Guest Contribution by Candice Kanepa.
Atlantic Canada’s fishing communities are increasingly threatened. Despite a Federal owner-operator policy, fishing licenses are concentrating and fleet corporatization is a growing reality. Most Atlantic Canadian fishermen are nearing retirement age, and see little choice but to sell their licenses to the highest bidder. Aspiring young fishermen can’t afford a million dollars’ worth license to enter the industry. This financial climate is unsustainable and threatens our already battered coastal villages.
However a report released by the Ecology Action Centre (EAC) Marine crew, entitled Social Impact Investing for Sustainable Fishing Communities, hopes to offer viable options to help protect Atlantic Canada’s owner-operator fisheries. These fleets make up over 10,000 independent enterprises and are the economic engines of our coastal communities. As the region’s largest private sector employer, in 2011, these fisheries produced $1.8 billion in landed value of seafood, 75% of which went directly to independent fishermen and their communities.
The report is the result of a workshop hosted by EAC exploring alternative financing models that can work to keep fishing licenses in their communities. It provides case studies presented in the workshop from the Fédération régionale acadienne des pêcheurs professionnels (FRAPP), Community Quotas and Eastern Shore Fishermen’s Protective Association, the Maritime Fishermen’s Union, and the case of Snow Crab quota consolidation on Nova Scotia’s Eastern Shore, among others.
The varied experiences shared by participants- from community-based fishermen, farmers, and foresters to investment experts- showed how out-of-the-boat thinking is already landing solutions. As new concepts from the world of social finance and community investment are implemented in sectors like housing and agriculture, they are showing creative ways to generate capital for new entrants on reasonable terms that can ensure that fishing jobs and incomes stay in Atlantic Canada’s communities.
What is Social Finance?
According to MaRS Centre for Impact Investing, Social Finance addresses socioeconomic and environmental challenges while generating financial return through grants, debts, loan guarantees, deposits and equity investments as direct investment into Community Development Corporations, Community Loan Funds, Local Investment Clubs, Alternative Financial Intermediaries, Local Exchanges, and Sustainable Tax Credits. Social finance requires a whole system of interconnected actors committed to long-term investments.
How does Social Finance work?
For example, the Pacific Coast Fishing Conservation Company (PCFCC), founded in 2006 by a group of seven hook-and-line dogfish fishermen, shows how quota banks can help set up rules that can hold steady through policy change fluctuations. A license or quota bank is a cooperative ownership structure that allows fishermen or communities to pool licenses and quotas that are then leased back to members, at reduced or fair trade cost, improving the economic viability and securing access for members. The PCFCC collectively borrowed to buy more quota for their enterprise and established a fair trade policy that included real-time trading with an agreed-upon lease rate formula and clearly defined shareholder responsibilities and consequences. The company also established a conservation covenant and code of conduct for fishing as well as an entrance and exit strategy to enable new entrants.
How can new and existing financial mechanisms for community investment be used to support ownership and access to fisheries resources?
In Nova Scotia, for example, a Community Economic Development Investment Fund (CEDIF) is a pool of capital formed through the sale of shares within a community, which operates or invests in local business to finance economic development. The New Dawn Enterprises, a Cape Breton-based Community Development Corporation, used Nova Scotia’s CEDIF to raise money from about 400 investors and support the development of a culture of self-reliance. New Dawn does not have shareholders and is instead operated as a business dedicated to community building. Over the past ten years, it has paid over $8 million in investment dividends in the community. The CEDIF allows communities to keep some of the wealth that would otherwise leave the area in the form of RRSP investments.
Another example is the Cape Cod Fisheries Trust (CCFT), formed in 2005 to support Cape Cod fishermen in the transition from competitive to ‘individual transferable quota’ fisheries in scallop and groundfish fleets. The Trust is funded by a combination of grants, loans and program-related foundation investments to buy quota opportunistically and then lease it to fishermen who would lack the capital to buy their own. So far it has raised nearly $3 million for the quota purchases and operates a Revolving Loan Fund that allows fishermen to reinvest in more quota purchases. A major strength of the Trust is the ability to work with a longer time horizon and more diverse portfolio than an individual. Once initial barriers to entry are overcome, smaller vessels are able to compete with large ones because of their efficiencies from low vessel costs and fuel consumption.
How can fishing associations get engaged in financial planning, market development and marketing to increase the value of community fisheries and fishery business?
The Future of Fish initiative works to improve market opportunities through value chain building and innovative use of technology doubling the income received from fish. This example shows how fragmentation in processing and distribution within the supply chain prevent fishermen from getting higher value for their socially and environmentally responsible fishing practices. Because most major seafood distributors operate fragmented supply chains, investment in quality, traceability and story-telling about fishing practices fail to generate meaningful returns. Over the past two years The Future of Fish has worked with around 20 supply chain entrepreneurs in different positions of the seafood chain to bring together multiple players and build alternative supply chains.
Protecting fishing communities is essential to Atlantic Canada’s economic well-being. To that end, EAC is now looking to work with fishing associations to build capacity on the use of social finance tools, investment funds, and license or quota banks to preserve ownership and access to fisheries. Establishing community fishing companies with shareholders’ agreement about how to get into the fishery, who owns the resource, adjacency, fleet separation, and operation rules, can help weather shifting policies. Once the community ownership is recognized, its members, fishermen and processors can also begin to invest in common assets that help align economic benefits with conservation efforts.
Social Impact Investing for Sustainable Fishing Communities is available on the EAC website.
Candice Kanepa is the Community Fisheries Coordinator –or new Deck Hand- with the EAC Marine crew. She considers herself an environmental practitioner who specializes in the art and science of integrating conservation into coastal and marine development to achieve greater ecological, social, and economic benefits; in plain English… a Jill of all fishy trades.