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A 'blue bond' dashboard for investors

Influential think tank Planet Tracker publishes dashboard highlighting benefits of innovative ‘blue bond’ model for investors, fishing companies, and marine ecosystems.

A school of snapper

Financial think tank Planet Tracker has unveiled an interactive tool that aims to encourage investors to consider financing the regeneration of wild fish stocks by issuing "blue bonds."

The Blue Recovery Bond Dashboard, launched last week, aims to demonstrate how the fishing companies and investors can benefit from a temporary reduction in fishing levels that helps wild fish stocks recover.

Roughly 90 percent of fish stocks worldwide are either fully fished or overfished, and the wild-catch seafood industry will see its profits plummet if it does not act now to reduce current levels of overfishing and allow ecosystems to replenish, Planet Tracker has warned.

So-called blue bonds could help tackle this issue by using the power of financial markets to support commercial fishing companies that agree to a voluntary reduction in the quantity of fish they catch.

Under the model, fishing companies would accept a voluntary fall in the quantity of fish caught for a set period of time, and investors would enable this freeze by compensating fishing companies for any decrease in free cash flow and earnings experienced over this period.

This period of restraint would allow ecosystems to replenish and ultimately benefit the world's fishing industry, because it would protect and boost future volumes of wild fish stocks, according to Planet Tracker.

Under the model, fishing companies would accept a voluntary fall in the quantity of fish caught for a set period of time, and investors would enable this freeze by compensating fishing companies ...

Once fish stocks have recovered, fishing companies would be able to fish at a higher level again and investors would cease payments, Planet Tracker explained. Fishing companies then would repay investors in the form of a coupon calculated as a function of wild-catch volumes, until the bond's maturity.

Planet Tracker has calculated that these so-called blue bonds would generate significant financial returns for investors. Assuming a 40 percent of reduction in catch over five years, investors could generate an internal rate of return of 25 percent, an 8 percent discount rate, and a coupon of $50 per metric ton of fish caught by fishing companies paid to investors, it said. Moreover, if companies fish more than their quota, they would be required to refund investors the cash they have received.

However, as with any investment, there would be an element of risk. If fish stocks are not deemed to recover to sustainable levels, fishing activity would not be able to resume and investors would be at risk of not receiving repayments.

The think tank also conceded there were significant barriers to the success of blue bonds, with the fledgling sector facing questions over how to find the right bond issuer to underwrite new bonds, how to agree on quotas for the species and the areas the blue bond covers, and how to monitor compliance with rules and regulation and limit the impact of the model on the rest of the seafood chain and its workforce.

Planet Tracker said the aim of the new dashboard model was to enable investors to see in practice how a blue bond could work, by allowing users to input their own modeling assumptions.

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