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Characteristics of Successful Sustainable Fishery Initiatives

Over the past six years, Wilderness Markets has assessed sustainable fisheries investment opportunities in more than fifteen different wild capture fisheries worldwide. Our specific objective is defining how to make conservation-based approaches a viable financial alternative to current wild capture fishing practices.

We have enjoyed working with numerous international and national partners on field assessments, desk reviews and systemic fishery improvement project (FIP) assessments. Much of our public work and partners can be reviewed at this link.  Fisheries assessed ranged from the United States, Mexico, Indonesia, the Dominican Republic, Grenada, Guyana, Chile, and four Caribbean-wide fisheries. Along the way, we have also reviewed a number of fisheries in Africa.

Behind these public reports are a series of financial models we created to quantify the viability of alternatives considered in different fisheries. These models move beyond the scientific and policy recommendations associated with fishery reform to account for the financial implications associated with existing or proposed measures. These models weigh the financial costs and benefits of changes in management, data collection and use, infrastructure and capacity development in the context of existing value chains and markets. 

Whereas others have ably demonstrated the potential upside associated with fisheries reform through significant economic modeling,[1]and others have documented key characteristics of FIPs,[2] we have focused on how and where the specific financial benefits may be realized in a value chain. We identify how the “upside” may be used to compensate for the costs of fisheries reform and improvement such as gear change, improved management, etc. Our focus has been on the financial implications for fishery participants, especially fishers.

Through our work and others’, the variables listed below have been identified as having a direct impact the financial viability of fisheries reform. These five variables have been examined across a range of fisheries and found to be consistent. It is important to note that these operate in the context of sustainable fishing interventions, most likely in a “parallel” model.

  • Product value 
  • Stock recovery cycle[3]
  • Infrastructure Access[4],[5]
  • Supply chain length[6], [7]
  • Organizational homogeneity and capacity[8]

These variables are focused specifically on the potential likelihood of securing the financial incentives necessary to address the costs of fisheries reform or improvements, i.e., ability to pay for conservation measures through the improved value of the fishery. These benefits may then be utilized to justify reform or directly support sustainable fishing practices.  


The priority quantitative variables that have a direct impact on the financial equation are:

Product Value 

Value refers to not only the price of the seafood, but also to the margin retained by the participant in the value chain, whether fisher, first receiver or processor. This is a combination of the price, operational capacity, input costs and volumes associated with a participant. 

Products handled by participants capable of securing comparatively high value in seafood markets were found to be more capable of absorbing the incremental costs associated with fisheries reform and conservation focused measures. Lower value products – either due to the inherent value of the stock, low volumes, operational inefficiency or poor capacity leading to low margins are less likely to be viable. The willingness of participants to engage in changes in practices such as gear change and harvest control regulations, is directly proportional to the value generated by the seafood product and realized by the participant. 

Stock Recovery Cycle

Life cycles, fecundity, biomass levels, fishing effort mortality, predation and habitat health are all critical components in defining the costs of conservation related measures. Short recovery cycles reduce the wait time to realize benefits in a fishery, capping social, political and financial costs associated with fisheries reform. 


The primary qualitative factors that influence the financial equation are:

Infrastructure Access

Domestic and global supply chains require sanitary and safe foods, therefore access to appropriate storage and transport is a significant driver of product quality and value. In seafood, this typically means access to HACCP compliant facilities able to reliably provide clean ice, cold storage and timely transportation. The absence of these factors negatively impacts value.

This variable is routinely exploited by supply chain participants (including well meaning development organizations) to attempt to integrate new products into global and domestic supply chains. Unfortunately, negative social and environmental consequences are not always considered by these participants, nor is there typically a simple mechanism for integrating or compensating fishers or others for improvement costs. 

Supply Chain Length

Supply chain length includes both the geographic distance and the number of participants “touching” a product in the supply chain. Extensive travel distances between points of harvest and market drive up costs of transportation, ice and storage, and lead to product deterioration. Each “middleman” in the supply chain adds handling and cost margins to the product. While these costs may be absorbed by the end market, long supply chains decrease the likelihood of compensating those bearing the cost of fishery reform and improvement, usually fishers. 

Organizational Homogeneity and Capacity

When considering artisanal and small scale fisheries, community cultural homogeneity has been identified as a critical component of community based fisheries management and reform efforts. Successful efforts are entirely dependent on alignment around goals[9], which is easier to achieve in geographically remote, culturally homogenous communities. Regardless of the financial upside, heterogenous community efforts close to major cities are challenging. 

