Development of a notional financial instrument for ethical investment in fisheries

Social and environmental awareness has in recent years become an increas- ingly weighted factor in many investors’ funding allocation decisions due to concerns that their investment could contribute to industries practicing hu- man rights abuses, have deleterious impacts on nature and ecosystems or just be misaligned with their personal or political beliefs. This concept involves a close analysis of practices and commitments of the companies at stake in order to inform investment decisions. Impact investment is a form of ethical invest- ment that takes action for improvements while generating financial returns. Fisheries are prime candidates for impact investment initiatives given their po- tential as ecologically sustainable sources of protein but also their widespread mismanagement, but they have not yet been widely targeted by impact invest- ment. Overfished fisheries could provide both greater supply and economic returns but the respite needed by the fishery in order to recover constitutes a hardship to fishers that are dependent on annual incomes. Investors could bridge that gap, covering any initial losses while the fishery recovers and later benefiting from the gains when the fishery reaches its sustained maximum re- turns. The aim of the current project is to set up a framework that allows for the definition of a market instrument aimed at correcting existing imbalances in the economic model for fisheries management. To this end, optimal bioeco- nomic utilization is explored, and a system proposed to internalize rights and responsibilities to the fishery. Within this framework, an instrument is outlined providing the required incentives for fisheries to finance themselves to ensure sustainability. The project includes considerations on the design of this instru- ment as well as some considerations on its pricing.