Certification to handle and sell certified sustainable seafood boosts a companies’ share price and proves that ‘it pays to be green’, according to new research published in Marine Resource Economics.
The independent research considered the impact on a company’s share price of achieving certification to the Marine Stewardship Council’s (MSC) Chain of Custody Standard. This assures consumers that sustainable fish products bearing the MSC blue tick label are tracked and separated from non-certified seafood during the journey from fishery to shop.
The recent increase in consumer demand for sustainable products and ‘eco-labels’ has resulted in more robust sourcing assurances such as the market-leading MSC Chain of Custody Standard.
The research from the University of Cantabria, Spain, shows that on average a company’s share price increased by 2.64% following certification, so that a company with a mean market value of US$875.80 million increased US$23.12 million just 20 days after certification (equivalent to 60.89% yearly. The rise was higher in companies with lower profitability and sales as investors anticipated that certification could result in an increase in their sales and profits.
Dr José L. Fernández Sánchez, co-author of the paper and economics Professor at the University of Cantabria in Spain said: "The adoption of more sustainable practices in our oceans and seas is sometimes questioned by producers concerned with their companies' profitability. The findings of this research should help resolve the dichotomy between economy and environment.
“The results we have found allow us to state that investors respond positively to sustainable schemes in fisheries, producing a gain for the companies in the financial markets. This confirms our hypothesis that ‘it pays to be green.’”
This is the first time that research has analysed the reaction of the financial markets to the introduction of certification that supports sustainable fishing.
Seafood is also one of the most highly traded commodities in the world, exceeding the combined trade value of sugar, maize, coffee. As of 2018, the world’s top 150 seafood companies (both public and private) had a revenue of roughly US$120 billion.
The research analysed whether the benefits of obtaining an ‘eco-label’ outweighed the costs, focusing on the stock market reaction which follows the companies’ public announcement that they had achieved certification to the MSC Chain of Custody Standard.
The researchers compared 58 companies that were certified to the MSC Chain of Custody Standard between 2006 and 2019, investigating a window between 0 and 20 days after announcements of certification. On average, there was a significant positive reaction from shareholders. Shareholder positive abnormal returns on stock price (when actual returns are higher than expected) grew from 1.08% in the first week to 2.64% after day 20.
As overfishing continues to rise, with more than a third (34%) of the world’s fish stocks overfished, the study authors emphasised the urgent need for more sustainable fishing practices. The UN has recognised that the MSC certified fisheries are part of the solution by “improving sustainable management and harvesting of fish” and successfully increasing the number of sustainable fish caught over the last decade.
Toby Middleton, Head of Market Operations at the MSC said: "The investment community is increasingly taking environmental, social and governance (ESG) related factors into consideration when assessing the value of a company or industry and its potential to deliver future returns.
“However, finding reliable ways to assess a company’s ESG performance can be a struggle. Investors are increasingly looking to impartial, independent and robust assessments, such as the MSC Chain of Custody and Fisheries Standards, to help them identify companies which are genuinely sustainable, and filter out those who are not. This research highlights to both seafood companies, and to investors, the very real benefits that can come from taking sustainability seriously.”
The research adds to the growing body of evidence which shows that fisheries and companies that embed sustainability into their operations by engaging with the MSC program, can benefit directly and tangibly themselves, as well as benefiting the health of the oceans.
In June last year, the MSC released new Guidance for investors in the seafood industry, to help encourage financiers to make investments that promote returns for both oceans and businesses.