03 December 2024, London. Ocean 14 Capital Fund is a private equity impact investment fund focused on the United Nations’ Sustainable Development Goal 14 (SDG 14): Life Below Water, has entered into an investment agreement with KIME Akva, a Norwegian cod farming operation, as a foothold into supplementing wild cod fishing with sustainable farming at a time when cod prices are increasing and quotas are decreasing.

With around a fifth of the global catch, Norway is one of the largest producers and exporters of cod. Cod supplies are facing headwinds with a 20% reduction in cod quotas in the Barents Sea in 2024 to 543,427 tonnes, on top of the 2023 quota reduction of 23%, driving prices higher.

Most Atlantic cod is caught in the Barents Sea by Norwegian and Russian producers, which collectively caught 761,000 MT in 2023, and catches of Atlantic cod fell 42% over the last eight years and is predicted to be down almost 15% from 2023 to 2024. The quotas in Barents Sea are further reduced with 25% in 2025 – 340 000 MT. Norway’s share of the cod quota will be 163,436 tons.

“What started as a side-project to my father’s fishing company, has over time become a real solution to the reduction of wild cod fishing through incrementally decreasing quotas,” says Ørjan Jensen, chief executive officer of KIME Akva, head quartered in Finnsnes. “The back story, which we recount on our website, is interesting, but what has become apparent over time is that with the right processes in place, farming cod in their natural habitat in Northern Norway is not only potentially profitable, but perhaps more importantly a sustainable answer to the global need for fish protein,” Jensen explains.

More than 3.3 billion people around the world get at least 20% of their daily animal protein intake from fish. As the global population continues to rise, it is increasing pressure on this valuable, natural resource. Between 1961 and 2021, the average annual growth rate of global consumption of aquatic animal foods was 3.0%, outpacing the annual population growth rate of 1.6%. Meanwhile, the percentage of stocks fished at biologically unsustainable levels has been increasing since the late 1970s, from 10% in 1974 to 35.4% in 2019.

Since, establishing KIME Akva as a conventional cod farmer in Northern Norway in 2020, the company’s ambition is to become a cost-leading, fully integrated cod farmer by 2025 and by building in-house juvenile production, the venture can assure high quality at lower costs.

The company has invested heavily in license development, and aims to have nine sites by 2029. Currently, KIME Akva has acquired five sites in Northern Norway and has licenses for 12.9k tonnes approved and initiated application processes for roughly 44k tonnes of maximum allowable biomass (MAB). In 2024, KIME Akva completed its first full production cycle and ultimately plans to scale production up to 24k tonnes harvest-weight per year by 2030.

“We are excited to partner with the strong team at Kime to provide a sustainable, high-quality supplement to wild cod, stocks of which are under pressure for a variety of reasons. Through our partnership with KIME, the Ocean 14 Capital Fund gains a foothold in the most efficient operator, with a well-structured team and leadership, in a market that is rapidly intensifying,” says Max Holtzman, Principal at Ocean 14 Capital, the Fund’s adviser.

In addition to supporting KIME Akva’s operational expansion, the Ocean 14 Capital Fund’s investment will also support the firm to develop tools to improve the Forage Fish Dependency Ratios (FFDRs) and Feed Conversion Ratios (FCRs), as well as reducing waste and plastic pollution.

Cod farming requires significant amounts of feed, partly derived from wild fish stocks, while energy required for the various farm operations will contribute to the carbon footprint. The FFDR calculates the quantity of wild (forage) fish used in feeds in relation to the quantity of fed animal production, while the FCR measures the efficiency of feed conversion.

“We are excited to be working with the impact team at the Ocean 14 Capital Fund, as our aim is to lead the development of the sector by working with them to look into/investigate adopting Zero FFDR and test Regenerative Waste production models,” adds KIME Akva’s Jensen.

“The Ocean 14 Capital Fund and KIME are well aligned with driving and improving operational improvements and efficiencies at important intersection of sustainability and finance, each which complements the other,” explains Ocean 14 Capital Fund’s Holtzman.

About Ocean 14 Capital

Ocean 14 Capital Fund 1 SCSp (“Ocean 14 Capital Fund” or the “Fund”) is a €201 million impact fund focused on driving a sustainable and regenerative blue economy. The Fund’s investment adviser, Ocean 14 Capital Ltd, has a team who combine more than 65 years of investment, impact and industry experience. The investment adviser’s team and advisors are considered to be some of the world’s most renowned scientists and marine biologists, and therefore are in a have unique position that enables them to access to deal flow and sector knowledge.

www.ocean14capital.com

About KIME Akva

Since it was formally founded by Ørjan Jensen in 2020, KIME Akva, now a conventional fully integrated cod farming operation in Northern Norway, has secured cod farming licenses; initiated operations at strategic sites; and formed key partnerships to ensure a robust supply chain.  In 2024, KIME Akva completed its first full production cycle. It now has licenses for 12.9k tonnes approved and plans to scale production up to 24k tonnes per year by 2030. It aims to operate in Northern Norway, the natural habitat for wild cod. The company’s management and operations teams, which have more than 20 years’ salmon and cod farming experience with leadership roles at SalMar and Arctic Cod, is backed by a strong and motivated board of directors.

www.kimeakva.no

Why does this matter? Fish are a vital source of nutrition for billions of people. Aquaculture is critical to supplying this nutrition and is now the leading source of fish production globally.