At the corporate level, strong leadership and the ability to effectively respond to market signals has been well documented in value chain literature and in pilot projects we have tested.

At its base level, the presence of a functioning investable entity is a significant advantage in successfully addressing the characteristics identified above. 


Based on our review of a range of different fisheries, the above characteristics have a significant impact on the success or failure of sustainable fisheries initiatives, particularly in emerging market contexts where the financial and social implications of fisheries reform are often ignored by the conservation community.

Unless these factors are integrated into projects aimed to curb overfishing, conservation efforts are unlikely to succeed and the unsustainable status quo is likely to continue.

We welcome your comments, thoughts and views on the above.

[1]Costello C, Ovando D, Clavelle, T, Strauss, K, Hilborn, R, Melnychuk, M, Branch, T, Gaines, S, Szuwalski, C, Cabral, R, Rader, D, and Leland, A. (2016). Global fishery prospects under contrasting management regimes. Proceedings of the National Academy of Sciences.113. 201520420. 10.1073/pnas.1520420113. 

[2]https://www.ceaconsulting.com/wp-content/uploads/Global-Landscape-Review-of-FIPs-Summary.pdf

[3]http://investinvibrantoceans.org/wp-content/uploads/documents/Executive_Summary_FINAL_rev_1-15-16.pdf

[4]Anderson J, Anderson C, Chu J, Meredith J, Asche F, Sylvia G, et al. (2015) The Fishery Performance Indicators: A Management Tool for Triple Bottom Line Outcomes. PLoS ONE10(5): e0122809. https://doi.org/10.1371/journal.pone.0122809

[5]Basurto X, Bennett A, Hudson Weaver A, Rodriguez-Van Dyck S, and Aceves-Bueno J-S. 2013.

Cooperative and noncooperative strategies for small-scale fisheries’ self-governance in the globalization

era: implications for conservation. Ecology and Society. 18. 10.5751/ES-05673-180438.

[6]Ibid.

[7]Wilderness Markets. 2016. Connecting the Dots: Linking Sustainable Wild Capture Fisheries Initiatives and Impact Investors.http://www.wildernessmarkets.com/our-work/connecting-the-dots/

[8]McCay BJ, Micheli F, Ponce-Díaz G, Murray G, Shester G, Ramirez-Sanchez S, and Weisman, W. (2014). Cooperatives, concessions, and co-management on the Pacific coast of Mexico. Marine Policy,44,49–59. doi:10.1016/j.marpol.2013.08.001. 

[9]Csaky, Eva (2014) Smallholder Global Value Chain Participation: The Role of Aggregation (PhD Dissertation, Duke University)

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.

Read more

Climate Change Stresses Clownfish

Rising ocean temperatures are causing significant changes with devastating impact on the ecosystem. Worldwide, the warmer and more acidic ocean conditions in the tropics have caused mass bleaching of anemones and corals[1]. A new study published in the Proceedings of the Royal Society B supports findings from another recent study in the journal, Nature, that the bleaching of anemones has a severe impact on anemonefish, like clownfish and dire consequences for marine life in general.[2]

sea water nature ocean animal underwater swim biology fish sea animal coral coral reef invertebrate marine life clown fish reef tentacle mollusk nemo aquarium cnidaria hide toxic creature exotic hidden protection invertebrates anemones protect symbiosis underwater world meeresbewohner organism clownfish water creature anemone fish sea anemones sea anemone marine biology coral reef fish marine invertebrates pomacentridae

Clownfish in anemone. Used under Creative Commons from : https://pxhere.com/en/photo/559857

Findings

The latest study looked at the metabolic rates between fish from bleached and unbleached anemones. Even though there was no discernible difference in activity between the two groups of fish, the study found that the “[s]tandard metabolic rate of anemonefish from bleached anemones was significantly higher by 8.2% compared with that of fish residing in unbleached anemones, possibly due to increased stress levels.”[3] Reduced spawning frequency and lower fecundity are two of the negative impacts that were previously observed.

