Aqua Culture Asia Pacific September/October 2022

Reuters reported on July 28, 2022, that Singapore’s central bank issued new disclosure and reporting guidelines for retail ESG funds. This was developed by no other than Dr Darian McBain who is familiar to us as she also led Thai Union’s Sustainability program called SeaChange. ESG is the acronym for Environmental, Social and Governance which covers a plethora of objectives. It has been described as an attempt to make business work better while dealing with the threat of climate change and mistreatment of workers, amongst other things. So how does ESG affect the future of aquaculture?

The simple answer is money and investment. The idea emerged in the mid-2000 that investors should evaluate companies not only on their commercial performance but also their environmental and social record, but it was hazy. Its evolution was made more concrete by UN’s Sustainable Development Goals (SDGs) in 2015.

One might argue that this is relevant to large companies listed on the stock exchange (like Thai Union or Charoen Pokphand) or startups looking for investment. There lies proverbial ‘chicken or egg situation’. Compared to salmon and the EU, Asia suffers from a lack of investment in aquaculture today. Could ESG catalyse investment in the aquaculture industry? Where do we start and how do we practice ESG along the supply chain? Because it requires action along the whole supply chain, are integrated companies are better positioned to take advantage of this?

As usual, it is better to start downstream in retail and the consumer as they speak with their purchasing power. Consumers in the US and EU are becoming increasingly well versed with the UN’s 17 SDGs. Large retailers focused on the SDGs as a competitive edge in the early days but with time, this will become a norm. Hypermarkets are insisting on sustainable seafood which require responsibly and sustainably farmed products from aquaculture. Processing plants and suppliers have to pass this message on upstream to farmers. The requirements can range anywhere from fair trade and worker treatment to renewable energy for low carbon products. Seafood tends to be consumed by a higher economic segment of the population who are willing to pay a premium for fair trade and climate friendly seafood and this could be the pull effect.

During the recent Global Shrimp Forum, Hugo Byrnes, Ahold Delhaize gave a wake-up call from a retailer’s perspective. Among them are issues on human rights, deforestation and shrimp welfare with no eye stalk ablation. Financial institutions want to know what retailers are doing on these matters and this goes down to the suppliers. Therefore, as leading suppliers, Asian farmers have to be educated on these new requirements, when asking for premium prices in return for their effort as the supply chain has to work together.

Feed companies also play an important role for two different reasons. The first is the ingredients they buy as not all fishmeal and fish oil are bad just as not all soybean meal is good. Fishmeal from by-products is contributing to the circular economy and reducing waste while soybeans from Brazil could be treated with suspicion if it comes from areas of the recently felled Amazon Forest.

The second is that many feed companies are large and better connected to the needs and demand of the industry and act as educators to the farmers. Information and education are key as the farmers may be the weakest link in the supply chain when it comes to adopting SDGs.

In summary, the aquaculture industry should have the SDGs adopted as a code of practice which can be certified and assisted by a pull effect from the retail segment and buyers. Although the future looks hazy now, it is logical that such a development and evolution in the aquaculture industry would attract investment and confidence. The objective is worthwhile and The Economist (July 23) reports that investment managers claim that more than a third of their assets (about USD35 trillion) are monitored through one ESG lens or another.