Wilderness Markets

Category: Long-Term View

  • Improve Data to Improve Sustainability

    Improve Data to Improve Sustainability

    Case Study:
    Developing and Implementing SIMP Compatible Seafood Data Reporting and Traceability System in the Crab Supply Chain

    Problem Statement and Opportunity

    The U.S. implementation of the Seafood Import and Monitoring Program (SIMP)[1] on 1 January 2018 establishes reporting and recordkeeping requirements to prevent illegal, unreported and unregulated (IUU) seafood from entering the U.S. The onus of proof is placed on the importer of record to provide and report key data from harvest to U.S. entry. In geographically diffuse supply chains, like blue swimming crab from Southeast Asia, with thousands of “points of entry”, i.e., fishers, tracking landings to the vessel is far less straightforward than short and narrow supply chains, such as skipjack tuna or sardines. This reporting requirement, while worthwhile, will require U.S. seafood importers to incorporate cost-effective traceability initiatives in their often-complex supply chains.

    There is a growing appreciation that the needs of fishers and their communities must be addressed in order to improve the underlying causes of fishery exploitation in the developing world, particularly for small-scale fisheries. -California Environmental Associates

    The requirement also presents an opportunity to promote resource sustainability through supply chain transparency and catch monitoring. Despite pledges to abide by size limits, U.S. importers of blue swimming crab (BSC) have difficulty ensuring their supply chain partners are buying only crabs larger than the agreed minimum size of 10cm and excluding berried females. The application along with a web-based reporting tool we developed can meet the requirements of the SIMP, as well as the European Catch Documentation (CD) requirements, and elucidate the in-country supply chain. By tracking landings by vessel and by harvester, this tool further provides the opportunity to address key social and environmental outcomes associated with the Sustainable Development Goals[2] (SDGs), which gives seafood importers a mulit-purpose toolkit to both decrease their reporting costs and increase the sustainability of the crab stocks.

    The opportunity to spur social and economic impact should not be underestimated. Educating, engaging and rewarding fishers and communities directly for complying with ecological goals like minimum size, berried females, no-take areas, and more offers an opportunity to engage communities directly in resource management and provide key links to SDGs. Aside from nascent work by Fair Trade[3] and SmartFish[4], there are few fishery sustainability efforts that actually benefit the fishers that form the foundation of many supply seafood chains. Indeed, most efforts impose costs on fishing communities—time, foregone income, capital for new equipment—without providing benefits. Our tool allows identification of compliant fishers, so they can be awarded price premiums and other incentives.

    Supply chain transparency is beneficial to the U.S. importer not only in terms of identifying good actors and meeting reporting requirements, but also gives them an edge in the marketplace full of otherwise opaque supply chains.

    Provision of ice is a key concern

    Assessment

    When initially considering how to provide BSC supply chain transparency from the ocean to the end buyer, we researched existing options, hoping to find one that could be customized to the supply chain. We conducted a desk review, scouring the internet and our personal network to identify all available options. In total, we reviewed nearly forty systems that provided varying levels of traceability; of these, we interviewed approximately six potential providers that met or came close to our key considerations:

    1. Ease of use – the user interface needed to be easy for data collectors in Indonesia and importers in the U.S. to use
    2. Utility for marketing purposes – a consumer-facing component was a must
    3. Facilitate regulatory compliance – must collect and provide data required by the SIMP and EU CD in a straightforward format
    4. Mapping – needs to provide maps of fishing locations to determine which areas are best for avoiding undersized and berried crabs
    5. Business model – a cost effective and durable business model that did not result in excessive fees or costs to each level of the value chain
    6. Data access, storage and ownership – data must be accessible by multiple parties within the value chain, stored in Indonesia, and owned by the funding company
    7. Reasonable set-up costs – ideally, a system would be compatible with existing software and hardware and would require little in the way of training. A team should be able to begin data collection with a few hours or less of upfront training on the system interface and they should be able to readily convey to the fishers the benefits of the system.
    8. Geographic and cultural relevance – the system needed to function in rural, relatively isolated areas with little to no telecommunications access
    9. Engage Harvesters and Vessel owners in order to build their understanding and the relative importance of adhering to harvest control regulation
    10. Ease of integration – overall, the platform needed to be easy to readily integrate into the supply chain.

