Global Canopy and the World Wildlife Fund have updated the Soft Commodity Risk Platform (SCRIPT) to enable financial institutions to sustainably invest in seafood, palm oil, soy and cattle.
Talking exclusively to Agri Investor, Tom Bregman, senior sustainable finance associate at Global Canopy, said: “The platform – funded by the Gordon and Betty Moore Foundation – targets banks in South East Asia and parts of Latin America to enable a transition to a more sustainable economy and resilient seafood sector as these regions are major commodity producers.”
“Every year, over 9 million hectares of tropical forests are cleared to make way for the production of soft commodities such as palm oil, soy, cattle and timber. And more than 30 percent of the world’s fisheries have been pushed beyond their biological limits,” he added.
“SCRIPT, which 40 banks have registered to use, was initially launched in April 2018 to help regional banks better manage sustainability risks for palm oil, soy and cattle,” he explained. Adding: “Now, it is being extended to the seafood sector, in response to increasing demand, providing a major opportunity to underwrite regional food security.”
The WWF values goods and services from the ocean economy at around $2.5 trillion annually, with South East Asia forecast to produce a quarter of the world’s seafood by 2030.
Significant risks linked to financing the seafood sector were found by environmental organization Global Canopy, with infectious diseases posing one of the biggest threats. Costs to the aquaculture sector are estimated at $6 billion in yield loss, according to the group’s report Finance for seafood in South East Asia: The business case for sustainability. Disease is often triggered by environmental factors such as overstocking of ponds or contaminated water. Poor management of natural resources and inputs can also have a big impact on farm level profits, increasing the possibility of reduced harvests and loss of access to markets due to consumer preferences for sustainability, the report noted.
Environmental impacts identified for soft commodities include deforestation from the use of soy in feed, untreated waste water causing pollution and contamination and depletion of local water resources.
The report explained that seafood companies also face an increased risk of exposure to regulatory changes from both exporting and importing countries.
“That’s why today’s tool and guidance is so important. They help provide a platform to bridge the capacity gap, enabling banks to develop meaningful policies that help manage supply-chain risks and opportunities,” Raj Kundra, vice president of international finance at the WWF, said.
It will help financial institutions engage seafood companies on environmental and social risks. A new policy for benchmarking seafood has also been launched.
Roberto Vitón, managing director of Valoral Advisors, welcomed SCRIPT, saying “it brings practical tools and resources to assess sustainability risks in some of the largest food and agricultural sectors currently targeted by investors across South East Asia and Latin America”.
“Understanding and mitigating risks related to deforestation, land degradation from crop and cattle activities and unsustainable seafood operations is critical when assessing debt or equity investments. By promoting more sustainably robust lending policies among regional banks across these regions, the SCRIPT can have a powerful effect both on local agricultural companies and the broader investment community to work together on minimizing the environmental and social impacts along the soft commodity supply chains,” he added.
“Given the growing number of asset managers specialized in agricultural investments, we may expect more active engagement of these managers with this platform and other industry-wide efforts to better manage risks associated with land and water use and to the effects of climate change,” Vitón stressed.
Adam Anders, managing partner at Anterra Capital, said: “We fully support what Global Canopy are doing and also see an increasing number of agtech start-ups looking to disrupt the current value chain by using new methods and technology to better serve farmers and better assess the risk of providing services (including credit) to farmers.”
The updated tool which is expected to be up and running later this month can be found at www.script.finance