Image: Mowi ASA
Salmon: that’s what’s on the menu for ESG investing in food, where aquaculture delivers nutritious meals and with much lower emissions than those produced by cattle, sheep and goats, according to UN studies.
Emissions rates related to aquaculture cultivation are about a fifth that of cattle, significantly less than that of pork, and roughly equivalent to that of poultry. Beyond emissions, aquaculture ranks high in what it brings to the table in other sustainability sectors.
The global population has risen from 2.5 billion in 1950 to 7.5 billion in 2017, and is expected to reach 9.7 billion by 2050. The primary concern of how to feed that number quickly becomes a question of how to feed and cultivate the meat, pork and fish consumed around the world.
It is here that salmon beats all contenders. The fish requires less feed to build weight, and more of that weight is edible, since salmon are cold-blooded and don’t have to expend calories to heat their bodies. Salmon cultivation also uses a fraction of the fresh water consumed by livestock industries, and aquaculture eases burdens related to overfishing on marine wildlife.
It comes as no surprise that aquaculture is the fastest growing global food sector, according to the United Nations Food and Agriculture Organization. The total harvested volume of salmon grew by almost 6% per year in the period between 2010 and 2019. Leading Norwegian investment bank SpareBank 1 Markets AS estimates that growth will continue steadily at an annual rate of 4% going forward.
Though salmon is still considered a delicacy, it has become increasingly accessible with the expansion of aquaculture. The resulting increase in salmon consumption means the environmentally-friendly dish should also be on the menu of ESG investments. This sector has environmental benefits, increased consumer choice and room to grow. It is worth noting the associated risks, which are mainly the potential spread of diseases and parasites and the use of antibiotics. But there are companies that manage those risks properly.
Top suppliers of farmed salmon include Norway, Chile, UK, Canada and the Faroe Islands. Norway accounts for more than 50% of the global salmon supply. Norwegian Mowi ASA is the world’s largest fish farmer, supplying sustainably farmed salmon and processed seafood to more than 70 markets worldwide. Recently, share prices for the Oslo-listed company have fallen to levels last seen in 2018, offering a buying opportunity. At the same time, the company was able to beat its own expectations on second quarter harvest volumes. Mowi operates in several countries and its subsidiary in Ireland is the most efficient aquaculture company in the world, with an EBIT/kg of EUR 3.5 based on 1H 2020 results.
Another stock worth looking at is Salmones Camanchaca, with operations developed along the Chilean coast under a strict commitment to the environment. It currently exports fish and shellfish to more than 50 countries. After taking a financial hit when a 12-cage module at one of its salmon farms was crushed in flood conditions in June, the company’s current share price presents an opportunity to invest with significant upside.
Against the backdrop of these behemoths, there is a developing story of Russian aquaculture. Analysts believe the country can make the same leap as the Faroe Islands did in the last 10 years and enter the ranks of the top salmon producers.
Russian Aquaculture is the largest salmon farmer in Russia. The company listed on the Moscow stock exchange in 2010 and held a secondary offering in 2017. The company has reported growing production, an advantageous market position, and plans to grow across Russia’s marine Arctic expanses. It holds second place in terms of efficiency with an EBIT/kg of EUR 2.8, according to the company’s 1H 2020 results.
Geography is crucial to the success of aquaculture. Salmon bred in the cooler waters of the Russian Arctic are less likely to get sick, leading Russian Aquaculture to abstain from the use of antibiotics. According to a sustainability report from the Global Salmon Initiative, farmers around the world have halved their antibiotic use over the last seven years through innovative disease control mechanisms and aquaculture stewardship, but the industry still has some way to go.
As investors increasingly look to alternative energy as a promising (and profitable) industry in the battle against climate change, aquaculture likewise presents an opportunity to support a sustainable alternative to traditional livestock industries. With its high nutrition yield at a fraction of the emissions cost, salmon production is a healthy choice for one’s portfolio, personal health, and the planet.
Disclaimer: The content in this article is for informational purposes only and does not constitute individual investment advice.