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Investing for Sustainable Fisheries Needs Funding for Capacity Building

Impact investors are ready to invest increasing amounts of impact capital in sustainable fisheries; what’s missing are  profitable businesses and organizations with the capacity to accept investment. These profitable “investible entities” aren’t emerging apace because the entrepreneurial ecosystem to develop their business capacity is lagging.

Lost at sea

Around the world, fishing remains grossly inefficient, wasting billions of dollars due to catching and discarding undesirable fish, inefficient supply chains that result in rapid product deterioration and using too much energy in the process. And while most of us in richer countries get our fish from one of a few large companies, the majority of the people in the world who rely on fish for their protein get those fish from the 85% of the global fishing fleet comprised of sub-twelve meter boats that are often unregistered and unmonitored.

As long as fishing sustainably is economically challenging, no amount of  investment will be able to secure effective fisheries reform. This is particularly true in emerging markets.

While there is considerable focus on drawing in impact capital to assist with reforming fisheries, as long as “sustainable” efforts have to compete with “unsustainable” fishing efforts, investors will be wary of providing a subsidy.

Structuring the frontier of sustainable fisheries investing

With the release in March 2018 of two landmark sustainable finance guidance documents – the Roadmap for the Future of Impact Investing: Reshaping Financial Markets (Roadmap) and the Principles for Investment in Sustainable Fisheries (Principles) – the ecosystem for investing in sustainable fisheries has gained significantly more structure. Documents like “Towards Investment in Sustainable Fisheries” and “Sunken Billions” provided the foundation to investing in sustainable fisheries, and these additions are key building components.

The Principles set the floor for a “minimum level of best practice for sustainable fisheries investing” and don’t focus on impact investors. By virtue of providing a baseline for environmental and socially responsible investing, they provide targets for social and environmental impacts—two of the three traditional triple-bottom line impact investing measures; omitting only economic returns. The Principles are “establishing clear principles and standards for practice”, aligning with the first category of action—identity—identified by the GIIN.

We argue that groups like Althelia, Meloy, Encourage and others have clearly demonstrated they have a different view of the role of finance in society, (Roadmap Action Category 2) and that tools like the FPIs, certifications and ratings like MSC, Fair Trade, Seafood Watch, etc., provide the essential framework for Roadmap Action Category 4, Tools and Services. Philanthropic foundations and governments are actively figuring out Category 6, Policy and Regulation.

What’s missing in sustainable fisheries enterprises

Which leaves action category 5 – Education and Training and 3 – Products. These go hand-in-hand. To some degree, investment groups like Althelia and others are addressing products by creating financing vehicles, deal structuring, etc. What we haven’t found on the ground are experienced business developers or profitable businesses themselves. Traditional capacity building groups on the agriculture side haven’t been able to make the same inroads in fisheries. Complicating matters is a product that, while high value, is also highly perishable.

Fisheries are harder to navigate than agriculture, sometimes literally. As difficult as it is to get product to and from remote coffee co-ops in Honduras, for example, getting to remote fishing villages in Indonesia is that much harder. The culture of cooperatives and collective action is often politicized, and is much scarcer, if it exists at all, unlike other food-related impact investments.

The technology exists to solve supply chain problems—solar-powered freezers, mobile cold-storage units, supply chain traceability using mobile networks—but there are precious few on the shore helping to organize and empower fishing groups to utilize these tools while securing greater autonomy in the market.

Though skilled at their profession, most fishers, even here in the U.S, haven’t yet embraced learning business basics, like understanding modern logistical networks, processing and transportation costs. How can we expect them to grasp the opportunities, without the skills to understand the supply chain, ? And without disruption and democratization of the power structure in fisheries, how will impact investing have true social impacts for the fishers on which the supply chain is built? More often than not, we have witnessed well-meaning efforts, including a number of environmentally driven efforts, that implicitly and explicitly benefit the middle of the supply chain to the exclusion of harvesters and fishers in both developed and developing countries. The irony of these efforts is that they continue to perpetuate existing power structures and disenfranchise harvesters.

How to move to scale

The 2012 report, “From Blueprint to Scale: The Case for Philanthropy in Impact Investing”, funded by the Gates Foundation and written by the Monitor Group with collaboration from Acumen Fund accurately and compellingly lays out the case for philanthropic capital in impact investing. To get past these knowledge hurdles and to push fishery businesses towards triple bottom line impacts requires sustained, focused funding that philanthropic foundations can provide.

Capacity is needed to move to scale

Figure 1 “From Blueprint to Scale” The Case for Philanthropy in Impact Investing[1]

“Grants represent the ultimate ‘risk capital’ for these businesses because they are not predicated on the likelihood of financial return, and so can tolerate uncertainty around commercial viability. They also lend themselves well to the creation of a public good where heavy investment is required to prepare market conditions, such as building supply chains or stimulating customer awareness. The benefits of this investment accrue not just to the pioneer firm but to the copycat competitors that spring up in its wake. Moreover, the time horizons of private philanthropists in particular can be much longer than that of investors or governments, and so can support the long gestation periods associated with new inclusive business models.”[2]

Addressing this imbalance will require more support of the people providing the critical business capacity building in fisheries, companies such as Blue You, Smartfish, MDPI and Blue Ventures. Creating and scaling more of these changemakers needs financial support.

For now, there are fish (and shellfish and invertebrates) in the sea. Without significant investment to develop capacity by philanthropies, governments and multi-lateral funders, we and the people who depend directly on the oceans seem likely to lose this resource.

 

[1] Harvey Koh, Ashish Karamchandani and Robert Katz. “From Blueprint to Scale: The Case for Philanthropy in Impact Investing. “ Monitor Group in collaboration with Acumen Fund. April 2012. https://acumen.org/wp-content/uploads/2017/09/From-Blueprint-to-Scale-Case-for-Philanthropy-in-Impact-Investing_Full-report.pdf

[2] Ibid.