A Change at Sea for All to See

A study by the Food and Agriculture Organization of the United Nations, based on fish harvest records from 1950 to 1994, found that 60% of the world’s important fish stocks are “in urgent need of management” to rehabilitate them or keep them from being overfished.

Yet American consumers continue to receive very little information about what they should be buying. Today’s growing market for organic and healthy foods suggests that the demand for safe, healthy fish is there—it’s the supply that is lacking. And where the supply exists, it is not clearly differentiated. There is too often a dearth of well-marked safe fish products in supermarkets or on restaurant menus.

The question remains: who’s supplying?

One answer is Henry Lovejoy. With his wife Linda, he started EcoFish Inc. in 1999. Henry and Linda had seen the damage done to the ocean by the fishing industry, and they wanted to be part of the remedy. Lovejoy saw a need for an enlightened middleman who would buy from responsible fishermen at prices that would cover their costs. He would then bring their catch to the biggest market by creating gourmet, value-added packaged fish for sale in supermarkets, and would also provide additional products to high-end chefs.

As Lovejoy looked to expand his business, he had a hard time finding the right investors. After rejecting offers from numerous venture capitalists who were not committed to his values, along came a unique new private equity firm, Sea Change Management. Launched in 2005, the Sea Change Investment Fund (SCIF) had assets of $20 million, half of which came from a program-related investment (PRI) from the Packard Foundation.

Sea Change invested $1.6 million in EcoFish, intended to generate conservation benefits to improve the health of fisheries and the marine environment, along with financial returns for its investors.

The Packard Foundation has long been working to restore health to the oceans, both through grants and loans. The Foundation’s $10 million PRI will be used to invest in fish suppliers that will work exclusively with responsible fisheries and create new products for the marketplace. The PRI, matched by funds from other investors, aims for long-term and far-reaching benefits, but there’s no assurance that it will work. It is the Foundation’s biggest attempt to radically change the marketplace—and is possibly its riskiest undertaking as well.

The $10 million loan is also significantly larger than most of the Packard Foundation PRIs, which normally do not exceed $5 million, and represented one-third of the Foundation’s total PRI lending in 2004. But the urgency of the situation convinced the foundation that it had to do something big.

The hope was that the Packard Foundation’s investment into the SCIF could encourage enlightened yet ambitious investors to take the risk of trying to make money in this new venture. It worked. By later that year, Winship had enlisted three equal partners who together matched the Packard Foundation’s loan.

The Packard Foundation wants to inspire others to help find new solutions to environmental problems, and hopes that the infusion of cash into new businesses will cause ripple effects. Sea Change is researching other companies similar to EcoFish, companies that will also work to increase the availability of quality fish products in the marketplace.

“We found that while there were fishermen who would go out and fish sustainably, the distributors would just dump it all in with what a trawl caught, decimating the seas,” says Curt Riffle, program operations manager for the Foundation’s Conservation and Science Program. “We decided that we needed to work with new distributors who are willing to make the extra effort. We believed that their businesses would be developing over the next 20 years, but at the rate we’re going, our oceans might not last that long.”

Eventually, the Packard Foundation’s plan is to remove itself from the picture, with the assumption that the marketplace for high-end sustainable fish products will grow. For Winship, paying back the Packard Foundation loan is a first priority. “We believe in PRIs because they allow the money to go to work again,” Winship said. “We wanted the marketplace credibility of having to submit to the rigor of people who expect their money back. The fact that we need to perform well and repay the loan, and distribute proceeds to our investors only after that adds a lot of credibility to what we’re trying to do.”

If it works, informed consumers’ access to new and better products will change in very observable ways. Consumers will see it at the freezer section of supermarkets, stocked with well-marked packages of sustainable seafood. They’ll see it in restaurants where chefs will use their menus to inform diners about responsible fish choices. In short, you will know that the investment is paying off when you can see the change for yourself.