The scale of MMEs impacting the aquaculture sector not only threatens global food security but is concerning from an economic and animal welfare perspective. Although the study’s findings are concerning, innovative technology firms have presented solutions to help the aquaculture sector combat the rise of MMEs.

For example, WellFish, an aquaculture diagnostics start-up, provides rapid fish health assessment using blood-based clinical chemistry analysis. Its technology utilises blood biomarkers and artificial intelligence to evaluate fish health, enabling aquaculture operators to enhance the well-being of their stocks and optimise production.

The solution potentially allows salmon aquafarms to reduce the frequency and scale of MMEs through improved monitoring standards. Solutions such as WellFish are crucial aids to the fastest-growing food production system in the world, with salmon consumption increasing three-fold since 1980.

However, mass production fosters an increased risk of mortality – between 2012 and 2022, an estimated 865 million salmon perished in the six major salmon-producing markets. In Scotland, 17 million salmon died last year, the most ever recorded, while 17% of Norwegian-farmed salmon died suddenly in 2023.

The rising number and severity of MMEs in salmon populations are linked to various catalysts. For example, environmental influences, including higher ocean temperatures, compound problems like disease, sea lice, and harmful algae blooms that afflict the industry.

Environmental factors are often not the only drivers – combinations of natural events, human oversight, and unsafe practices create conditions for significant MMEs. For instance, the overuse of antibiotics can lead to bacterial resistance, while thermal delousing may compromise fish health.

If not managed correctly, salmon aquaculture can also affect the surrounding marine ecosystem. Nets that define the pen perimeters may be coated with copper oxide, which can pollute the water. Furthermore, salmon escaping from captivity can interbreed with and weaken the gene pool of the wild population, including endangered species like the wild Atlantic salmon.

Despite the ecological and welfare issues associated with certain forms of salmon aquaculture, simple operational adjustments can mitigate the worst effects. Measures such as reducing the density of salmon in pens can improve fish welfare and reduce the spread of disease and lice – RSPCA standards recommend a target ratio of 15kg of fish per m3.

Other welfare practices include regular cleaning and general maintenance of nets, sea lice shields, and environmental monitoring equipment able to monitor shifts in water temperature or oxygen levels.

The salmon industry could also take pointers from the practices pursued by other aquaculture sectors. Tilabras produce thousands of tonnes of fresh tilapia annually and manage the stock through their entire lifecycle from egg to harvest. Here, the tilapia are fed on locally-produced plant-based feed rather than fishmeal and the stock has ample room to swim in.

The technological and operational solutions now available to the salmon aquaculture industry can improve fish health monitoring, welfare conditions, and disease prevention, working towards a reduction in the frequency and scale of MMEs even as ocean temperatures rise.

Why does this matter? As fish farming operations grow worldwide, and governments simultaneously look to reduce greenhouse gas emissions and target other environmental issues, the aquaculture sector is under pressure to expand sustainably.

The Scottish Salmon Producers Organisation’s (SSPO’s) Sustainability Charter sets out the Scottish salmon industry’s plans to do just this – with 41 specific actions to increase standards in both environmental impact and animal welfare.

From an environmental perspective, alongside targeting net-zero emissions by 2045, the sector – worth £885m to the Scottish economy – will work to use 100% renewable energy, source 100% of fish feed from sustainable sources with full traceability of ingredients, and reach 100% recyclable packaging. Scottish salmon farmers have also committed to improve fish pen structures to prevent escapes, and to work with government and regulators on trialling new technology. This includes innovations to capture waste from marine farms.

In terms of social sustainability, firms will provide sustainable homes in the Highlands for workers to tackle the lack of affordable housing in the region. Electric vehicle charging points will also be installed for communities, and the sector has committed to providing future high-quality jobs through investing in skills and recruitment.

The salmon farming sector in Scotland has not been without its issues. In 2018 an NGO report highlighted concerns over fish welfare in Scottish farms, with environmental campaigners accusing the industry of breaking sea lice, mortality and escape limits. Late last year Mowi was criticised after 700,000 of its salmon died over three months. SSPO put the lower 2019 survival rate figures down to planktonic blooms and increased water temperatures.

Scottish regulators have clamped down on the sector in recent years – though rules were temporarily relaxed earlier in 2020 due to Covid-19. Specific loch-based farms have also been highlighted as environmentally problematic, and a plan to develop a salmon farm in the Wester Ross Marine Protected Area has recently been opposed due to its potential environmental impact.

This has prompted operators to look to new locations, including farms further out to sea. Norskott Havbruk is in discussion with authorities about developing Scotland’s first open ocean fish farm. Meanwhile Loch Long Salmon is looking to establish semi-closed farms in the country, where deep water is pumped into an impermeable bag containing the salmon. To tackle lice, Scottish farmers have been experimenting with sea-lice eating wrasse fish to cut down on medicine use, and University of Edinburgh researchers are also looking to tackle the problem with selective breeding.

Elsewhere, other countries and firms are seeking to improve the sustainability of salmon aquaculture. Canada, for example, is pushing the industry to move away from net pen aquaculture towards alternatives, and semi-closed farms are also being trialled in the country. Norway is building fully electric salmon farms, while also piloting schemes to use facilities’ waste to create biofuels for aviation.

More generally, these initiatives will act to boost a sector that’s already seen as relatively sustainable in the context of global protein producers. Salmon farmers score highly in the Coller FAIRR Protein Index, which ranks all protein producing firms based on ESG factors, with Mowi leading the list.

Source: BBC