    Findings from Assessment

    None of the reviewed systems met the requirements of the lead firm with the exception of the Pelagic Data Systems units for vessel management, i.e., vessel tracking. Due to the cost of acquisition and the relatively high ongoing costs of use, these were installed on a trial basis. This test was not successful, and cheaper, more effective units were identified.

    Development

    Not finding a suitable existing program, Blue Star Foods decided to develop their own application to gather data tied to their marketing goals and objectives around supply chain integrity. The SIMP and EU CD data requirements were integrated into the data collection system. Wilderness Markets worked closely with an app-development team to develop an Android and iOS  application and support the field trials. After the initial field trials, the system was deployed to in-house teams from Blue Star Foods Indonesian partners, consisting of procurement and quality control specialists.

    Implementation and Deployment

    Data was collected at selected mini-plants and landing sites during a six-month period. Both harvesters and data collectors were simply encouraged to log landings during the pilot phase without any indication or reference to IUU or other considerations. They were not penalized or otherwise reprimanded for reporting undersized or berried crabs during this time period. Vessel tracking data was collected for a select number of boats during this period, which could be matched to landings data.

    Parallel Approach
    Sumatran Fisherman with Blue Swimming Crabs

    Initial learning points

    • Data collection required additional training of procurement and quality control teams. This in turn required an additional budget to be implemented effectively.
    • The pilot only covered a small portion of overall U.S. imports from Indonesia (less than 1%) – the current opacity of the supply chain means we did not know how much each mini-plant contributes to the supply chain before the pilot
    • The system efficiency is high enough that recording all landings at a mini-plant or at a landing site is possible, though unless a quality control individual is onsite continually, it cannot guarantee there will be no side selling unless all buyers agree to use the system.
    • The data feedback loop to management has been significantly shortened and is possible in nearly real-time allowing:
      • Faster identification of low productivity landing sites
      • Faster identification of high productivity landing sites
      • Faster identification of undersized and/or berried crab seasons and locations
    • Data integrity and accuracy continues to be an issue and needs to be worked on – Due to their small size, most vessels are unregistered so vessel identification is challenging. Usual data integrity and accuracy issues for data collection operations exist, such as ensuring consistent data entry, checking entries for errors, etc.

    Initial Data Findings

    • Initial indications, based on sampling approximately 10% of the harvest per vessel, are that up to 25% of landings can likely be classified as IUU (berried females & sub 10cm).
    • Boats with lowest supply chain loyalty appear to have higher levels of IUU (an assumption to be tested in additional sites)
    • It is now possible to identify the specific boats that are causing the high levels of infractions, and to address with through the supply chain in a focused manner.
    • Less than 20% of the surveyed vessels were responsible for 80% of the IUU landings

    Fishery Management Implications

    The ability to specifically identify vessels not complying with agreed harvest controls will permit a more targeted, focused and cost-effective approach to monitoring and enforcement of infractions. With less than 20% of the vessels are causing 80% of the issues with regards to IUU landings, efforts can be made to reduce IUU in a focused manner.

    The data provides:

    • Ability to provide shore-based landing information
    • Ability to identify both geographic and seasonal potential closure options based on real data
    • Ability to target enforcement based on recorded infractions
    lead firm crab
    BSC fisherman with new vessel tracking device

    Links to SDGs

    In addition to the business and fishery management implications, the findings are directly linked to at least three SDGs:

    SDG 8 Decent Work and Economic Growth

    Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

    Biological data indicates a quick (less than 1 year) stock recovery when undersized crabs are left in the water, thereby increasing the economic value of the fishery and decoupling growth from environmental degradation (Target 8.4)

    SDG 9 Industry, Innovation and Infrastructure

    Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

    Increasing the transparency of the supply chain means that small-scale enterprises, like the mini-plants, can have better access to financial services (Target 9.3).

    SDG 14 Life Below Water

    Conserve and sustainably use the oceans, seas and marine resources for sustainable development

    Using the data generated by the app, progress can be made towards sustainably managing fish stocks, combatting IUU, and providing meaningful market access for small-scale artisanal fishers (Targets 14.4, 14.6 and 14.B).

    Recommendations and Next Steps

    A key recommendation of the initial pilot is the need to establish unique vessel IDs with the support of local government authorities, which will allow more meaningful monitoring and enforcement of landings.

    In addition, the need to engage with, and involve, other firms purchasing from the fishery was identified in order to reduce the opportunities for side selling.