The study published in Nature in 2017 focused on the hormonal stress response and reproduction of anemonefish in bleached anemones. The 14-month monitoring study found a strong correlation between the anemone bleaching and the anemonefish’s stress response and reproductive hormones. Anemonefish in bleached anemones had a 73% decrease in fecundity compared to anemonefish in unbleached anemones. They spawned half as frequently, laid 64% fewer eggs, and experienced a significantly higher egg mortality in incubation. The authors were unable to determine why the bleaching of anemones would trigger a stress response in anemonefish. They offer the possibility that bleached anemones may provide less cover and have reduced neurotoxicity of venom which leads anemonefish to perceive a greater risk of predation. [4]

According to Beldade, Agathe, O’Donnell, & Mills (2017), there are “…[a]t least 50 species of fishes and facultative symbionts of sea anemones worldwide…as many as 12% (56/464) of coastal fish species depend directly, either for food or shelter, on organisms capable of bleaching. While the strength of such dependency varies greatly, if these species suffer even a fraction of the impact found for anemonefish, then a short-lived bleaching event could decrease the reproductive output of at least 12% of species, especially those highly dependent on corals or anemones.”

Takeaway

The two studies contribute to a growing library of research on the effects of global warming on marine life and highlights the importance of understanding how individual differences in stress responses influence a species’ chances of survival.

Why does Wilderness Markets care about anemones and anemonefish? Because our work requires us to look not only at enterprises and fishery management, but at the entire ecosystem to properly account for business risks. Learn more about us.

https://www.flickr.com/photos/60477809@N03/34860139102

Photo Credit: “q phia”; anemone fish on bleached anemone, fukui, siladen, 2017

[1] Norin, T, Mills, S. C., Crespel, A., Cortese, D., Killen, S. S., & Beldade, R. (2018). Anemone bleaching increases the metabolic demands of symbiont anemonefish [Abstract]. Proceedings of The Royal Society B. doi: 10.1098/rspb.2018.0282

[2] News Deeply. (2018). Executive Summary for April 13th. Oceans Deeply (Bleaching of Anemones Makes Life Harder for Clown Fish). Retrieved from https://www.newsdeeply.com/oceans/executive-summaries/2018/04/13.

[3] Norin, et al.

[4] Beldade, R., Blandin, A., O’Donnell, R., & Mills, S. C. (2017). Cascading effects of thermally-induced anemone bleaching on associated anemonefish hormonal stress response and reproduction. Nature Communications, 8. doi: 10.1038/s41467-017-00565-w

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/

West Coast Pilot – Culinary Workshop

A previous post outlined our pilot project in California with Changing Tastes; this post provides a peek into a culinary workshop that is part of the planning phase.

Purpose

As part of our work to reintroduce local fish back into local markets in California, our foremost consideration is how to reintroduce them to our plates and palates. Without delicious dishes and high quality products, winning back a space on the plate will be impossible.

To discover how local fish can create a winning combination of flavor, presentation, and affordability for chefs in corporate dining, our partner Changing Tastes arranged a culinary workshop in California. More than a dozen chefs and several sustainability managers from the same or similar groups joined us in mid-November at a test kitchen in the Bay Area to develop the recipes and messaging needed to successfully bring back Californian West Coast Groundfish.

Palate and Pocket

To explore which fish could please both palates and pocketbooks, the chefs spent the morning preparing a sampling of locally-caught fish, including Dover and petrale sole, boccaccio, chilipepper and black gill rockfish, and sablefish (AKA black cod) provided by Real Good Fish. These fish represent the spectrum of species that are part of the West Coast Groundfish program, one of the most sustainably managed fisheries in the world, and one that has the fish to prove the stocks are  healthy. These are fairly common landings that span from very inexpensive Dover to higher-end sablefish. The variety of textures, thicknesses and tastes were highlighted in Latin and Asian-inspired themes, such as black gill fish tacos with mango slaw (Chef Ochoa), petrale-coconut ceviche (Chef Fogata), black and white coconut crusted black cod (Chef Thomas), and steamed Szechuan boccaccio (Chef Hernaez).

Heart and Mind

Equally important to taste and cost is persuading diners to try these new dishes. In a nearby space, restaurant industry marketing and communications executives as well as sustainability managers and representatives of groups that support sustainable seafood brainstormed marketing ideas for the dining spaces where the fish will be offered to diners next spring.

Common themes included emphasizing that the fish is locally-caught in California. They noted that “local” often implies fresh to diners. Including a map of the different ports where the fish originates from for the pilot, and identifying fishermen and women from each was another popular theme.

Marketing experts, chefs, sustainability managers and others agree on not using the word “groundfish” in marketing materials. This group and others realize that this collective term for these species isn’t one that necessarily appeals to diners, nor does it help them understand the diversity of species and flavors within the broad category.

