Toronto, 21 December 2021 - Convergence awards a feasibility study grant to the consortium of ADM Capital Group, IDH - the Sustainable Trade Initiative, and Alune Aqua to develop a blended finance solution, the Asia Aquaculture Facility (AAF), that utilizes a revenue-based financing model for aquaculture farmers to engage in sustainable intensive aquaculture in Asia and support mangrove conservation. This grant is awarded through the Asia Natural Capital Design Funding Window, co-designed with and funded by the RS Group, a Hong Kong based family office.
The aquaculture sector plays a critical role in ensuring food security and meeting the world's increasing demand for protein. According to the OECD, by 2029 the sector will supply 58% of the fish available for human consumption. However, many farms still follow traditional semi-intensive practices with limited yield and profitability potential. AAF plans to tackle such challenges by introducing a financing system that facilitates sustainable aquaculture intensification.
Convergence’s grant will explore the feasibility of establishing the AAF, a $10-20 million, 10-year financing facility. The AAF will provide revenue-based financing for sustainable aquaculture intensification through a debt fund, where financing would be contingent upon achievement of certain environmental outcomes (e.g., improving the waste management system), and support mangrove conservation and reforestation through a linked technical assistance facility. The aim is to pilot the vehicle in Indonesia with a focus on shrimp aquaculture and potentially expand to India, Vietnam, and the Philippines. The facility will engage with value chain actors and broader stakeholders to bolster the transition to sustainable aquaculture intensification.
“Blended finance makes it possible to design a solution like AAF that improves the sustainability and efficiency of the aquaculture sector, while simultaneously supporting mangrove conservation and reforestation. What makes it even better is its replicability and the demonstration case it provides for the market,” says Joan Larrea, CEO at Convergence.
The pilot in Indonesia has the potential to directly improve 5,000 livelihoods by improving productivity and reducing loss events. In the initial phase, the facility could support the regeneration of 500 ha of mangrove and the protection of 1,800 ha of mangrove. The facility, once fully mobilized, has the potential to protect or capture around 250,000 tonnes of carbon.
“With catalytic support from Convergence and the RS Group, ADM Capital and its AAF partners will refine our approach to financing aquaculture,” said Chris Botsford, ADM Capital co-founder and CEO. “We know that many high-impact aquaculture business models can’t access traditional early-stage finance. The AAF will seek to address this through a financing model that is more financially, behaviourally, and culturally suited to borrowers.”
“The AAF will provide finance designed to react and reflect the realities of aquaculture farming. As champions of farmers, Alune all too often sees farming businesses limited by traditional financial options,” said Alexander Farthing, CEO of Alune Aquaculture. “The support of Convergence and RS Group accelerates access to better financial products for thousands of aquaculture farmers. We are excited to continue our work with our partners ADM Capital and IDH as we scale blended finance for aquaculture together.”
“For AAF to be successful, it needs to be strengthened with jurisdictional sustainability governance, by specifically addressing risks related to aquaculture, such as diseases, lack of community business models, and negative environmental impacts like mangrove conversion. IDH believes that partners within AAF can support the further development of appropriate blended finance at scale,” says Fitrian Ardiansyah, Executive Chairman & CEO, IDH Indonesia.
The Asia Natural Capital Design Funding Window is currently accepting applications, with an upcoming deadline of March 10, 2022. Please visit our website for more details.
About Convergence’s Design Funding Program
Convergence’s Design Funding Program provides early-stage capital to support blended finance solutions in frontier markets and nascent sectors in order to accelerate the number of investible transactions targeting the SDGs. Initiated, co-designed, and funded by the RS Group with $3 million in funding, the Asia Natural Capital Design Funding Window supports blended finance solutions that find new ways to enhance and protect the world's stock of natural assets, including water, land, soil, air, plants, and animals, by attracting private investment at scale. This design funding program is the first of its kind focused on the Asia and Pacific. Please visit Convergence’s Design Funding page for submission deadlines as well as other open windows.
Convergence is the global network for blended finance. On top of market acceleration through its Design Funding program, Convergence generates blended finance data, intelligence, and deal flow to increase private sector investment in developing countries. Convergence’s global membership includes over 200 public, private, and philanthropic investors as well as sponsors of transactions and funds.
About the consortium
ADM Capital Foundation was established in 2006 by ADM Capital, recognizing the need for innovative and replicable models of funding for impact. Working with a multitude of partners (IUCN, Marine Stewardship Council, UNEP and Conservation International) across Southeast Asia, the foundation aims for a cleaner and more secure water supply, better air quality and a halt to the free flow of wildlife product.
IDH, the Sustainable Trade Initiative, works in multiple sectors and landscapes in Africa, Asia, and Latin America with over 600 companies, civil society organizations, financial institutions, producer organizations and governments towards sustainable production and trade. IDH has reached over 3.5 million smallholder farmers of tropical food and cash crops in multiple sectors to improve livelihoods and is supported and endorsed by donors such as: BUZA (The Netherlands), DFID (UK), USAID (US), and Bill and Melinda Gates Foundation.
Alune Aqua is an Irish aquaculture financial technology company with offices in Indonesia and Singapore. Creating an aquaculture financial ecosystem for people and planet, Alune provides category-leading, proprietary credit and risk tools, investment support teams, industry partnerships and distribution channels for shrimp aquaculture. Alune manages over $60m USD in capital for the aquaculture industry in SEA, supported by an ecosystem of multinational feed companies, aquaculture technology companies, and a network of farmer confidantes around the world.