    A second phase is being planned to address the constraints of the first. The goal of the second phase is to:

    • Capture a minimum of 25% of the Blue Star Foods Indonesia sourcing;
    • Integrate improved vessel activity geographic data
    • Expand geographically
    • Include more processors, mini-plants and fishers in Indonesia, particularly in co-packer conditions
    • Replicate into the Blue Star Foods Philippine supply chain

    Conclusion

    The drivers of market access compliance requirements, improved social and financial impact in in artisinal fisheries and greater supply chain integration are powerful drivers for change in any industry. The relatively low cost now associated with data capture tools mean lead firms can utilize almost ubiquitous cell phone availability to cost effectively assess the degree and extent of IUU in their supply chain, while strengthening their impact objectives and improving market recognition.

    This approach provides resource managers and NGOs as well as development agencies with a relevant, cost effective tool to engage private sector supply chains in achieving SDGs in a measurable, informed and data driven manner.

     

    [1] “U.S. Seafood Import Monitoring Program”. Retrieved on 7 March 2018 from: https://www.iuufishing.noaa.gov/RecommendationsandActions/RECOMMENDATION1415/FinalRuleTraceability.aspx

    [2] “Sustainable Development Goals”. Retrieved on 19 March 2018 from https://sustainabledevelopment.un.org/?menu=1300

    [3] “Capture Fisheries Standard (CFS)”. Retrieved on 8 March 2018 from: https://www.fairtradecertified.org/business/producer-certification

    [4] “Rescate de Valor”. (English: Value Rescue) Retrieved on 8 March 2018 from: http://rescatedevalor.org/

  • Investing in sustainability – the role of intangibles

    “Early in the twenty-first century, a quiet revolution occurred. For the first time, the major developed economies began to invest more in intangible assets, like design, branding, R&D, and software, than in tangible assets, like machinery, buildings, and computers. For all sorts of businesses, from tech firms and pharma companies to coffee shops and gyms, the ability to deploy assets that one can neither see nor touch is increasingly the main source of long-term success[1]”.

    Rated as one of the Financial Times Best Books of 2017, Capitalism without Capital is a useful and timely read as we consider sustainability based investment broadly, and sustainable wild capture fisheries specifically. It goes a long way to explaining and addressing one of the many challenges the sustainability community faces when evaluating and considering how to transition “projects” to enterprises.

    Wilderness Markets and others have made considerable progress in identifying, developing and deploying appropriate due diligence questions to address investment risk as well as developing appropriate business plans and models, most recently in wild capture fisheries (with the World Bank). However, these criteria either ignore or assume the presence of effective intangible development capacity which is seldom the case with most natural resource “projects” nurtured by NGO’s and many communities. These “projects” often lack both the human and intellectual capital to effectively develop and grow businesses, leading to an over emphasis on tangible assets.

    Yet, as is clearly defined in this book, this is where significant value is to be gained. In the abscense of effective design, branding, R&D and software, the likelihood of enterprise success is marginal, seldom providing the risk adjusted returns investors would like to see.

    The social implication of this trend are also discussed in the book. It provides good perspective on how inequality is both a result and a cause of this investment trend, resulting in a negative vicious cycle. Applying equally to groups and individuals, in both developed and developing markets, participants are unable to upgrade skills due to economic challenges (or an overreliance on tangibles), thus depriving them of the resources needed to upgrade their skills. We have seen this in fisheries in the United States, Mexico and Asia.

    Intangibles also have significant implications regarding the appropriate types of capital to be deployed. Given the nature of intangibles – identified as the 4 S’s (scaleability; sunkenness; spillovers and synergies), these types of investment are more appropriate to equity than to debt, which has implications on the recently launched debt funds in sustainable fisheries and oceans.

    As we and others continue to evaluate and explore how best to attract private capital to a range of sustainability markets, this book provides good perspective on an important topic.

    [1] Jonathan Haskel & Stian Westlake, Capitalism without Capital; The Rise of the Intangible Economy, Princeton University Press 2017

  • The Finance Gap in Sustainable Wild Capture Fisheries

    Over the past few years, three broad strategies have evolved to address the challenge of achieving sustainable wild capture fisheries. These consist of:

    • Addressing governance, regulation and policy
    • Providing preferential access to markets via certification mechanisms and Fishery Improvement Plans
    • Aggregating mission aligned capital

    While each of these strategies have merits in and of themselves, they function best if their implementation is aligned, particularly in emerging markets where parallel or consolidated approaches are more likely to succeed than a serial approach. The implementation of these three strategies independently of each other often result in distortions that misalign incentives. As a consequence, this lack of alignment has resulted in few real world business examples or models that can effectively scale across fisheries, geographies and communities. Despite the attractiveness of economics of fisheries reform in at a macro level, the financial implications for practitioners in the real world have been challenging.

