Impact investing—investing for social and environmental benefit along with profit—is increasingly playing a leading role in addressing problems plaguing the marine environment. The movement seeks to fund efforts by improving fisheries management, gathering reliable data, controlling overfishing, and reducing bycatch and waste, all while protecting artisanal fishers from losing their livelihoods.
Projects aimed at these goals have been funded with grants from governments and government-supported organizations, and from private foundations. In the past few years, to bring more capital to the challenge, and create a financially stable business model that is not dependent on unpredictable short-term infusions of grant money, the field of “impact investing for sustainable fisheries” has been developed.
A publication that gives some insight into the current state of impact investing is “Our Shared Seas - A 2017 Overview of Ocean Threats and Conservation Funding,” prepared by California Environmental Associates for the David & Lucile Packard Foundation. As well as noting current threats to the oceans, the publication notes trends in funding to address the problems.
According to the report, in 2015, roughly USD 800 million (EUR 674,000) in grant funding was directed toward ocean conservation, half from foundations, primarily in the U.S.A., and half from official bilateral development assistance (ODA) grants or multilateral aid agencies. Foundations invested heavily in fisheries and in establishing protected areas, mainly in North America, Europe, and the Coral Triangle (spanning Indonesia, Malaysia, the Philippines, Papua New Guinea, Timor Leste, and the Solomon Islands), as well as in science and market development. Five major foundations accounted for most of the grants, but new entrants were increasing the share of private funding. ODA funding went mainly to Africa and parts of Asia, with an emphasis on economic development and alleviating poverty. “Over the last five years, as philanthropic funders and NGOs have urgently searched for ways to accelerate sustainable management of the world’s fisheries, many have promoted ‘finance’ as a critical lever to drive change,” California Fisheries Fund Director Larry Band wrote in a segment of the report.
“Finance” here means commercial capital. In addition, he said it is important to clarify how grants, public funding and impact investments can be used to catalyze commercial capital involvement by finding the most effective “blended capital” strategies. Such a strategy might have not-for-profits providing risk capital at the early stage of project development, and commercial capital entering when the project is well-defined and structured, with clear expectations of profitability.
Some dedicated sustainable fishery funds have already been formed, including Althelia’s Sustainable Ocean Fund, Encourage’s Pescador Holdings, and Rare’s Meloy Fund, but success stories in impact investing are still rare.
The difficulty is that few projects have reached a stage where sufficient likelihood profitability can be assured. This is due to many factors: the complexity of fisheries management, which often involves many stakeholders and regulatory bodies; the difficulty of making firm projections of fisheries recovery and resulting improved profitability; and the difficulty of making long-term, illiquid investments in developing countries.
A notable success in impact investing is the Seychelles Blue Bond, the world’s first sovereign “blue bond” to support the transition to a sustainable fishery. The World Bank on 29 September approved a loan package consisting of a loan of USD 5 million (EUR 4.2 million) from the International Bank for Reconstruction and Development (IBRD) and a grant of USD 5.29 million (EUR 4.46 million) from the Global Environment Facility (GEF). In addition, a guarantee of EUR 5 million from the IBRD and a credit of USD 5 million from the GEF’s Non-Grant Instrument Pilot will enable the future issuance of the Blue Bond by the Seychelles government. The Blue Bond is expected to mobilize public and private investments to finance the country’s transition to sustainable fisheries. It will support sustainable marine resource management, infrastructure, and fishing enterprises, and to efforts to identify high-value markets for seafood products.
The bond was designed in combination with a debt-for-conservation swap supported by the French government, The Nature Conservancy, and the county’s Paris Club creditors that will help the island nation deal with climate change and conserve the marine environment. The restructuring will provide funding to support adaptation to climate change through improved management of coasts, coral reefs and mangroves, and will establish marine protected areas spanning approximately 400,000 square kilometers. The agreement introduces impact investing to debt restructuring and provides proof-of-concept for other developing countries with large exclusive economic areas.
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