A SUSTAINABLE FUTURE FOR SHRIMP FARMING
How economic growth is helping protect a delicate ecosystem
There are many high-potential businesses in the developing world that, through no fault of their own, face barriers that make growth almost impossible. In response to this challenge, the Dutch Fund for Climate and Development (DFCD), a unique consortium of NGOs and investors, set up the Origination Facility. This is a program designed to help promising companies that offer scalable solutions for climate adaptation and improved biodiversity to become investment-ready. It provides the financial and technical support they need to scale up sustainably. So, when a project came along that could not only boost the local economy but also offer significant ecological benefits for the region, it was an opportunity simply too good to miss.
FMO investments
2023 USD 15 mln
financing the expansion of processing capacity
FINANCIAL PRODUCTS USED Loan
TENOR 7 years
FUNDING SOURCE DFCD
the DFCD Land Use Facility
Camimex has been operating successfully in Vietnam’s Cà Mau province at the country’s southern tip since 1977, with three shrimp processing factories and an annual production capacity of some 10,000 tons. They source their shrimp from over 3,000 smallholder farmers, roughly half of whom are organically certified and together farm 8,500 hectares of integrated mangrove farms. Despite Camimex’s solid commercial track record, investing in the Vietnamese aquaculture sector is generally considered high-risk, so the company needed support to address those investor concerns, and make itself investment- and market-ready.
It was SNV, one of DFCD's consortium members, that identified Camimex as a perfect candidate for the Origination Facility. “At SNV, we had run an eight-year ‘mangroves & markets’ programme in Cà Mau province,” explains Alex Downs, Asia Business & Investment Officer at SNV. “So we already had deep domain knowledge of the regional aquaculture, and in particular organic aquaculture, sector. We knew who the best-in-class companies were, and that definitely included Camimex, who had established themselves over the years as a global leader in integrated mangrove shrimp production.”
Camimex annual shrimp production:
of mangrove farms
Photo: The sustainable shrimp farming area in the mangrove forest of a household in cooperation with Camimex in Ngoc Hien district, Ca Mau province.
Mangrove forests are biodiversity super-hotspots that can be a powerful tool in our efforts to adapt to climate change.
SCALING SUSTAINABLY
The Origination Facility works to de-risk projects and in the case of Camimex this was quite an extensive process. “When we look at a nature-based investment that needs to scale up, we have to consider the risks that will arise over time and how to work with our partner to mitigate them. In the case of Camimex, we were looking at a significant scale-up. So we knew it was key to ensure, first, that the scale-up could be achieved sustainably, both economically and environmentally; and secondly, that with scale they wouldn’t lose quality or control.” SNV chose to work closely with Camimex on one specific site to ensure the processes and certifications there were all in place. In the process, they also worked on improving the inclusive business model to address the opportunities for and needs of women. “There are very few work options for people in the area and Camimex is one of the region’s main employers. So we wanted to ensure the most economically vulnerable in the community would also have access to the opportunities the programme would create. This included, for example, conducting a number of impact studies to make sure we were going to reach all the people we wanted to. And of course that we would be achieving our overall goals of increasing farmers’ income, reducing their risk and generally improving livelihoods, while also managing strong and improving biodiversity in the region.”
4 shrimp processing factories
3,000 smallholder farmers
8,500 hectares of imangrove farms
10,000 tons production capacity annually
PATIENT INVESTOR
Much needs to happen before a project is investment-ready and Alex argues that one key to the success of the Camimex project was that SNV involved FMO from early on. “At the outset, FMO was equally enthusiastic about the project’s potential, and thereafter was engaged at all the key milestones along the derisking process. For example, by validating the ex-ante impacts we had identified. So rather than us at SNV completing everything and then handing it over to FMO, FMO was actively aligned throughout the journey, making the transition much smoother.”
SNV's support means that farmers can scale up their supply to Camimex, while FMO's capital enables Camimex to expand its shrimp-processing factories to accommodate that increased supply. But as Alex explains, how FMO is investing is also important. “Because this is a climate-vulnerable area, expansion and upscaling obviously need to be done in an environmentally-responsible manner, and this can be more complex and require a little more caution. FMO is willing to provide the kind of long-term, patient capital investment Camimex need.”
So rather than us at SNV completing everything and then hand it over to FMO, FMO was actively aligned throughout the journey, making the transition much smoother.
Photo: Shrimp seeds will be carefully selected for a new shrimp farming season.
