Financing fish for the future

As we wrote about earlier this month (click here to read), the Prince of Wales recently brought together experts from the twin worlds of fishing and global finance to discuss ways of investing in the sustainability of the seas. Toby Middleton, who was there, explains the challenges and opportunities under discussion.

Much of the debate around the sustainable management of natural resources centres on how to minimise environmental damage and how to ameliorate what can’t be avoided. This happens either through mitigating measures – where outcomes are poor – or preventative measures, before things deteriorate. Either way, those measures have to be paid for.
This presents two practical challenges: how to establish an appropriate market structure that delivers the necessary measures, transforming existing practices as necessary, in a cost-effective and efficient manner; and how to enshrine good environmental practice in the public conscience to create strong market demand that will drive businesses’ will to pay for the inevitable costs of change.
How do you do that with fish?
The challenge of markets and their financing was the unique and intractable issue addressed at the Prince of Wales International Sustainability Unit meeting to consider frameworks for financing sustainable fisheries, held earlier in July. Bringing together a group of global experts from the worlds of finance and fisheries, the ISU addressed some thorny issues:
What is a fishery? This is not farming: there are no fields. The animals don’t cooperate by remaining in a stable geographical distribution. Unlike their terrestrial brethren, their composition is mixed by species, age and sex across the three dimensions of the oceans they inhabit.
Who owns the fish? There is perhaps no better illustration of the commons, bar the air we breathe. Yes, there are national jurisdictions, but fish don’t have passports and can go where they please. Access to fisheries is invariably shared, putting the benefits of investment by the few into the hands of the many.
What matters most: stocks or ecosystems? The concept of improving a fish stock is relatively straightforward. Let fish spawn, allow the resultant juveniles to grow to spawning age and the stock will increase. Then there are more fish to catch, so long as nobody fishes the stock out in any one year.
However, many challenges faced by fisheries are not only about the stocks, but the wider environmental impact of fishing. Investment into reducing the by-catch, or discards of fishing, or protecting the marine habitat on which fish stocks depend tends not to yield any immediate short-, or even medium-term economic gain. And when it does provide a quantifiable yield, it is rarely to the fisheries that made the initial investment.
Data, monitoring, enforcement and investment go hand in hand. You can’t monitor what you can’t count, and you can’t enforce what you can’t monitor. No-one would invest without good data and without a robust, credible and effective management regime fisheries are hostages to fortune.

In pure economic theory, markets are ruthless in their pursuit of efficiency, and follow the path of least resistance. They exist to reduce cost and maximise profit. They are not geared to wait patiently for ecological gains that do not directly impact on that agenda, and may in fact compromise it. When contracts are negotiated on 12- and even 6-week cycles, raw material costs can fluctuate wildly making earnings projections a tough science. This makes long-term and stable investment strategies notoriously difficult to forecast.
This is a fairly top-level overview of some of the fishery issues in play.
Meanwhile, the financial community applies a whole new set of considerations: What is the yield and rate of return? Who do I pay my cheque to, and from whom do I collect my premium? Can I mitigate and spread my risk profile? What is that risk profile? What other sources of finance are available? How do I structure the investment equitably?
Notwithstanding all these vagaries, are there not other, well-established financial products that I can invest in? If I can get 15% annual profit in the hedge fund market, why do I need to learn this complex, briny and nautical world of seafood for a possible 6% return?
All this hints at a rather large elephant in the room. Dare anyone stand up and confess “Excuse me, what does MSY mean?” Or equally, “I’m afraid I don’t have the faintest idea what a debt equity swap is.” How do you learn to speak fish? Or banker for that matter?
But herein lays the hidden secret, and the truly unique and priceless value of an HRH invitation. In the absence of this meeting, or the huge body of work that preceded it, these questions may not have been raised. The community of global experts from their respective fishery and finance fields would probably never have come together. The promise of sustainably funded fisheries by financial power-houses with the economic muscle to drive change on the water may otherwise remain just that, a promise.
This is not to pretend that a utopian sustainable blue economy is just a couple more high-level meetings away. Candidate fisheries and case studies must emerge, and flows of finance must come forth. Someone must accept that risk and take the plunge. However, there’s a fundamental truth that gives me confidence: nobody wants to catch, sell or eat the last fish. Conversely, managing fisheries, and the oceans on which they depend, sustainably makes absolute sense; ecologically, socially and economically. There’s money in them there oceans, provided we all invest in them.
Toby Middleton is Senior Country Manager for the Marine Stewardship Council (MSC). He is responsible for the MSC’s regional presence in the North East Atlantic, covering UK, Ireland, Iceland, Faroes and Greenland. MSC were invited to attend the meeting as the world’s leading standard for certified sustainable seafood. The certification reports of the MSC certified fisheries have provided a library of case study examples of the economic case for sustainable fisheries management.
The pictures on this post come from the discussion document Towards Investment in Sustainable Fisheries co-produced by the Prince of Wales’ International Sustainability Unit. To read the document, click here.