    We especially note the development of mission aligned capital for sustainable fisheries in the past year. The Althelia Sustainable Oceans Fund and the Rare Meloy Fund are now either operational, or close to being operational. These new facilities represent important progress in this space.

    While these represent important steps forward, they do not, as of yet, address the demands of current market conditions, particularly in emerging markets. Based on our field assessments in Asia, Latin America, parts of Africa and the United States, the reality is that the majority of the demand lies in defining, developing and testing sustainable fisheries instruments and models that may, one day, be eligible for the Meloy Fund or the Oceans Fund.

    One sequence of fund development is to a) prove a concept, b) grow and refine and c) to deploy large scale capital (courtesy of Dalberg Global Advisors).

    1. Prove the concept – at this stage, practioners are testing financial instruments and models in a variety of settings with a wide variance of risk – returns and a great deal of tail risk. Transactions are often small, with high transaction costs, and with limited to no track record. While the Meloy Fund may most closely approximate these characteristics, the Funds requirements and relatively high return requirements and minimum transaction sizes remain a mismatch for the sector.
    2. Grow and Refine – at this stage, practioners are aggregating small scale proven models into larger vehicles; allocating and pricing risk appropriately; have a track record to demonstrate risk returns and an experienced team.
    3. Deploy Large Scale Capital – at this stage, practitioners are able to deploy large pools of institutional capital towards proven concepts; have more stable returns with lower tail risks and lower transaction costs as well as strong comparable track records for the sector and fund managers.

    Based on our reviews, in the absence of financial instruments and model with documented and understandable risk, the sustainable wild capture fisheries sector appears to have a significant funding gap at the “Prove the Concept” stage. Resources are required to define these instruments and models, ideally with existing sector participants, many of whom are searching for approaches to transition NGO driven projects to investable entities with very limited success to date.

    In reality, there is a significant pool of potential projects in the form of Fishery Improvement Plans, fishery projects, blue economy projects and alternative livelihood projects in many geographies. While Wilderness Markets has developed a systematic analysis of the potential investment opportunities in a number of fisheries, we have been struck by the rather random approach to this challenges and the lack of resources to systematically support the transition to investable entities that may, one day, be eligible for investment from the Meloy Fund or the Oceans Fund.

  • How to Develop Impact Investment Opportunities in Sustainable Fisheries

    The Need for Sustainable Fisheries Finance

    We know all the problems associated with overfishing and we know that research shows:
    1) that switching to more sustainable management will lead to increased revenues and food security; and
    2) the cost for doing so exceeds what can be provided through traditional development and philanthropic organization.

    How do we get past the second to make the first possible? Supported by the World Bank, and with input from dozens of impact investors and fishery experts, we detail the main barriers and potential approaches to overcome them in our latest paper: Developing Impact Investment Opportunities for Return-Seeking Capital in Sustainable Marine Capture Fisheries.

    Who Should Read This Paper

    This paper provides an overview for international development organizations, development finance institutions, NGOs, and the governments they work with of (i) the key concerns that impact investors may have when considering the financing of sustainable fisheries, and (ii) potential approaches for public-private partnerships to overcome these obstacles. It is intended as a primer for these actors, to understand the perspective of the commercial impact investor.

    Overview

    This paper explains the central challenges that keep impact investors from participating in sustainable fisheries, and is structured along four main barriers:

    1. A lack of reliable fishery data
    2. Ineffective fisheries management
    3. Unreliable infrastructure systems
    4. A paucity of investment-ready enterprises

    It then proposes three models for sequencing and combining different sources of capital to overcome these obstacles:

    • Serial approach: Public and philanthropic funders first support the establishment of strong governance arrangements, improved data collection, and fishery management. Once these initiatives mitigate some of the risk associated with a fishery investment, then return-seeking investors are incentivized to finance sustainable infrastructure projects (often through public-private partnerships) and/or enterprises along the value chain, focused on outcomes that achieve a triple bottom line: social responsibility, economic value, and environmental impact.
    • Consolidated approach: Governments negotiate agreements with a single private sector entity or cooperative to delegate fishery management responsibilities. The private firm or cooperative then simultaneously invests in fishery data, management, infrastructure, and triple bottom line enterprises.
    • Parallel approach: A range of investors and other stakeholders (for example, governments, nonprofit organizations, fishing collectives) develop coordinated investments to improve fisheries data, management, infrastructure, and triple bottom line enterprises. Efforts can be separately funded, but they work in tandem and share the ultimate goal of achieving sustainable catch with an appropriately capitalized and profitable fishing sector.