BIODIVERSITY HOTSPOT
The Origination activities focused on propositions for investment projects that will contribute to climate resilience in the Mekong Delta, one of the region’s most environmentally critical areas and home to Camimex. “The proximity of the ecologically fragile Cà Mau region to the ocean makes it very vulnerable. Moreover, like the ocean, the vegetation and soils of mangroves store blue carbon, which sequesters more carbon even than tropical rainforests. Mangrove forests are therefore biodiversity super-hotspots that can be a powerful tool in our efforts to adapt to climate change, and so preserving them is absolutely crucial, explains Alex” It makes the Camimex project, which is focused primarily on organic shrimp production, even more important. To be certified as organic, at least 50% of the pond areas used to cultivate the shrimp must be covered by mangrove. As the organic shrimp market leader, Camimex, is already very experienced in organic production. They also sell Naturland products, which require even higher ecological standards and even more mangrove cover. The company ensures that farmers operate to the highest sustainable standards and that more mangrove is being planted.
“Without a system like this, and in the absence of other options, local people may well cut down the mangrove forest for short-term economic survival. This project provides those people with a sustainable income stream.”
Photo: Forest rangers and farmer inspect the environmental conditions in the shrimp farming area.
NATURE-BASED SOLUTION
The result is an investment proposition based on a genuine nature-based solution, with a number of mutually complimentary benefits. “First, Camimex is supporting biodiversity by planting more mangrove, which fosters and increases local biodiversity. Perhaps contrary to widely-held belief, the sustainably-farmed shrimps themselves also enhance the mangrove’s biodiversity. And the mangrove has the additional function of serving as a buffer zone, protecting the local ecology against erosion from, for example, sea storms. At the same time, the increasing numbers of farmers supplying Camimex will all be employing farming practices that protect the environment. Creating a virtuous cycle that returns the environment to its natural state.” And finally, as Alex points out, we need to remember what would likely happen without this sort of initiatives. “Without a system like this, and in the absence of other options, local people may well cut down the mangrove forest for short-term economic survival. This project provides those people with a sustainable income stream. You aren’t going to cut down the forest that can now support you economically over the long-term. So the Camimex project is also directly contributing to protecting the existing mangrove belt.”
Photo: Facilities at Camimex's sustainable shrimp hatchery in Nam Can district, Ca Mau province.
REPLICABLE MODEL
When asked about the prospects he feels the Camimex project opens up, Alex becomes even more animated. “One of the key takeaways from this project is that such nature-based solutions are not only viable and sustainable, but replicable. There’s no reason why we can’t replicate this model to roll out similar nature-based solutions in other mangrove environments, such as Mombasa in Kenya, or the Sundarbans in Bangladesh and India, the world’s largest mangrove forest. At SNV, we’d love to be able to help set up projects in those areas, learning from and building on our very positive and successful experience with the Camimex project.” And looking at the evidence, you can’t help thinking that Alex’s enthusiasm is not only contagious, but well-founded.
The Dutch Fund for Climate & Development - www.thedfcd.com
The DFCD is a fund for scalable climate solutions run by a consortium of four expert organisations — FMO, CFM (Climate Fund Managers), WWF Netherlands and SNV (the Netherlands Development Organisation) — on behalf of the Dutch Ministry of Foreign Affairs. The fund facilitates investments in projects aimed at climate adaptation and mitigation in Least Developed Countries and FMO priority countries. Projects fall under one of three ‘facilities’:
The Origination Facility focuses on project identification and (pre-) feasibility development activities. It aims to develop projects into viable business cases for the other two facilities. It is managed by WWF-NL and SNV; The Land Use Facility targets investments that have graduated from the Origination Facility in sectors relating to agroforestry, sustainable land use and climate resilient food production. It is managed by FMO; The Water Facility targets investments that have graduated from the Origination Facility in sectors related to water and sanitation infrastructure, and environmental protection. It is managed by CFM.
The DFCD was originally set up in 2019 with an initial commitment from the Dutch Ministry of Foreign Affairs of €160 mln. In October of this year, FMO received a guarantee from the European Fund for Sustainable Development Plus (EFSD+) that enables a €240 million top-up to DFCD’s Land Use Facility. This will facilitate scaling of climate-related investments led by local MSMEs and improving the prospects of vulnerable groups such as youth, women, and smallholder farmers, while enhancing ecosystem resilience. Read here the press release
A FUTURE WE CAN FORESEE IS A FUTURE THAT WE CAN CREATE TOGETHER
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