Financing ecosystem conservation deals is complicated enough, what with the need for local partnerships, sustainable commodity production, payments for ecosystem services, and ways to improve local livelihoods. Financing such projects in coastal communities and marine environments is even more complex.
There are no more than a handful of impact funds targeting ocean investments, and countries have made little or no progress toward meeting Sustainable Development Goal No. 14, “life under water.”
“Ocean-based protein, distressed fisheries, reef restoration: every investor says, ‘Great,’” Matthew Weatherley-White, managing director of the Caprock Group, a $3 billion wealth advisor said in an interview. “Then you get to these complicated, innovative, new kinds of deals. At that point, a lot of people get cold feet.”
That makes all the more significant the persistence of fund manager Althelia Ecosphere and its limited partners in reaching a $37.5 million first close for a planned $100 million Sustainable Ocean Fund. Simon Dent, a former BNP Paribas banker, launched fundraising more than two years ago.
“Yes, it been a long road but excited to have well-needed investment $’s to deploy in the space,” Dent told ImpactAlpha in an email exchange.
Althelia, now part of Mirova (which is itself part of Nataxis) has raised a $120 climate fund for land-based conservation projects. Dent had been struck by the billions in forestry investments while little if any capital flows to sustainable fisheries and ocean conservation. (Understanding this mismatch drove ImpactAlpha’s special Financing Fish coverage.)
Aqua-Spark, a Dutch-based aquaculture fund, has raised more than $20 million and made a half-dozen or so investments. Pescador Holdings, developed by Encourage Capital for investment in sustainable seafood and fisheries in the Americas, has made investments in Geomar, a Chilean producer of gourmet canned seafood that works with coastal small-scale fisherman, and Portland, Ore.-based Fishpeople, which sells packaged meals featuring sustainably caught fish.
The Sustainable Ocean Fund aims to “invest into scalable impact-aligned economic models in the ocean space that generate real assets, build resilience in coastal ecosystems and create sustainable growth and livelihoods,” Dent says. That means investments in both aquaculture and wild-caught fisheries, along with processing and supply chains, as well as solutions to waste and plastic in the oceans.
Dent said the fund plans to deploy capital in three projects before the end of the year. The fund will invest only in emerging markets, with at least 40% of the capital targeted for Latin America and the Caribbean.
Know your customer
Caprock brought a dozen investments totaling $8.5 million into the fund, which was anchored by $7.5 million each from the European Investment Bank, the global insurance company AXA and the Dutch development bank FMO. The Inter-American Development Bank added $4 million and the David and Lucile Packard Foundation made a $1 million program-related investment. Althelia’s own partners invested $1.5 million.
“We are supporting this early-stage, innovative fund model as part of our strategy to address key sustainable oceans issues such as overfishing and habitat loss,“ Packard’s Susan Phinney Silver told ImpactAlpha. She said the foundation’s imprimatur, as well as its capital, helped the fund “gain traction with other impact investors to get to a critical mass of scale.”
The Development Credit Authority of USAID agreed to provide credit enhancement through loan guarantees directly to the fund’s portfolio companies. Conservation International and the Environmental Defense Fund are providing technical assistance.
Helping the Luxembourg-based fund get to a first close required a greater-than-usual amount of patience and paperwork, said Caprock’s Weatherley-White. Not all investors are willing to provide an implicit subsidy in the form of the extra time and talent required to get novel vehicles off the ground, er into the water. “That’s a cost we’re willing to bear because that drives impact,” he said.
Luxembourg’s “know your customer” requirement alone took four months, said Caprock’s Mark Berryman, who also joined Althelia in La Paz, Mexico for due-diligence on prospective portfolio companies.
“We believe with absolute commitment that scalable, commercial, market-based solutions are critical to drawing capital into themes like sustainable fisheries and oceans,” said Weatherley-White. “We have to get these funds launched to prove out the thesis.”