    Each of these sequencing models presents particular challenges and opportunities. Structuring investments to achieve triple bottom line outcomes is still a new idea within the fisheries sector. There is growing evidence from other sectors, however, including agriculture and forestry, that these types of investments are achievable. Examples include the Moringa Fund[1] and Livelihood Funds,[2] which bring together public institutions, private investors, and NGOs, using innovative investment models to simultaneously address environmental degradation, climate change, and rural poverty while helping businesses become more sustainable.

    The Impetus

    Attracting impact investments is critical for the future of fishery recovery and expansion—these projects cannot rely on short-term loans and grants; they need longer-term finance that is committed to sustainability and responsibility. Development organizations, NGOs, and other noncommercial actors have a critical and catalytic role to play in crowding-in impact investment for sustainable fisheries by sharing risk with the private sector, promoting policy reforms, and funding interventions (through either concessional lending, grants, and/or technical assistance) with the intention of removing the barriers to impact investment.

    Read the paper: Developing Impact Investment Opportunities for Return-Seeking Capital in Sustainable Marine Capture Fisheries

     

    [1] The Moringa Fund is a EUR 84 million investment fund that targets profitable large-scale agroforestry projects with high environmental and social impact in Latin America and Sub-Saharan Africa. The fund makes equity investments of EUR 4–10 million per project and adds value through its technical skills, environmental and social expertise, and global network.

    [2] The Livelihood Funds are a series of investment funds created by Danone, which brings together investors—including Schneider Electric, Crédit Agricole S. A., Michelin, Hermès, SAP, CDC Climat, La Poste, Firmenich, and Voyageurs du Monde—to invest over EUR 40 million to finance nine on-the-ground programs for mangrove restoration, agroforestry, and rural energy.

     

  • Projected change in global fisheries revenues under climate change

    A recent paper (September 2016) in the scientific journal of the National Institutes of Health exploring the implications of climate change on global fisheries revenues provides some sober reading.

    The report explores how fisheries revenues of maritime countries will be impacted by climate change as a necessary  “crucial next step towards the development of effective socio-economic policy and food sustainability strategies to mitigate and adapt to climate change”.

    The report shows “that global fisheries revenues could drop by 35% more than the projected decrease in catches by the 2050 s under high CO2 emission scenarios. Regionally, the projected increases in fish catch in high latitudes may not translate into increases in revenues because of the increasing dominance of low value fish, and the decrease in catches by these countries’ vessels operating in more severely impacted distant waters. It finds that developing countries with high fisheries dependency are negatively impacted.”

    See: Lam, Vicky W. Y. et al. “Projected Change in Global Fisheries Revenues under Climate Change.” Scientific Reports 6 (2016): 32607. PMC. Web. 18 July 2017.

    The significantly higher impacts on developing country revenues both for export and domestic consumption are documented in the paper and provide further evidence to the risks climate change creates for wild capture fisheries.

  • Coral Reefs and Ocean Health

    Every so often, we run across reports that force us to stop and question our assumptions. Recent papers on global warming and the impact on oceans is a topic we have been monitoring for a couple of years now, with each new paper more depressing than the last.

    It is our view that the role of ocean warming on stock health, and by extension, investment risks associated with stock health is either ignored or underestimated in most wild capture fisheries investment models.  However, with little information on which to base this assumption, it has been difficult to express this disconnect. Furthermore, most of the impacts are felt at the base of the supply chain  – by fishers and fishing firms.

    A recent open paper in the journal Nature provides some interesting context. Titled “Coral reef degradation is not correlated with local human population density”, the research appears to “suggests that local factors such as fishing and pollution are having minimal effects or that their impacts are masked by global drivers such as ocean warming” and …. “findings indicate that local management alone cannot restore coral populations or increase the resilience of reefs to large-scale impacts. They also highlight the truly global reach of anthropogenic warming and the immediate need for drastic and sustained cuts in carbon emissions.”

