in favor of legalization.

“Joe Biden and I on marijuana—I think the war on drugs has been just a disaster for this country, for the African-American community.”

“I think it should end. I think marijuana should be legalized. We could do that fairly simply. But yeah, so we have differences.” — Bernie Sanders

Looking Forward…

There is, however, growing support to specifically solve the baking issues cannabis companies are currently facing.

One of the primary challenges standing in the way of the cannabis industry today is the inability to access banking services.

Despite the growing support for this issue to be resolved, one of the primary people advocating for the legalization of cannabis Cory Brooks has publicly declared that he would oppose any legalization that would specifically seek to resolve this issue unless there are additional social equity measures in place.

The Progress…

Despite all this, the cannabis industry continues to make massive progress in the form of states legalizing cannabis.

Should the U.S legalize cannabis, each State would then be given the option as to whether or not to legalize cannabis for adult-use purposes.

As such, it remains essential that additional states continue legalizing cannabis such that when federal legalization does occur, every American will then gain access to cannabis.

Our Take

At the beginning of 2021, I was quite optimistic that we would see some form of federal legalization of cannabis occur in the United States this year.

Although this sense of optimism is declining, in spite of this setback it’s crystal clear that the wheels of progress are still turning in favor of cannabis.

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