A new investment tool from Credit Suisse aims to bolster investment in the recovery of global fish populations.
Environmental Defense Fund Q&A with Namrita Kapur, Managing Director at EDF+Business and Ian Murdock, Risk and Finance Data Analyst at Credit Suisse
Overfishing endangers ocean ecosystems and the billions of people who rely on seafood for their food and livelihood. Without sustainable management, our fisheries face dramatic declines – and we face a food crisis. To reverse this global challenge, EDF has engaged in global partnerships to find solutions for thriving oceans that support more fish, food and prosperity. Most recently, EDF teamed up with Credit Suisse to find sustainable finance solutions to address the systemic challenge of reinvesting in sustainable fisheries. Namrita Kapur sat down with Ian Murdock to discuss this innovative new tool.
Namrita Kapur: What inspired you to partner with EDF to take on such a major global challenge?
Ian Murdock: My interest was motivated by personal and business interests.
Our clients want to do more than simply save and invest. They want their investments to do good, providing not just a reasonable return, but a better future for all.
In Disney’s Moana there is a line that goes: “See the line where the sky meets the sea? It calls me.” The call for me, was Credit Suisse’s ‘virtual volunteering’ program, and a request from EDF to help explore and explain the risks in making fisheries sustainable. As a CFA charter holder with 20 years of experience in major banks, the chance to combine my professional expertise with my personal interest in ecosystems was too good to pass up.
As a kid, I developed an interest in science and the environment, trying to dig a hole ‘to Australia’ in the back yard – always just beyond the next tree root! I loved coastal hikes with my family, and learned a deep respect for nature and the value of conservation. More recently, I’ve been studying environmental science with the Open University (Milton Keynes, United Kingdom), taking undergraduate classes part-time while working at Credit Suisse.
The Virtual Volunteering program at Credit Suisse organizes staff worldwide to help solve problems and develop solutions for non-profits. My colleagues, Tamaki Bieri and Filippo Viel, both based in Zurich, also stepped up for this assignment. Tamaki has a Ph.D. in Cellular and Molecular Biology and works as a business projects manager for Credit Suisse. Filippo has an MSc in Economics and Finance, and works in commodity finance. I was very happy to have such a high-powered team! Working together with Phoebe Higgins, based in the EDF San Francisco office, we started to investigate the question: why don’t we see more investment in sustainable fishing?
The economics are obvious. Research shows that, unlike a non-renewable resource, fishing stock can be managed rather than simply extracted. In the long run, you get a better resource, while allowing a scientific sustainable yield. Local fisheries get a stronger business, providing for communities beyond simple sustenance. So why hasn’t more been done? For one thing, it’s difficult to assess and manage the risks. This is where our risk tool is intended to help.
Kapur: How does the new financing tool work?
Murdock: Ultimately, investors should be willing to take some risk. What our tool offers is a way to explore, assess and then control that risk. We started with a risk identification process. For organization, we split the risks into three broad categories based on the flows of a fishing business. Resource risks are those associated with getting the fish, business risks relate to selling the fish and financing risks relate to returning cash to investors.
To try and bridge the gap between theory and practice, we took inspiration from credit grading models, where a variety of quantitative and qualitative factors serve as weighted inputs for a ranked output. In terms of scoring the risks, we chose a risk matrix, ranking the risks across likelihood and severity. These approaches from the worlds of banking and project management give an easily modifiable framework. Rather than focus on more general risks, we selected those with a special consideration for fisheries.
Once the different risks are scored, a radar chart displays the results. Ideally, all the risks would be within a target tolerance; but where they are not, we offer some resources to consider for risk management and reduction.
So please, download the tool and take a look. If not now, just save it for later, when you might have a moment to explore the open seas. Like Moana – go beyond the safety of the reef!
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