Steering Aquaculture to Calmer Waters

New investment in shrimp farming highlights the challenges and opportunities of place-based investing in the opaque world of aquaculture.

The ESG risks of aquaculture are well established, but with hundreds of millions relying on it for protein and employment, the practice of farming seafood is not going the way of coal.

One major part of this diverse industry is shrimp farming. According to the US Census Bureau, the country imported 747,775 tonnes of shrimp in 2020, valued at US$6.5 billion, and up 6.8% in volume from 2019. Frequently, shrimp farming is for the benefit of western diets, but those working in it cannot easily access investment funds for modernisation, often due to its poor environmental reputation.

It’s something that French asset manager Mirova is keen to stress when trying to change perceptions around the industry.

“We want to support best in class,” says Antoine Rougier, Marine ESG Manager at Mirova, which recently invested in JALA, an Indonesian shrimp farming startup that aims to bring about more efficacy and environmentally friendly aquaculture practices.

The project is led by locals and uses data and analytics to try and increase knowledge of sustainable farming techniques by the local community. It’s part of a range of initiatives aimed at using community-driven projects to clean up the marine economy.

Current commercial investment endeavours in the world’s oceans and seas comprise largely extractive industries, including fisheries and aquaculture. As a result, according to a report released in October from the Ocean Risk and Resilience Action Alliance (ORRAA), economic returns have been made largely by those in the developed world.

ORRAA said the upswing in ocean-related commercial activity represents major challenges. “We find ourselves in a new phase in humanity’s use of the ocean that is rapidly transforming it and having major economic, social and ecological consequences,” said Albert Norström, PhD, Head of Knowledge and Evidence, Global Resilience Partnership, and project lead of new reports at the Stockholm Resilience Centre, in the report. ORRAA criticised the unbridled commercial activity in the ocean and lack of regulation.

Place-based investment opportunities

Mirova and other investors in JALA say that projects like this – run by local entrepreneurs with roots in the community and focused on efficacy and sustainability rather than profits – are what is needed to build long-term economic stability in coastal area.

According to Rougier, they are incremental, involving subsidies and education at the outset. The case for further investment and future scalability also depends on the stability of the business operation and confidence it will bring about sustainable change to areas that have typically seen traditional subsistence farming eradicated and have been left exposed to climate change.

He stresses investments must look “not only at the environmental side, but an overall approach including the social side, community, and health and safety”, meaning local involvement and knowledge is essential.

Place-based investing is intended to yield both financial and social and environmental returns, with a focus on addressing the needs of specific locations, particularly marginalised ones. Shrimp farming is ripe for place-based investing as it largely takes place in vulnerable communities in the global south. Indonesia is one of the top five shrimp producers in the world alongside China, Ecuador, India and Vietnam.

The shrimp is the most valuable traded marine product in the world today, according to a report from WWF. In 2005, farmed shrimp was a US$10.6 billion industry. Since then, production has grown at an approximate rate of 10% annually, which is one of the highest growth rates in aquaculture. But this comes with a heavy toll environmentally.

“In tropical climates where most farmed shrimp is produced, it takes approximately three to six months to raise market-sized shrimp, with many farmers growing two to three crops per year,” says the WWF report.

“A steady stream of organic waste, chemicals and antibiotics from shrimp farms can pollute groundwater or coastal estuaries. Salt from the ponds can also seep into the groundwater and onto agricultural land. This has had lasting effects, changing the hydrology that provides the foundation of wetland ecosystems.”


In November, JALA attracted US$6 million in new investment from the Meloy Fund, a US-based fund focused on benefiting coastal ecosystems and managed by Deliberate Capital and Real Tech Fund, a Japanese tech focused venture capital fund, and Mirova, through the Althelia Sustainable Ocean Fund.

Part of JALA’s remit involves increasing efficacy of shrimp ponds, educating locals on sustainable aquaculture and leading governance at a place-based level.

Lisa Hubert, Investment Manager, Althelia Sustainable Ocean Fund, says engagement with local stakeholders to ensure investments respond to local needs and priorities was an important criterion.