Pilot Evaluation

Among potential evaluation methods and data points, our participants identified these as the most likely:

  • On-site, established food focus groups
  • Measurement of orders by volume
  • Gauging the relationship between price of dishes and purchases
  • Comparison to sales of other seafood dishes
  • Comment cards
  • Online commenting system
  • Surveys, potentially with incentives, and/or provided in a quick format via touchpad at the point of purchase
  • Querying the culinary team during and after the pilot

 

Post-workshop steps

Our next tasks are confirming which specific dining halls and cafes will participate from each of the corporate dining partners and confirming likely order volume by species or species group, e.g., petrale sole is a species and rockfish is a species group. Almost simultaneously, we will work with the corporate dining partner and their existing distributors to determine the likely sources, feasible start dates, and volumes. We look forward to sharing updates as this work progresses in 2018.

 

 

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.

Sustainable Fisheries – the role of the fishermen

Significant attention is being paid to the oceans. Between the UN Oceans Conference as the recent Economist leader, attention is (finally!) being given to the significant and numerous benefits and threats to the worlds oceans.

At a time of increasing populations, increased demand for healthy proteins – and arguably a climate imperative – human consumption of seafood is increasing exponentially. Wild capture seafoods are increasingly losing ground to aquaculture raised seafoods, for better or worse.

So why should we continue to care about wild capture seafoods? Isn’t sort of like expecting we should still live off wild buffalo and antelope?

It is – and the problem is, many emerging market countries are still dependent on wild capture fisheries for social, political and economic outcomes. Many emerging market economies depend on a sustained source of seafood to address social and poverty concerns. Fisheries related political decisions –in the form of subsidies and / or gear – are good politics at election time. And the national and global supply chains themselves are valuable sources of foreign currency in many countries.

While significant progress has been made to improve fisheries management in developed countries with strong rule of law, challenges remain on the open ocean and in many emerging markets. As summarized in a series of reports we completed, these challenges cut to the core of why fisheries remain “unmanaged”. We would argue that a developed world, legal first approach (which we call the “serial” approach) will not work in many emerging markets.

What is instead needed is a concerted effort to engage fishermen, gather reliable data and find culturally appropriate solutions in conjunction with the supply chain. These efforts can be complimentary – and inform – efforts to address legal and regulatory requirements in “parallel”, allowing fishermen to realize the benefits of changes in practices, presenting value chain actors and regulators with clear data on landings, and doing so in a culturally appropriate manner.

Our recent efforts in the United States and in Asia continue to support this theory.

In the United States, now that the west coast groundfish fishery is in recovery, fishermen face the reality that the market price is below the cost of landing the fish as management costs have increased while revenues have remained flat (or declined when adjusted for inflation) for the higher volume species. The market, in effect, compares US groundfish to imported white fish and sets the price at the lower of the two, in large part due to the volumes, but also due to the lower costs of imports. Unless prices and market access improve for US groundfish fishermen, its unlikely many of them will remain in business (and this in turn will imperil the funding of the fisheries management system).

In Indonesia, the bigger challenge relates to the lack of registration of fishermen and vessels, poor landings data and limited data on fishing sites and practices, particularly in artisanal fisheries which are increasingly being drawn into national and global supply chains due to the increased demand. In many countries, fishermen are essentially unregistered, have limited access to services and are not legally recognized. In nearly all the emerging market value chains we reviewed, the first legally recognized stage of the value chain was the aggregator or middle person. This legal recognition is important – it enables access to government and private services and it allows managers to define and engage with users.

It will continue to be challenging to manage these historically productive fisheries unless these challenges are addressed in a culturally appropriate manner.

Wilderness Markets is developing a range of measures building on the interests of fishermen that address these challenges in US and developing country fisheries. These include improving market access and recognition for fishermen with industry; addressing fishermen registration and organization; ensuring good data is collected and made available to all relevant parties as well as aligning economic incentives. An essential underpinning of all this work is the need to engage with, and facilitate, changes in practices in existing firms.

As we are seeing in our work, systems change is possible, it takes the combination of a bottom up approach and a systematic assessment of metrics to keep everyone on track.

How Crabs, Fishermen, and Bankers Benefit from Better Data in Indonesia

In our previous post, we discussed why we and others have concluded that good data is crucial to fisheries management and investment decisions. This post dives deeper into our work to incorporate better data collection, analysis and availability into the Indonesian blue swimming crab (BSC) fishery.

How many fishermen are there? Where are they fishing?

Is this gear actually catching larger crabs? Is the gear cost-effective?