    If these findings are true – and we are unsure there is scientific consensus around them – it will have significant implications for wild capture value chains, local populations and for the range of local and community based efforts attempting to address overfishing through local management.

    We would welcome comments or thoughts on this paper, which can be accessed at this link.

    Bruno, J. F. and Valdivia, A. Coral reef degradation is not correlated with local human population density. Sci. Rep. 6, 29778; doi: 10.1038/srep29778 (2016).

  • How Poor Data is Holding Back Fisheries Reform AND Impact Investors

    How Poor Data is Holding Back Fisheries Reform AND Impact Investors

    The Problem(s)


    Poor management of fisheries is calculated to result in losses of USD $83 billion to the world economy each year. As cited in many other fisheries papers, data indicates an alarming proportion of fisheries, nearly 90 percent in 2013, are fully overfished, depleted or recovering, an increase from 75 percent just eight years prior.  Investments in fisheries could provide net benefits of USD $54 billion per year.

     If developing countries fisheries are to continue their role as a primary source of protein and income for millions, more than just public and philanthropic money must be invested in recovery and management.  Reform needs private capital. Unfortunately, there is a dearth of investable, risk-adjusted entities in sustainable fisheries that can meet triple bottom line goals. This then hampers participation of impact investment capital. Simply put, although there are investors with money, there are not nearly enough viable entities in which to invest. This challenge is further compounded by poor data.

    The Role of Data for Management and Investment


    Often bypassed in fishery initiatives, capturing good data is critical to both fisheries management and investment. Among other data points, management requires data about size, sex, species, nursery areas and seasonality to be able to manage the fishery to ensure continuity of the resource. Investors need to be able to assess risk to their prospective investments. For fisheries, this means understanding how well the fishery will perform in the future, i.e., whether there will be more fish in the sea and how many. Management data and investment data go hand-in-hand.

    Indeed, in “Towards Investment in Sustainable Fisheries”, the three key enablers of sustainable and profitable fisheries are secure tenure, sustainable harvests, and robust monitoring and enforcement, each of which relies on robust data. Investable entities and risk management are key requirements for investment that build off these enablers. Encourage Capital’s strategy for small-scale seafood investments also relies on interventions driven by data, including catch accounting systems, and product tracking and traceability.

     Lack of data is identified as one of the major concerns with regards to stock health and effective resource management in the major domestic and export fisheries of Indonesia, the number two producer of wild-caught fish in the world. Indeed, for industry, the lack of clear recommendations and supporting data is a significant issue from a decision-making perspective. This lack of data and analysis directly affects efforts to build consensus and accountability at all levels of the value chain.

    Stay Tuned…


    Data is critical to ensuring food security and income through better managed fisheries and investments thereto, which is why data collection, analysis and sharing is one of the focus areas of our work in Indonesia. Follow us to see our next post, where we share what we’re working on in to get better data in Indonesia.

  • Connecting the Dots: Linking Sustainable Wild Capture Fisheries Initiatives and Impact Investors

    Connecting_the_dots_coverWhy aren’t we seeing the impact investments in wild-capture fisheries that have been transforming smallholder agriculture like cocoa and coffee?

    Wilderness Markets, with the support of the David and
    Lucile Packard Foundation and the Gordon and Betty
    Moore Foundation, undertook a series of fishery value
    chain assessments to better understand the opportunities and constraints for private impact capital to flow into wild capture fisheries markets.

    Given the investments in developing sustainable fisheries pilots, we expected to identify a range of investment opportunities in each of the fisheries assessed. However, we did not find investment opportunities that could address the suite of challenges associated with improving financial and social outcomes, while also contributing to conservation outcomes, particularly in developing country fisheries.

    Our research indicates the lack of triple-bottom line (TBL) investment opportunities is due to six main constraints to an economically sustainable fisheries value chain—data, management, market differentiation, infrastructure, finance and the lack of investable entities.

    Thus, while there are impact investors interested in these markets, and there are a number of livelihood opportunities for investment, there are few to no entities ready to take on investments that are capable of achieving a TBL outcome similar to examples in the agricultural markets. In reality, investing in the open access, wild capture DCFs for only economic and/or social outcomes is likely to exacerbate and accelerate both the degree and rate of fish extraction.

