Copyright 2016 by Encourage Capital. All rights reserved.
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Case Study

January 10, 2016

The Sapo Strategy : An Investment Blueprint for Industrial-Scale Fisheries in Brazil

Publisher: Encourage Capital

Funders: Rockefeller Foundation, Bloomberg Philanthropies

Authors: Kelly Wachowicz, Trip O’Shea, Alex Markham

Encourage Capital has worked with support from Bloomberg Philanthropies and The Rockefeller Foundation to develop and evaluate an impact investing strategy supporting the implementation of sustainable fishing improvements in the distressed monkfish (Lophius gastrophysus) fishery in Brazil. The Sapo Strategy (Sapo) is a hypothetical $11.5 million greenfield impact investment to create Brazil's first sustainability-focused, vertically integrated seafood company, with the objective of restoring the stocks of both the monkfish and related fisheries to full productive potential. In a fishery that does not have quota or other forms of formal tenure over the resource, this approach suggests how fisheries management investments in Brazil can support the needs of a cash-constrained public sector, and yield attractive returns to investors while restoring marine ecosystems and benefiting local economies. The $11.5 million investment would be predicated on working with authorities to reform fisheries policy to ensure access limitations, establish secure, stable resource tenure in the form of a "catch share" system, and strong enforcement and monitoring. The strategy would enable the design and implementation of comprehensive fishery management improvements, purchase and retire up to 15 double-rigged trawl vessels and licenses, control at least 85% of licenses/quota and associated gillnet vessels in the monkfish fishery, and create a new monkfish processing and distribution business to manage sales and export to international buyers. Given the current challenging policy environment in Brazil, certain enabling considerations must be met in order for the strategy to be viable. Sapo is targeting an 17.5% base case levered (equity) IRR, with upside potential of over 30%, while simultaneously restoring the monkfish stock biomass, generating $7.9 million in additional revenues to fund gillnet fishers' incomes and offer social benefits, and increasing meals-to-market by 7.5 million portions annually over the eleven-year investment period.