Can socially conscious investing save the world’s fisheries?

Forty percent of the world’s fisheries are overfished, according to Encourage Capital, a New York-based investment management firm that recently released a series of detailed investment blueprints designed to address the issue.

Javier Fuentes, MBA ’16, worked at Encourage Capital as an intern last summer and was part of the team that wrote “Investing for Sustainable Global Fisheries,” with support from the Bloomberg Philanthropies Vibrant Oceans Initiative and the Rockefeller Foundation. The blueprints are free to nonprofit companies and investors and propose strategies for both generating financial returns and promoting sustainable fishing practices.

According to Encourage Capital, 3 billion people around the world rely on fish for food or income but the exploitation of the world’s fish stocks poses a serious threat to the industry. Fisheries mismanagement, which includes overharvesting and waste in the supply chain, translates into industry losses of approximately $50 billion a year, Fuentes said. Encourage Capital spent more than two years examining productivity, supply chain dynamics, and 25 fish species in Chile, Brazil, and the Philippines.

Fuentes, who will also earn a Master in Public Administration from the Harvard Kennedy School of Government in a three-year dual-degree program, said impact-focused investors can make a meaningful difference in the industry.

An awakening to sustainability

A native of Chile, Fuentes, who has both an engineering and finance background, enrolled in MIT Sloan’s Sustainable Business Lab in 2013. He said the action learning course, as well as some of the other courses he took through the Sustainability Initiative at MIT Sloan, exposed him to the extent of social and environmental problems that surround business practices.

“It’s not just pollution or climate change … with fisheries, we are in very bad shape. In S-Lab, we learn to navigate problems like this,” Fuentes said.

Prior to S-Lab and his internship at Encourage Capital, Fuentes had never given much thought to the world’s fish stocks. His first summer internship in 2014 at California Environmental Associates in San Francisco gave him the chance to research the problem in depth, but he quickly realized that many of the proposed business model solutions were tough to implement on a large scale.

“Strategies that focus only on specific communities or limited geographical areas usually struggle to make an impact on the sea,” Fuentes said.

Reshaping the supply chain

In his internship at Encourage Capital, Fuentes studied fisheries in Chile. Chilean fishermen need to find an alternative to the common hake, a cod-like fish, which is declining, Fuentes said. The team proposed to local fishermen that they try to commercialize squid, which eats hake. Squid can be shipped abroad to places such as Asia.

In order to trace the harvesting, the team also proposed to use state-of-the-art technology to track the boats, control fishing practices, and follow the production from sea to retailers.

By looking at the challenges to individual fish species, “We started to understand that a strategy to protect shellfish is different from a strategy to harvest tuna in a sustainable way,” Fuentes said.

If private investors follow Encourage Capital’s blueprints, depleted stock can potentially recover, albeit at different rates, Fuentes said. The hake’s reproduction cycle is four to five years, and if improvements are made to fishing practices, stocks could recover in as little as eight years, he said.