Convergence has awarded a proof-of-concept grant under the Asia Climate Solutions Design Grant to Conservation International to design and launch the Climate Smart Shrimp Fund (CSSF), a US$100M blended finance revolving debt fund that aims to finance sustainable shrimp farming while restoring degraded mangrove ecosystems in Indonesia. Building upon successful pilots in Indonesia and Ecuador, the fund brings together a strong consortium of local implementing partners that collectively bring about proven expertise in sustainable aquaculture, climate finance, and mangrove restoration.
Mangrove habitats provide one of the most efficient carbon capture and storage opportunities, in addition to providing flood protection, livelihood benefits, and crucial habitat. However, mangroves have also been destroyed at an alarming rate, with conversion to shrimp aquaculture ponds being among the primary drivers of mangrove habitat destruction. Responsible shrimp production is crucial to avoid these adverse impacts on climate change and livelihoods. The CSSF fills a critical financing gap by providing tailored financing solutions for responsible farm modernization, technical training, and mangrove restoration to smallholder farmers that have limited access to formal credit with few opportunities to modernize their farms and adapt responsible practices.
By supporting Indonesian shrimp farmers in transitioning to sustainable practices, the fund aims to restore 1,500 hectares of mangroves, which will contribute to carbon sequestration, improve coastal protection, enhance water quality, and create new revenue potential through ecosystem services. The fund will also support approximately 9,500 shrimp farmers in adopting climate-smart production practices that will triple productivity and incomes while reducing the need for land expansion, thus preventing further deforestation and coastal degradation.
Design question and learning potential from the market: How can a blended finance vehicle be structured to establish local partnerships and attract investment from local and international investors for sustainable shrimp farming and mangrove restoration?
The fund will adopt a staged approach targeting concessional capital initially to demonstrate potential before securing commercial investors for the full scale. Local sources of capital are also mobilized by targeting domestic financial institutions that are aligned with Indonesia's blue economy priorities, regional DFIs, and other impact aligned investors. This approach aims to demonstrate the commercial viability of climate-resilient shrimp farming and mangrove restoration that can eventually attract long-term local capital for sustainable aquaculture projects.
The proof-of-concept grant will be critical for Conservation International in finalizing the partnership with a dedicated fund manager that will support in designing and managing the fund post-launch and also support the vehicle in fundraising. In addition, the fund will be utilized to support Conservation International in developing a due diligence framework incorporating monitoring, reporting and verification criteria for the identification of a pipeline of investable shrimp farms. The grant will also support Conservation International in identifying a pipeline of local implementation partners that can provide capacity building support to farmers on disease management,sustainability certification, and monitoring of mangrove restoration through its Technical Assistance Facility.
The grant will culminate in the development of an operational roadmap and the finalization of a legal structure for the launch of the vehicle with initial investment commitments secured, along with the formulation of an Environmental and Social Monitoring Framework focused on climate and gender action.
