EKO Asset Management Partners recently landed a big one. In January the New York–based investment management and advisory firm shared in a $53 million grant from Bloomberg Philanthropies that comes with a unique challenge: Figure out how investors can profit from helping to tackle chronic overfishing. Since 2012, EKO has been exploring ways of encouraging sustainability reforms to industrial and smaller-scale fisheries by luring private capital. Better management of the world’s fish stocks could grow their populations by more than half and boost yields by up to 40 percent, according to the journal Science.
Over the next two years, the Bloomberg funding will support EKO’s work with U.S. environmental groups Oceana and Rare to design and establish financing mechanisms that can help to improve fisheries practices in Brazil, Chile and the Philippines. The firm is one of a handful of financial institutions that are teaming up with nonprofits to pull investors into a nascent market known as conservation finance.
Jason Scott, co-founder and partner at EKO, says he and his project colleagues are focusing on three strategies to make money from protecting fisheries. First, they will offer a bondlike vehicle to back practices such as use of nets that catch fewer unwanted fish. The second strategy is financing to help small-scale fishing operations buy cold storage and other revenue-boosting equipment, and the third involves private-public partnerships that finance state investment in better science, monitoring and enforcement. Investors would earn a share of revenue and taxes or other fees.
Much of EKO’s fisheries research is based on its previous work, funded by the New York–based Rockefeller Foundation, in green infrastructure. Scott believes that environmental conservation problems such as the overfished oceans are teeming with profit opportunities overlooked by traditional investors who don’t understand the science, regulation and policy involved. “That lack of awareness creates an opportunity for investors who want to dig deep into certain areas,” he says.
Devoted to investments that help preserve ecosystems for the long term, conservation finance sees about $10 billion in annual investment and spans sustainable timberland, agriculture and aquaculture; wastewater treatment; and freshwater protection, according to a January report by Credit Suisse Group, the World Wildlife Fund and consulting firm McKinsey & Co. To meet environmental needs the market must grow to 20 to 30 times its current size, or between $200 billion and $300 billion in annual investment, the report estimates. Assuming that philanthropic and government contributions at least double in the near term, its authors say the gap would close if every high-net-worth individual, retail investor and institutional investor dedicated 1 percent of their portfolios to conservation finance.
The market’s multifariousness has held it back, acknowledges John Tobin, Credit Suisse’s Zurich-based global head of sustainability and a co-author of the report. “That doesn’t mean there can’t be investable and very profitable products in the area of conservation finance,” says Tobin, who calls for more thinking on the subject. “Protecting species and supporting protected areas has been a philanthropic endeavor until now. I don’t think many people have approached the topic saying, ‘Hmm, environmental conservation: There’s money to be made here.’”
This underdevelopment has fueled a perception that the market is risky, says Melissa Moye, Washington-based director of conservation finance planning and design for the WWF. “There’s a lot of variety without a lot of standard metrics for understanding what these investments might yield,” Moye explains. “We need simple financial solutions that can be standardized.” As part of the Bloomberg-funded fisheries project, EKO’s Scott says, his firm will publish “investment blueprints” for strategies that it thinks will adequately finance sustainable fisheries in the three target countries. “Our goal is to put these ideas into the public domain and have investment managers, including ourselves, try to raise funds around the ideas.” • •