KIC’s investment in marijuana producers not questionable, says experts

With South Korea’s sovereign wealth fund sparking a media debate over its investment in marijuana producers, some experts here said Wednesday that the case can hardly be seen as breaching its commitment to socially and environmentally responsible investing.

Marijuana production itself cannot be the target of criticism, although it carries a heavy social stigma in Korea where the recreational use of marijuana is banned. Even if the investment was made by sovereign wealth fund Korea Investment Corp, it has nothing to do with its principle as an institutional investor employing environmental, social and governance principles, according to experts. KIC vowed in October 2019 to adopt ESG principles when investing in equities.

“As long as an investor is buying a stake in (marijuana producers) for medical purposes, the issue appears to have little to do with ESG,” said Zebra Investment Management CEO Bruce Lee.

But critics points out that there is little clear-cut definition of which investment meets ESG guidelines and which do not, leaving rooms for a debate.

“Even if ESG principles are in place, it would reflect an investor’s own judgment,” an ESG expert said on condition of anonymity.

As of the first quarter, the KIC added 260,541 shares of Canadian marijuana maker Aurora Cannabis, raising its holding by nearly 11-fold compared to end-2019, a filing at the US Securities and Exchange Commission Securities showed May 14.

Besides Aurora Cannabis, KIC also bought 45,800 shares of Ontario-based producer Cronos Group, as well as 17,400 shares of another Ontario-based Canopy Growth.

KIC increased its stock holdings in the companies during the January-March period, along with AT&T, General Electric and Advanced Micro Devices.

The move appears to be in line with KIC’s bargain-hunting for underpriced stocks. Aurora Cannabis recorded a 52 week-low of C$9.08 ($6.6) on May 13, while Cronos Group and Canopy Growth hit the lowest in two months, at C$6.84 and C$19.09, respectively. All three companies are constituents of MSCI’s All Country World Index.

The KIC was overseeing $157.3 billion of net assets, such as stocks, bonds, properties and hedge funds, as of end-2019.

By Son Ji-hyoung (consnow@heraldcorp.com)