    Looking across the value chains assessed, taking action on solely one point, such as improving data management, has not instigated a cascade of solutions toward sustainability. In fact, the data shows that all six sustainable value chain constraints—data, management, market differentiation, infrastructure, finance, and the lack of investable entities—must be addressed simultaneously to move toward investable, self-sustaining fisheries. Similarly, linking the value chain approach to the EDF/ISU framework allows for a data-driven, market focused approach in selecting, prioritizing and implementing interventions.

    Ultimately, developing sustainable seafood value chains means developing a portfolio of solutions. On the assumption that the Key Enablers are being addressed and that secure tenure is part of the solution, there are two kinds of value chain based opportunities appropriate for foundation-type support: the first will inform value chains by providing information about the conditions, opportunities and constraints and is most appropriate for grants; the latter will test and pilot models in seafood value chains that are based on successful innovations in other value chains. The “test and pilot” work is also appropriate for grants and, we anticipate, program-related investment, which could lead to triple bottom line entities attractive to impact investors.

    In the end, success hinges on whether the stakeholders are willing to work together and, most of all, put in the hard work needed to address all the constraints.

    Click here to download Connecting the Dots

    Table 3 presence or absence of key enablers, drivers and requirements

  • Sustainable Seafood Pipeline Development

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    Fishing Net Floats

    During my time at Verde Ventures, the challenge of developing a viable portfolio in sustainable seafood continued to vex us. Despite the challenge and need, we were unable to develop a serious pipeline of high impact transactions, as we had developed in coffee. In fact, despite an internal commitment to place $1 million in sustainable fisheries, we were only ever able to commit $50,000 in 3 years.

    After leaving Verde, I decided I wanted to get to the root of why this was the case. The need is clearly present – with the natural resource clearly under significant threat, with a large segment of many developing country fishery (DCF) populations dependent on the natural resource, and the increased demand for ethically sourced product, surely we could develop a pipeline of deals?

    With the support of the David and Lucile Packard Foundation as well as the Gordon and Betty Moore Foundation, I was fortunate to have the opportunity to assess four fisheries in order to identify and assess the constraints preventing impact capital from accessing this market. At the same time, I was to identify potential investment opportunities, understand their capital requirements prior to finding a match for these requirements.

    Our work took us through the multi-fishery fresh fish value chain from Baja California to the US; Indonesia’s multiple yellow fin and skip jack tuna value chains, the Blue Swimming Crab value chain as well as, California’s Groundfish value chain. These four fisheries were assessed against a common set of frameworks in order to maintain consistency, with an overall focus on USAID Value Chain Analysis and a focus on development and improved economic outcomes for harvesters.

    Our findings, over the past 12 months of field work are sobering. Anyone anticipating the immediate deployment of large sums of high impact capital will be disappointed. While we were able to identify a number of very strong livelihood models and opportunities, these all came with significant environmental costs. The only exception to this was the California Groundfish fishery. None of the DCF were able to provide environmental, social and financial returns based on the simplest models developed in the agriculture value chain impact market.

    The key constraints identified across the fisheries were:

    • Uncertain stock health
    • Lack of investable opportunities at the harvester level
    • Lack of effective aggregation and legal recognition at the harvester level leading to the inability to access adequate financing
    • Lack of access to appropriate / adequate infrastructure
    • Lack of a viable triple bottom line model and business case
    • Lack of market data

    Each of these constraints in and of themselves would be significant issues in any developing world context. The reality is that they all co-exist in developing country fisheries, and combined, make it very difficult to establish and operate any form of small and medium size enterprise that would be acceptable to impact investors. Interventions designed to improve quality – such as refrigeration – require investable entities, a strong business case, organized harvesters with adequate equity and access to markets.

    However, even if all these elements are addressed in any of the assessed fisheries, any investment will almost certainly increase rates of natural resource extraction and impact stock health in open access systems.MACAU Fisherman

    The one example we identified where this was unlikely to be the case was the California Groundfish fishery, where the Federal ITQ system has been designed and implemented to ensure stock health is not negatively impacted by over-exploitation. This is an important step, and has, in our opinion, created the conditions necessary for investors to seriously consider investments in the fishery at multiple levels of the value chain.

    Over the course of the next few weeks, we’ll explore these findings and look at some of the opportunities and solutions identified as a result of these assessments.