If impact financing is key to sustainable shrimp farming, how can satellites, mobile phones, and big data accelerate this process?
Written by Zack Dinh and Shelby Oliver, founders of Sea Warden Inc.
Summary
- Scaling up impact investing efforts is critical to accelerating the transition to sustainable shrimp farming practices.
- Impact investing is bottlenecked by the cost of conducting due diligence and portfolio monitoring (validating implementation of sustainable farming practices).
- Remote monitoring (satellite and mobile phone data collection) is a low-cost solution that can enable financiers to conduct due diligence and portfolio monitoring at scale.
- Remote monitoring provides farms with operations advice and market insights, streamlines access to certification, and improves supply chain traceability.
The Issue
Sustainable shrimp farming through controlled intensification
In September 2020, WWF published Future Proofing Shrimp Production, a policy guide summarizing the shrimp farming industry as: “largely characterized by unindustrialized producers and unsustainable practices. It requires the use of natural resources that can, without proper management, result in negative impacts, such as natural habitat conversion, water pollution, over-exploitation of marine fisheries for fish meal and carbon emissions associated with electricity and farm fuel.”
The guide identified controlled intensification as a solution to making shrimp farming more sustainable. Intensive production systems produce higher amounts of shrimp per land area by using more precise methods, and with responsible practices can reduce impact to local water quality and disease risk by minimizing farm interaction with the external environment. However, shrimp farming is dominated by smallholder producers who lack access to formal credit necessary to adopt more intensive production methods.
Challenges
“Financiers should direct debt and equity investments to producers small and large to transition to more controlled intensification.”
— Future Proofing Shrimp Production, World Wildlife Fund
To accelerate the transition to controlled intensification, WWF identified intentional direction of capital to shrimp farms as a key driver. While investments have the potential to generate high returns, there are major challenges including the fragmented and sometimes remote distribution of farms, and limited data on production and financial performance. These issues complicate the identification of suitable farms and increase financial risk to the lender. These issues raises several considerations:
- Can we reduce the cost of conducting due diligence to enable deployment of investments to smallholder farms at scale?
- How can we ensure that investments are used properly and help farmers follow responsible production practices?
- How can sustainably produced shrimp be traced through the supply chain to maximize outcomes for both farmers and consumers?
The Solution
Remote monitoring technologies including satellite observations and mobile phone data collection can address the data challenges preventing successful delivery of capital needed to fund sustainable shrimp farming practices. We introduce our solution as a framework where remote monitoring plays a key role in every step of the acceleration process: from finding farms suitable for investment, farmer onboarding, production & portfolio monitoring, and supporting traceability through the supply chain.
Our model for accelerating sustainable shrimp production practices
Phase 1: Farm selection
We identify ideal farm candidates by analyzing satellite observations, weather data, official production records and other forms of big data. Historic datasets spanning many years provide a deep understanding of farming practices and performance. Key Data Elements (KDEs) generated by this process classify ponds based on eligibility criteria defined by the impact financier. Check out our previous post for a deeper look at our remote monitoring approach.
Phase 2: Onboarding farms
Contact with eligible farms is made by collaborators based in the area. To apply, interested farms provide additional information using their mobile phones. KDEs that cannot be collected by satellite observations are verified by photos and videos submitted by the farmer. By combining historic observation data with farmer-submitted information, we generate digital farmer profiles that enable the impact financier to conduct their due diligence process.
Phase 3: Deployment of funds and resources
The impact financier releases funds to selected farms, requiring that funds be used to make specific farm improvements such as the installation of automatic feeding devices, plastic pond liners, construction of water treatment & settling ponds, etc. Depending on the agreement, resources can be deployed as a combination of funds, equipment, feed credit and technical support. Afterwards, farm improvements and purchases are verified by remote monitoring.
Phase 4: Responsible production and portfolio monitoring
Ongoing satellite observations and farmer submitted data ensure that operations adheres to responsible aquaculture production standards. Remote monitoring data is analyzed in real-time, supporting farmers with management advice, market insights, and early warning of disease events in their area. Remote monitoring also enables impact financiers to efficiently monitor many farms within their portfolio, and provide additional resources when needed.
Phase 5: Post-production transparency and traceability
Production records collected through remote monitoring greatly simplifies the audit process for certifications provided by programs like ASC and BAP. These globally recognized certifications boost brand recognition and improve access to markets with stricter sourcing policies. Furthermore, by integrating remote monitoring data into existing traceability platforms, we can enable pond-level traceability through the supply chain, a major benefit for retailers and consumers.
Implementation Partners
Impact financiers
By providing remote monitoring as a service, we can scale-up existing aquaculture-focused investment programs while improving return on investments. We make impact financing as simple for the financier as possible: 1) select a region of interest, and 2) define criteria for funding eligibility. Companies like Indonesian-focused eFishery are optimized to accept investor funds, and deploy them successfully to eligible farms.
Local support
The success of impact financing relies on having local support on the ground to conduct farmer onboarding, training, and provide technical support. In the Indian state of Gujarat, we are trialing our remote monitoring approach with MVJ Group, a company that provides inputs, operations support, and export services to hundreds of shrimp farmers in the region. In Indonesia and Vietnam we are working with ThinkAqua, an NGO focused on improving the welfare of smallholder aquaculture producers.
Certification programs
Globally recognized certification programs such as the Aquaculture Stewardship Council and Best Aquaculture Practices understand the value of using remote monitoring to support annual audits and to make certification more accessible to smaller scale producers. This year Sea Warden is partnering with ASC to trial remote monitoring in Vietnam and Indonesia to support improver programs that will accelerate smallholder farms towards certification.
Integration with traceability solutions
Tamper-proof data systems powered by blockchain technology enable farmer-to-consumer supply chain traceability. Our partners at Envisible have demonstrated the use of their platform Wholechain in supporting smallholder agricultural and seafood producers. By appending remote monitoring data into systems like Wholechain, the level of transparency reaches new levels: every crop sold can be traced back to the farm of origin and verified that production followed responsible production standards.
What is the full potential for remote monitoring?
In this post, we’ve covered why impact investing is critical to accelerating the transition to sustainable shrimp farming practices, and how low-cost remote monitoring can scale up impact investing efforts, while supporting certification and traceability efforts. However, remote monitoring can provide additional solutions for the shrimp farming industry:
- Feed and other input suppliers: optimizing feed production and distribution by tracking regional production activity.
- Equipment providers: identification of sales opportunities using farm-level equipment surveys and growth trends.
- Conservation: scaling up farm-level social and environmental improvement efforts while enabling area-based assessments.
- Government: farm permit tracking, detection of disease events, and validation of production statistics.
About Sea Warden
Our mission is to advance the sustainability of farmed seafood by addressing critical data gaps within the aquaculture industry by leveraging satellites, AI, and cloud computing to map and monitor global aquaculture activity. Find out more at seawarden.io
