Planet Tracker report offers recommendations for investors to protect their investments and help drive the industry towards more sustainable practices.
Over the past 20 years, global aquaculture production has expanded by 50 percent. In particular, shrimp aquaculture is now humanity's fastest-growing protein source. The exponential expansion of aquaculture, a mega-growth industry, is not without significant impacts to marine environments worldwide. In much the same way that cattle production is contributing to rainforest destruction, shrimp farming is contributing to the transformation of mangroves and other fragile ecosystems.
The financial think-tank Planet Tracker has released a new briefing paper that explores financial risks associated with farmed shrimp production. The paper articulates a path where institutional investors can help steer aquaculture toward a more sustainable future by demanding transparency and accountability from businesses, and by realistically assessing the increasing material and regulatory risks to production. Through these actions, institutional investors can build and manage sustainable portfolios that are more risk-resilient, and support the advancement of responsible natural resource use.
Mangrove deforestation threatens farmed shrimp investments
Shrimp is the world’s most valuable farmed seafood commodity. However, the US$45 billion industry (as valued in 2018) continues to pose significant threats to mangroves, which are being destroyed at five times the rate of rainforests. Mangroves can also sequester ten times as much carbon as terrestrial ecosystems, protect and provide habitat for thousands of fish species, and help defend against flooding—a key ecological benefit given the marked increase in storm surges resulting from climate change.
Yet because these risks tend to be inaccurately and under reported, investors with a $63 billion exposure to the farmed shrimp sector are unable to adequately assess the degree of financial risk embedded in their portfolios. While 30 percent of mangrove deforestation and coastal land-use change across Southeast Asia is attributed to shrimp farming, Planet Tracker’s “Shell Shock - Mangrove Deforestation Threat to Farmed Shrimp Investments” study found “no evidence of reporting of either the mangrove deforestation or farmed shrimp emissions by shrimp companies or the top 20 institutional investors exposed to these companies.”
According to Matthew McLuckie, Director of Research at Planet Tracker and one of the report’s authors, “Unless capital markets embrace greater transparency and disclosure, they risk higher exposure to production and price shocks due to nature-related supply-and demand-side constraints, exacerbating investors’ inability to calculate company valuations accurately.”
The report’s authors advise that the top 20 institutional investors exposed to farmed shrimp equities demand greater transparency from their portfolio companies and better reporting on farmed shrimp revenue due to the ongoing environmental risks they face. They also call on investors to press the shrimp farming industry to create greater transparency around revenue and operating costs, full product traceability to clarify company exposure to mangrove deforestation and chemical inputs, and full accountability by openly disclosing the risks companies face from regulations. This includes clarity around import restrictions on products deemed to be responsible for deforestation, currently in the process of being adopted in major import markets including the EU.
Read more:
“Will blue finance fulfill its potential?” The Economist, January 2020.
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