Unsustainable fishing: a potential investment risk in South East Asia

Photo taken by Marco Verch, and used here under a Creative Commons license.

Alex Morrice + Tom Bregman

Global demand for seafood is rising rapidly, but concerns about the sustainability of seafood production are also increasingly prominent. Two new briefings and a new tool from Global Canopy’s SCRIPT project detail the risks and opportunities at hand for financial institutions involved in financing seafood, and the natural capital this sector relies on.

Estimates suggest that current seafood production may have to double by 2050 to meet demand. At the same time, 87% of global fisheries are partly or fully exploited, trawler catches are plummeting, and populations of some species, such as bluefin tuna, have been reduced to 2–3% of their previous levels in less than a century. This is therefore an urgent sustainability concern, and financial institutions investing in seafood — aquaculture and wild-caught fish alike — must be aware of the risks associated with these investments.

The risks of being associated with unsustainable seafood production fall into four main categories. Physical risks arise from the over exploitation of stocks in the case of wild fish, and the prevalence of illegal, unreported and unregulated fishing. In aquaculture, physical risks include the spread of disease between fish farms, which severely affected fish farms in Thailand in 2014, dramatically reducing yields. Reputational risks are becoming more serious as consumer awareness of the impacts of unsustainable seafood production grows.

Regulatory risks come from both producing and importing countries, with the EU’s ‘card system’ reducing or banning imports from countries unable to prove a lack of IUU fishing, and crackdowns on IUU fishing in producer nations. Finally, market risks have been reported for Malaysian seafood, which was found by US officials to contain banned antibiotics. The response to this discovery has reduced market access for Malaysian seafood. These risks affect every part of the seafood supply chain, and financial institutions which fail to address them will not be able to capitalise on the opportunity seafood represents.

South East Asia will produce a quarter of the world’s seafood by 2030, and the blue economy is valued at trillions of dollars. The seafood industry provides millions of jobs, and underpins food security in the region. In order to make the most of this opportunity, financial institutions must have robust requirements for the companies they finance. These include ensuring transparency and disclosure on progress towards sustainability targets, clear identification of risks and dependencies, and strong policies on fishing methods and farm management.

Today, SCRIPT is launching an updated Policy Benchmarking Tool to help banks assess the strength of their deforestation and seafood policies against their peers globally and regionally, which can be accessed at script.finance. For more detailed information on the risks to financial institutions associated with seafood production visit here, and for guidance on best practice and company engagement, read our joint briefing with WWF here.