|
Financing Fish
Three seafood funds seek to establish an investment trend in sustainable fisheries
Principles for investment in wild-caught fisheries highlight risk-assessment and transparency to attract capital
Photo by Maaren van den Heuvel on Unsplash
Managing wild fisheries with proven sustainability practices can mean bigger, not smaller, catches of tasty seafood.
That creates an opportunity for investors with a long-term view who are willing to invest through the transition period required for depleted fisheries to recover.
Three fund managers who are early adopters of such a strategy have joined forces with the Environmental Defense Fund to develop a set of guidelines, the Principles for Investment in Sustainable Wild-Caught Fisheries, to help attract capital from investors. The principles include requiring fisheries to meet all national and international fishing laws, to understand the environmental status of the waters they work in and analyze the future environmental risks, and to use transparent sourcing systems.
Is the Recovery of Wild Fisheries the New J-Curve for Impact Investors?
In a sign of healthy competition, not one but two private equity fund managers are gearing up to raise tens of millions…
impactalpha.com
“We’re trying to help investors see that investing along the lines of these principles is simply a better long-term way to invest,” says Jason Scott, co-managing partner of Encourage Capital, a New York-based impact investment firm that manages Pescador Holdings, a private equity vehicle that has made two investments. Encourage has published a set of blueprints for sustainable seafood investments.
“There’s a lot of interest, but there are also concerns that are holding people back from deploying capital at scale in these markets in a sustainable way,” Scott says. “That’s the gap we hope these principles will close.”
Bountiful catch
Research shows that with sustainable management, more than three-quarters of the world’s fisheries could recover within 10 years. That means the efforts could double the amount of fish in the ocean and safely increase catches enough to feed an additional half a billion people. Fishing communities could increase their annual revenue by more than $50 billion annually.
Encourage Capital: Six Blueprints for Financing Sustainable Fisheries
Investors can earn double-digit returns while simultaneously helping to restore and protect global seafood supply…
impactalpha.com
To get there requires more of everything: more capital invested by more funds in more investment-ready deals. In addition to Encourage, the other fund managers who have adopted the principles are Rare, which runs the Meloy Fund, which has raised $17 million of a $20 million target; and Althelia Ecosphere, which expects a $50 million first close of its Sustainable Ocean Fund by the end of June. The European Investment Bank, the Inter-American Development Bank and AXA are among the investors committed to the planned $100 million fund.
More than a dozen other organizations have adopted the principles, including Future of Fish, Clarmondial, Conservation International, the David & Lucile Packard Foundation and the Walton Family Foundation. Zoma Capital, the family investment office of Ben Walton and his wife, Lucy Ana, has backed Encourage’s Pescador Holdings.
Encourage, Rare and Althelia manage three of the very few sustainable fisheries funds of any size. Fundraising has been slow. An estimated $200 billion is needed to finance the restoration of fisheries globally. EDF has scoped a blended capital approach that leverages philanthropic and public support to mobilize private investment to take such recovery efforts to scale.
Encourage has structured Pescador Holdings for market-rate private equity returns (that is, an internal rate of return in the range of 15–25%). The thesis is that companies in developing countries that source sustainable seafood can reap a premium from developed-market consumers who increasingly want to know where their food comes from.
The holding company made its first investment in December 2016, in Geomar, a Chilean producer of gourmet canned seafood that works with coastal small-scale fishermen. In the summer of 2017, Pescador invested in Fishpeople in Portland, Ore., which sells packaged meals featuring sustainably caught fish.
Pescador Holdings' First Investment Offers a Blueprint for Sustainable Seafood
Encourage Capital, which spent the last few years developing blueprints for investments in sustainable seafood, has…
impactalpha.com
“We think a lot of these companies are under-valued, because the capital markets misunderstand a lot of the risk and return,” Scott says. “We’re buying equity in companies with access to a sustainable supply of seafood, helping protect and restore that supply to increase revenues, and vertically integrating supply chains to increase their margins.”
The risks are both regulatory, in an international industry straddling dozens of countries, and biological, with the world’s oceans facing rising temperatures, pollution from agricultural runoff and huge gyres of plastic waste.
The good news — if you can call reaching that tipping point in a crisis where human beings finally get off their rears and act “good news” — is that stakeholders are concluding that business-as-usual is no longer an option. Estimates vary, but none of the tallies look good: By one measure cited by EDF, if nothing changes 80% of the world’s fisheries will be in deep trouble in less than 15 years.
The folks who make their living hauling the sea’s offerings onto boats day in and day out understand that depleting the source of their livelihood does not leave them much of a future. Governments as well are coming to terms with the fact that demand for protein from the world’s skyrocketing population cannot be met if we stay on the current trajectory. Advocates for sustainable fishery investment are betting that the urgency of the overfishing crisis will even spark change within the broader industry.
“There are many large companies that are either operating sustainably or could be compelled to operate more sustainably,” Scott says.
Deal pipeline
Still, at the moment sourcing investment-ready deals remains a challenge. Much of the sustainable fishing industry remains small scale, made up of artisanal and coastal fishing enterprises.
“We’re seeing businesses that are interesting, but they’re not fully investment ready,” says Manuel Bueno, fund director for The Meloy Fund for Sustainable Community Fisheries, a wholly owned subsidiary of the global conservation organization Rare. “They’ve been successful in growing, but they’re hitting a brick wall in terms of making it to the next stage, from an operational and a sustainability perspective. These businesses need a partner that can help add value to what they’re doing, not just a financier.”
To that end, the Meloy Fund offers assistance to support business growth, including financial management, corporate governance, operations, marketing and sustainable seafood best practices.
The fund, which launched in July 2017, provides in-kind debt, mezzanine and equity financing to fishing and seafood-related businesses that have an impact on community fisheries in Indonesia and Philippines. The 10-year fund targets market-rate returns. It made its first investment in Meliomar, a Philippines-based fish processor and exporter.
Bueno is among those who believe the urgency of the overfishing crisis will drive a broader change in the fishing industry. “Ten years ago it was a free for all,” he says. “The thinking was, ‘If we run out here, we’ll go somewhere else.’ But now there’s nowhere else to go.”
EnvironmentFisheriesClimate FinanceFeaturesImpact Investing
One clap, two clap, three clap, forty?
By clapping more or less, you can signal to us which stories really stand out.
Go to the profile of Carol J. Clouse
Carol J. Clouse
Covering sustainable business, social entrepreneurship, impact investing; @ImpactAlpha @HuffPost. Fan of good stories, scuba diving and Spanish wine.
ImpactAlpha
ImpactAlpha
Daily news and actionable intelligence for people who are building an inclusive, resilient and prosperous future
|