“One of the founders [of JALA] is also a shrimp farmer himself, so it’s not a team that is very far removed from the field and the interests of the farmer,” explains Hubert.

JALA develops hardware and software that measures the water quality of shrimp ponds and offers a platform to manage the acquired data, allowing aquaculture producers to monitor pond conditions and make management decisions.

“The platform is equipped with functions such as shrimp growth information, harvest prediction, financial management and disease alerts,” its statement added.

As well as the pollution associated with shrimp aquaculture, other challenges flagged by JALA include disease outbreaks and mortality, inefficient value chains, low value addition for the farmers and limited product traceability and transparency.

To improve sustainability and efficiency, the firm plans to develop auto-feeders, oxygenators, and environmentally friendly recirculating aquaculture systems, and intends to explore how its ecosystem can contribute to the dissemination of sustainable certification standards.

As of 2021, nearly 7,000 farms are using the platform to improve productivity and feed conversion ratios, and facilitate the monthly trade of 200 tonnes of shrimp.

Earlier this year, Global Reporting Initiative’s (GRI), the sustainability standards-setting body, announced a consultation on a standard for agriculture, aquaculture and fishing. Material topics include emissions, natural ecosystem conversion, pesticides, as well as water and effluent disposal, the key to the main controversy around shrimp farming.

JALA’s marketplace aims to pair up shrimp farmers and processing companies, which “allow the farmers to become more competitive in the supply chain”. This allows for product traceability, which the industry is lagging on compared to other food production sectors.

Traceability has been listed as a major ‘red flag’ by investors for due diligence in supply chain across the agribusiness sphere.

A fresh start

The issue of place-based investing, however, does create issues around how a fund manager from Paris, London or New York monitors a project that is being run – in this case – from a rural area of Indonesia. “We have boots on the ground who are dedicated to ESG,” says Hubert.

She adds that the fund collaborates extensively with the farmers on transparency and to make sure farmers operating on former mangroves are not included in the project. It also works closely with JALA on making sure it is well-budgeted and has smooth and efficient internal processes to ensure longevity.

Dale Galvin, Founder and CEO of Deliberate Capital, which is the fund manager of the Meloy Fund and one of the backers of JALA, emphasises the need for impact investors to have a deep understanding of the local ecosystem. He has fifteen years of experience working in South East Asia and has worked on projects in the Philippines and Indonesia. The fund has a hub in Singapore, which helps to ensure it works in partnership with people who know the region and understand its needs. Investors should not work on projects in isolation, he says, but as part of an ecosystem to achieve integrated results.

“Aquaculture can be a controversial and tricky business for impact investors,” says Galvin.

“There’s a lot of questions you have to answer around ‘Where is your feed coming from?’, ‘What is going on with your water discharge?’ and ‘What is going on with your wetland?’,” says Galvin, reflecting the many environmental issues raised by potential investors. “This is before questions around carbon footprints and whether the farm was on converted mangroves.”

The loss of mangroves is an issue for the industry equitable with deforestation in Amazon for pasture. Mangroves are a carbon sink and strengthen coastal areas from erosion by stabilising the sand. There are schemes to provide certification to prove shrimp was not farmed on areas that were cleared mangroves.

“Investors have questions around environmental effects and there are a lot of people working on technologies that improved the impact profile of aquaculture,” says Galvin. “It’s an education and both an investment problem and opportunity.”

Understanding nuance

After spending decades being seen as terminally unsustainable, aquaculture is proving change is possible through a combination of placed-based principles and application of technologies that enable its pressing issues to be addressed.

The marine food sector and coastal areas are still often lacking in terms of investment, according to ORRAA, but recent developments show that with sector-specific ways of working it can be attained.

ORRAA launched its UN-backed #BackBlue Ocean Finance Commitment with signatories including AXA, Willis Towers Watson and Palladium in October to try and create a sustainable blue economy. Together with more certification and the initiatives like the GRI’s work on actionable standards the industry could shake off its unfixable image.

“Aquaculture can be sustainable in the right circumstances,” Galvin adds. “It’s not always or even usually, but impact and ESG investors need to understand those nuances before they make knee jerk decisions about how they feel about the sector.”

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