If we want to invest in improvements, how can we figure out if there will still be enough crabs to catch in the future to provide revenue? How risky is the investment?

These questions are ones we asked as we started working with a lead firm in Lampung, a province in South Sumatra, Indonesia. The answers to these questions were not available. Therefore, we’re helping to find the answers through a mobile data collection app to create better data.

About the fishery

Blue swimming crabs (BSC) is an important source of revenue for fishermen who sell their landings into the export-oriented BSC value chain. Since BSC first started being harvested commercially in the Lampung area, crab sizes at capture are reportedly getting smaller and there are fewer of them, indicating a stock that is or is becoming overfished.

BSC only require a short time between successive generations (less than 2 years). That, combined with their relative lack of mobility, mean that conservation efforts will have more immediate results than a fishery like snapper or tuna.

Why this fishery is a target for impact investment

The high value of crabmeat and the short time window for stock recovery translate to higher likelihood of return on investment. Investments in fisheries, if done from an impact orientation, can readily incorporate triple-bottom line outcomes that incorporate environmental, economic, and social returns.

Environmental: Improve the availability of crab through improvements to stock health.

Economic: Achieve a market premium through differentiation based on transparency, traceability, and sustainability

Social: Involve harvesters  in management and compensate them for the costs associated with adopting more sustainable practices

Each one of these impact areas requires better data for design and monitoring and evaluation.

What we’re doing to improve investability

The fishery needed more data to help with management and de-risking investments, but the mechanism had to be:

  • easy to use
  • affordable
  • replicable
  • scalable

The data needs to:

  • answer questions about stock health
  • provide traceability and transparency
  • be easy to access and share with multiple stakeholders, including private companies, multiple governments and NGOs.

Working with our lead firm partners, we created a mobile app for use on Android or iOS devices. The app will provide information to prove both transparency and traceability. Because of the platform, it can easily be tweaked to use in other geographies and fisheries as well as being useable offline – a must for developing country fisheries.

Value chain use of the data

Industry can use the data for monitoring and enforcement of regulations. In Lampung, there are agreements not to land or buy crabs that will negatively impact stock health. These agreements forbid landing berried females and crabs less than 10cm. There are also agreements to support gear change from gill nets which will allow for a more selective harvest. Data collected through the app will therefore be used by individual companies to validate and verify these requirements.

Companies will use the data collected to guide buying strategies to protect stock health and increase price premiums. Data indicate where the best size crabs are being landed and the firm encourages buying from those areas. They are also planning to provide rewards to help fishermen to purchase sustainable gear.

Environmental impacts of the data

On the more environmental side, data can be accessed by fishery managers for determining appropriate access and effort controls which will impact stock health. Managers can use the data for determining local seasonality based on size and sex of the landings; this, in turn, can help determine the crucial times and locations for fishery closures. The efficacy of gear change on landings can also be assessed using the data.

Not only can government use the data, if aggregated appropriately, the NGO community and private companies can use it for their conservation and development programming.

Social implications of data collection

The app collects data about the fishermen, including their basic contact information, landings data, and vessel affiliation. The landings data for individual fishermen will serve as a record of their income from BSC fishing. Accordingly, financial institutions, like banks, can use this data to determine their bankability.

Circling around – how does this relate to the broad issues of improved management and investment?

Management will benefit from better data on size, sex, landed weight and geography for localized management plans. Stock assessments will also improve with better data. Also relevant, the process of data collection has helped identify unregistered fishermen. Because of this, they can be provided with the opportunity to register for their federal fisher i.d. card (“Kartu Nelayan”). Among other things, this gives fishery managers a better sense of the number and characteristics of fishermen in the area so that efforts to manage the fishery will include them.

Implications for investment are multi-level. At the company or even industry level, investors can use the landings data for individual companies. In addition, the improved stock assessments and record of the expected recovery will serve them when determining value chain investment risk. Correspondingly, at the personal level, the data contributes to financial inclusion for the fishermen: it serves as a record of income for fishermen to banks and having their Kartu Nelayan gives them the opportunity to receive potential government benefits.

What’s next for better data

In this fishery specifically, we’re working to address legal issues related to data collection, ownership and sharing in cooperation with the ministry of fisheries and aquaculture and NGOs active in the fishery. At the same time, we want to ensure the ongoing usefulness of the data mechanism we’ve helped to develop.

We’ve also developed an investable model, designed for philanthropic and impact investors.

To stay updated on our efforts to capture better data or learn more about the investable model, subscribe or send us an email. Both options are below.

