water-scarcity-and-use

Managing Biodiversity & Climate Risks in Aquafeed

The FAIRR Initiative’s global collaborative investor engagement on sustainable aquaculture will encourage the world’s largest salmon companies to develop a strategic, science-based approach to diversify feed ingredient sources to better manage ESG risks associated with sourcing wild forage fish and soy.

The engagement asks eight global salmon companies to develop and disclose strategies to diversify their feed ingredients towards lower impact and more sustainable alternatives to enable production growth, reduce climate risk exposure and ensure risks associated with soy, fishmeal and fish oil sourcing are being adequately managed.

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Phase 1 of the engagement has now closed. Investors met with seven of the eight target companies and we will be launching our progress report in November 2021. Phase 2 of the Sustainable Aquaculture engagement will be opening for investor sign-on in 2022.

For more information or to access meeting notes, please contact: [email protected]

Background

Aquaculture is the fastest-growing food-production sector, accounting for over half of all fish consumed by humans. Targets for the anticipated growth of salmon production are very ambitious globally: for instance, the Norwegian government aims to increase production volumes five-fold over 2014 to 2050.

However, salmon aquaculture feed remains reliant on fishmeal and fish oil (FMFO), which are produced from wild forage fish. Supply of forage fish is expected to remain flat into the future, in line with minimal growth across all wild fisheries.

Contact: Lily Stuart, Research & Engagements Manager

The Risks

While salmon producers have made clear progress on reducing the use of FMFO over the long term, flat supply is forecast to increase costs and constrain growth for producers. In the 1990s, marine ingredients made up around 80% of feeds and today, they constitute around 20-30%. A World Bank analysis found that over the 2010-2030 period, fish meal and fish oil prices may rise by 90% and 70% respectively.

As FMFO use has declined, the inclusion of soy in salmon feed has increased. However, all three ingredients are vulnerable to climate risk. One study suggests that under various climate scenarios spanning 2016-2050, price increases of 89%-121% are expected for plant oil, 14-92% for fishmeal and 41-85% for fish oil.

Steep price rises in marine and soy ingredients will increase pressure on producers’ margins. If the industry is to continue growing, it requires increased quantities of feed, meaning marine ingredients must be supplemented with novel alternatives.

There is currently a lack of consensus on the extent to which forage fisheries can be exploited, meaning it is difficult for investors to assess how effective current company strategies are to mitigate the risk of feed availability constraints.

Related Resources

See our research, blogs and podcasts on sustainable aquaculture for more information on the sector.

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