Overfishing and unsustainable management of fisheries place monumental pressure on ocean ecosystems, causing environmental degradation and biodiversity loss, and exposing investors to fishing related risks. Investor Watch’s Fish Tracker Initiative, Asia Research and Engagement and Sea Around Us published this report to help investors identify which listed companies have exposure to seafood-related risks, outline a standard for transparency on sustainability issues, and provide insight into links between companies and overexploitation. As such, this report aims to reveal the financial implications that breaching planetary boundaries, related to fishing, has for investors in companies that derive revenue from seafood production activity.

As the ocean acidifies with greater absorption of carbon emissions, and sea temperatures rise, fisheries are significantly impacted by climate change and investors are exposed to unprecedented risks. The report outlines multiple examples of value destruction in the seafood value chain, such as the collapse of Atlantic cod caught off Newfoundland as a consequence of severe overfishing. The short-term pressure to maximise profits is a major hindrance in adopting long-term, value-maximising strategies, especially in the open ocean where regulation is difficult to enforce. Further, the lack of publicly available data and complexity of the seafood sector introduce particular challenges for those wishing to understand their exposure to risks.

Thanks to a growing global demand for seafood, the sector presents major opportunities for profitable investment. Though inaction may support short-term profitability, overfishing and spread of disease are imminent issues that threaten to diminish long-term profitability for many companies. Thus, lucrative investment opportunities can only be realised if natural resources are managed with a long-term view. By aggregating data about companies with seafood exposure, the report seeks to portray the role of listed companies in seafood extraction, and to identify risks and opportunities for investors with exposure to the sector. It also seeks to explain the geographical distribution of seafood revenues for listed revenues, and their respective shares of production. Linking the health of fish stocks to company revenues can serve to provide investors with a new perspective to reduce risk and generate superior returns.

The report provides a recommendation for an investment framework that investors should use, placing emphasis on governance, strategy resilience, risk management, and metrics and targets. It also outlines a number of initiatives that key stakeholders, including investors, financial regulators, companies with seafood exposure, seafood industry policymakers and civil society organisations, should take to ensure future sustainable management of fisheries.

1. 31% of fisheries are currently overfished, and 58% cannot increase their catches sustainably, placing immense pressure on ocean ecosystems. Of the 19 largest fishing companies by revenue, over 30% of their stocks are overfished.
2. 228 companies on the world's stock markets have exposure to seafood production, with combined seafood revenues of $70.6 billion that represent only between 8% and 23% of reported global production volumes in 2014.
3. The geographical distribution of seafood revenues for listed companies is highly concentrated in a small number of markets: Japan, Norway, Thailand, Chile and South Korea. These markets account for over 77% of the total estimated listed company seafood revenues, with Japan accounting for 46% of the total.
4. Only 10% of listed companies deriving revenues from seafood provide a publicly disclosed sustainability policy. Additionally, only 16% of listed companies with seafood revenues provide adequate information to identify sourcing and product mix, inhibiting investors from evaluating risks.
5. Investors need to understand the sustainability of fish stocks and revenue sources of companies with seafood exposure, and should ask companies to adopt sustainability policies and practices that address potential environmental and social risks. Such policies include commitments to removing illegal and unregulated fishing from value chains, adopting certification and traceability practices, and introducing appropriate labour standards.
6. Financial regulators need to ensure relevant listing rules require companies to provide adequate public disclosure on sustainability issues, including material disclosure on exposure to fisheries and their status of exploitation. Supporting investor-industry engagement by facilitating dialogue ensures that companies are held accountable for their sourcing and product mixes.
7. The Task Force on Climate-related Financial Disclosures could be used as a framework for disclosure that can be adapted to the seafood sector, paying special attention to governance, resilience of the company's strategy, risk management, and metrics and targets used to measure risks and opportunities.
8. The Seafood Business for Ocean Stewardship (SeaBOS) initiative aims to lead a global transformation towards sustainable seafood production and a healthy ocean. The ambition of SeaBOS is to enable the world's largest seafood companies to be forces for good, contributing to a resilient planet and sustainable marine ecosystems.
9. A central question for investors is whether portfolio companies are fishing from overexploited fisheries. Where companies have significant catch from areas where overfishing is occurring, there is a risk that a decline in fish stocks will lead to a collapse in revenues. Even before losses are incurred from over-fished or collapsed stocks, companies that target over-fished stocks face substantial reputational risk.