Governance or a Markets Approach? Both. Adopt a Parallel Approach to Fisheries Reform

In our previous posts, we’ve discussed reasons and ways for involving private capital in fisheries reform, including taking a lead firm approach. This post about the parallel approach is a direct follow-up to the three models we propose for investment sequencing; we recommend checking out that post first.

Overview

Is there only one way to make a fishery sustainable? We don’t think so. That said, we do know that there are some key areas that need support on the way to sustainability. Indeed, whether to consider a “governance” or “markets” approach to fishery sustainability is a false dichotomy. In areas where a market is present, which is most, governance and markets must be considered simultaneously and balanced for the short and long-term benefits.

The working model we’re developing adopts a parallel approach to address the challenges associated with developing countries fishery reform. In this approach, the markets, and by definition, the private sector, are key partners. The commercial relationships with harvesters developed by this model are critical to ensuring support for long term fisheries reform given the lack of representation and organization at the base of the value chain. We explain our thinking in more detail below.

Approaches to Management

Under ideal circumstances, fisheries reform would have a “serial” approach to design, implement, and enforce regulations. Scientific and economic data would be the bases for robust fisheries management. With reasonable assurance that stocks will not be overfished, value chain participants can plan investments in tandem with stock recoveries.

Serial or Parallel Approach?

Emerging market fisheries face significant social and political concerns to the serial approach. For example, legislating changes that result in reduced fishing effort to promote species and stock recovery has political and social ramifications that not all governments are prepared to address. Furthermore, the cost of enforcing such changes are likely to be higher than what is considered normal – both in monetary and social terms.

Parallel Approach

Given the desire to reform fisheries while also demonstrating the economic benefits associated with such reform, we propose that a “parallel” approach may be more appropriate in emerging markets. In this approach, different actors work in tandem to develop and implement measures to increase sustainability.

What’s are the Management Basics?

Investments to improve data and management are primary concerns for fisheries reform as these will demonstrate the success and costs of various efforts. Though species, geographies and cultural norms vary, there are some agreed-upon fishery management principals which will be informed and supported by good data. These include five parameters for:

  1. size,
  2. sex,
  3. seasons,
  4. geographies and
  5. ability to access to the fishery.

Generally, social and legal changes necessary to create and enforce these management measures increase as complexity and distance from the resource increases. The degree to which the value chain can enforce them runs in the opposite direction. That is, the value chain has the greatest potential to enforce size, sex and seasons, but their ability to enforce rules decreases for geographic restrictions and even more so for access control. Rulemaking must involve local society and governments, and their participation is particularly important for complex tasks like access and geography restrictions.

The blue swimming crab (BSC) fishery in Indonesia is a good example of a parallel approach opportunity that currently engages both the value chain and government. National government has already adopted and passed restrictions regarding size and sex. The challenge now is how best to implement and enforce these efforts.

Working Model

In our parallel approach model, value chain stakeholders in Indonesia have begun gathering data to help inform and reinforce decision-making. At the same time, the provincial government, in cooperation and communication with the local community, will set standards and provide enforcement for the five parameters. Managing seasonality, geographic limits and access restrictions are also actionable through the value chain. However, these will require a higher degree of social acceptance, enforcement and value chain adoption. Good data from working closely with cooperatives and harvesters will provide foundation for the harvest control strategies. We envision starting with the easiest strategies first, essentially moving from 1 (size) down to 5 (access control) over a period of less than four years for creation and testing of the rules. It is imperative that the local government and community create the standards to ensure the lead firm can work to establish sustainability within the fishery.

The value chain and lead firm approaches provide a valuable opportunity to implement effective enforcement needed to achieve sustainability. Value chain participants can insist on the adoption of these standards, which may then be verified based on effective data collection and using internal and external audits. The current working model also includes a proposal for the lead firm to make purchases through a preferred supplier network currently formed as a cooperative. Consequently, access to finance for value chain stakeholders will be contingent upon their compliance with the rules. Working in collaboration with local cooperatives and harvesters, the economics of this fishery are such that all participants should benefit from improved BSC size and  abundance.

Final Thoughts on the Parallel Approach

Ideally, government would provide the necessary framework and policies to implement these strategies, while providing effective enforcement as in the serial approach to reform. However, in the absence of this involvement, providing market-based opportunities to adopt these measures in a socially acceptable manner may provide a viable alternative approach, which is why the parallel approach is the most viable in many fisheries like BSC in Indonesia.

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