SDG Impact Finance Initiative with the support of Convergence approved an expansion grant of USD 300,000 to the Fisheries Improvement Fund (FIF) by Finance Earth (FE) and WWF. The FIF aims to accelerate the implementation of Fishery Improvement Projects (FIPs) worldwide. With an investment target of USD 25 million, the fund aims to unlock up to USD 100 million of public and private funding for FIPs by 2030.
Across the globe, there are more than 3 billion people who rely on marine and coastal biodiversity for their livelihoods. The value of ocean goods and services stands at an estimated USD 2.5 trillion. However, 90% of the world’s fisheries are exploited beyond sustainable levels. This resulted in a decline in the health of the ecosystem. According to studies, better fisheries management could significantly increase both fish stocks and profits, with potential gains of 29% in wild fish production and 204% in profits. There is a crucial need for fisheries improvement projects (FIPs). With over 150 active FIPs worldwide, accounting for just 10% of the global commercial wild catch, there exists a significant need for funds to accelerate finance to FIP deliveries.
The FIF offers a unique solution by integrating sustainability into supply chains and unlocking scalable, long-term financing for fisheries improvement. The model used by FIF is similar to an outcome-based model which adds value to FIP development by structuring funding and securing upfront finance commitments covering the full cost of FIP implementation (including financing costs), instead of leaving FIPs to source funding in an ad hoc way to continue FIP implementation. Through the funding period, off takers are committed to paying the volume-based fee over the course of the FIP in exchange for the FIP reaching completion and delivering the agreed social and environmental impact.
The FIF has secured a Program Related Investment (PRI) from a leading charitable foundation to launch the pilot Fund in Chile. WWF Chile will be the recipient of this funding to implement the project. Volume-based fee commitments from participating companies will cover the full cost required to repay the PRI over a five-year timeframe. Additionally, the FIF received additional commitments from major corporations such as Mars Petcare to support delivery of the FIP pipeline globally. The expansion grant from the SDG impact Finance Initiative will help FIF to raise additional funds from commercial investors, build project pipelines, and conduct due diligence. Furthermore, the grant will enable the FIF to set up additional SPVs in emerging markets outside of its initial pilot in Chile.
Design question and learning potential for the market: How can a blended finance SPV be used to address seafood sustainability and ocean regeneration on a scalable level across the globe?
FIF uses a blended finance mechanism that combines flexible repayable finance with an equitable volume-based fee structure for participating supply chain companies. FIF combines repayable finance and retailer grant contributions in an SPV and maintains contracts with service providers, off-takers, and FIF itself.
The FIF (through its manager, FE) works with FIP implementers in a new or existing FIP opportunity to assess the project’s funding requirements (including financing costs) and identify key supply chain actors. FIF then engages with supply chain actors to secure offtake agreements with the SPV and provide an upfront volume-based fee which covers the full costs of FIP delivery over a defined time period. Upfront payment commitments from the suppliers, as well as concessional funding from impact investors de-risk investments for private commercial investors. Throughout the project, FIF releases the volume-based fees from the suppliers to the FIP implementers over a set delivery schedule that was pre agreed upon. The offtake volume-based fee and SPV grant contribution from retailers and local supply chain actors can cover the full cost of FIP delivery and provide a revenue stream for the fund.
FIF generates revenue by charging a small off-taker fee from each supply chain company. As the program expands, FIF’s model is easily scalable to emerging markets that require FIP investments. In the long run, as more companies enter into volume-based fee agreements with the FIF, participants' fees can be lowered, further incentivizing companies to join from the outset.
