Many large investors – including BNP Paribas Asset Management (BNPP AM) – are exposed to the seafood value chain. Their investments typically target downstream players such as food retailers rather than upstream companies such as fisheries or food processors.
Such investments expose them to the risk of marine biodiversity loss – through overfishing, for example. The implications can be hard for investors to understand, largely because the available data is patchy, at best.
Improving the bottom line
To address that data gap, BNPP AM teamed up with Planet Tracker – a non-profit financial think tank that seeks to better align capital markets with sustainability issues. Both parties worked on a study of one of the world’s largest food retailers to assess the current sustainability of seafood (sourcing) and see whether making practices more sustainable would also yield financial benefits.
Investors are increasingly adopting planetary boundaries as the lens through which to judge the good – or poor – sustainable extra-financial performance of candidate investee companies.
Planet Tracker helps financial professionals in their decision-making by providing data-driven, financially-grounded research which assesses how industry sectors can become greener.
Its open-source Seafood Sustainability Protocol can help retailers, processors and distributors improve the sustainability of ocean ecosystems by changing their sourcing.
Four million new data points
In ‘How retailers can be sustainable and profitable in seafood’, Planet Tracker details a case study exemplifying how the tool can be used. The study focuses on Carrefour, one of the world’s 10 largest food retailers, using millions of non-public data points on Carrefour’s seafood purchasing.
The research shows that Carrefour has made significant progress in sourcing seafood sustainably and locally, or in fighting illegal fishing. Of the 13 sustainability indicators provided by the protocol, Carrefour did well or is moving in the right direction on 11.
Better financial returns
Encouragingly – and potentially applicable to all seafood retailers – improving the overall sustainability of Carrefour’s seafood sourcing can improve financial returns. For example, the study suggested that the retailer earns some of its lowest seafood margins on the most overfished species.
Disclosing details of its seafood supply chain (e.g., on the Ocean Disclosure Project) would generate net financial benefits equal to 3% of estimated gross profit on seafood in France. Supporting initiatives on seafood traceability (e.g., GDST) could also be monetised, according to the study.
New perspectives
The study has provided Carrefour with greater clarity on the path to improved sustainability and financial performance in its seafood business. Highlighting ‘line-caught’ fish on product packaging has already prompted a positive reaction from consumers.
Investors and lenders can reduce risks and improve returns by engaging with the food retailers they fund on ways to align revenue, profit and cash flow growth strategies with ocean sustainability.
This can include:
- Greater disclosure on seafood supply chains
- A change in seafood sourcing towards more sustainable choices
- Time-bound targets on seafood traceability
- Supporting initiatives aimed at providing financial incentives to suppliers that implement traceability solutions.
Disclaimer
Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
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