Climate Positive Financing in Sea Farming

Adapting to and combating climate change through aquaculture investment

When it comes to climate change, oceans are the bellwether of our shifting circumstances. For states like Maine, with a heritage and economy heavily tied to the sea, this is increasingly apparent in the changing behaviors of marine creatures. Maine shrimp are highly sensitive to warmer temperatures; the fishery has been closed since 2013 due to low stocks. Cod, once abundant in Maine waters, have effectively moved north to Iceland. And warm water species like black sea bass and seahorses are found more frequently, along with the invasive green crab.

These changes are affecting people’s lives and livelihoods. For the thousands of workers employed in Maine’s iconic fishing industry, known for its sustainable management of marine resources, commercial aquaculture can be a part of the solution, helping to retain a vibrant working waterfront and build on the state’s reputation as a source of high-quality seafood, while reducing climate change impact.

When implemented and managed appropriately, aquaculture expands food production, boosts economic growth in coastal and rural areas, and improves the health of ocean ecosystems. Certain species, such as kelp, can also directly combat climate change by sequestering vast amounts of carbon – up to 20 times more carbon per acre than land forests¹.

For Coastal Enterprises, Inc. (CEI), a community development financial institution (CDFI) based in Brunswick, Maine, investing in aquaculture supports community economic development and helps diversify income streams along the rural coastline. An increasing focus on climate-positive investment in shellfish and sea vegetable businesses led to the development of CEI’s “sea farm loan” for operating capital; purchasing boats, gear, and equipment; renovating or building facilities; land acquisition and debt restructuring. CEI expands the reach of its business advice and financing through Aquaculture in Shared Waters, an annual training program, which CEI co-hosts with the Maine Aquaculture Association, Maine Sea Grant and the Maine Aquaculture Innovation Center, for lobstermen, fishermen and other entrepreneurs who want to develop a business plan for an aquaculture venture.

Over the past decade, Maine has seen 2.2 percent annual growth in aquaculture, with an overall economic impact of $140 million annually, according to the University of Maine². The majority of aquaculture businesses in Maine, and those financed and advised by CEI, are small, local businesses that employ fewer than 600 people in total.

Local Innovations in Mussel Production

When Carter Newell shifted from growing oysters to mussel production, he experienced higher capital costs, water environments less protected from storms and crop losses to some very hungry Eider ducks. A scientist with degrees in marine ecology and aquaculture, Newell set out to develop more efficient and effective equipment for growing mussels in Maine waters. His big idea: a patented submersible raft that solves many of the challenges associated with traditional raft culture methods.

Environmental sustainability is key to Newell’s methodology. Local stocks are used for seed and grown in coastal waters on biodegradable rope, rafts are built using Maine-sourced goods, and ultimately, mussels are sold to Maine restaurants, wholesalers and farmer’s markets. And mussels, like oysters, filter out pollutants and chemicals like nitrogen and phosphorus, leaving the waters they are raised in cleaner than before.

As the research and development of the technology progressed, Newell knew he needed significant capital to push the project forward. Grants from USDA and the Maine Technology Institute supported the development of the submersible raft system; CEI stepped in with business advice and a loan for expansion. CEI subsequently provided financing for an aquaculture processing facility, a refrigerated truck and two additional submersible rafts.

Capital providers with knowledge of aquaculture and relationships within the community are vital for the industry to grow and prosper – as traditional lenders and investors are often deterred by risks associated with a mussel’s 18-month grow out period and the fact that most of the collateral is underwater.

Relying on Kelp Networks for Business Expansion

Because it is grown and harvested in a single season, kelp farming has a lower risk profile than mussel farming. However, American consumers are far less likely to be familiar with kelp, a challenge CEO Briana Warner has faced head-on since taking over Atlantic Sea Farms in 2018. Warner is focused on establishing a national retail brand, marketing kelp as the “virtuous vegetable,” with farmed kelp adding a healthful, sustainable food source that requires no arable land, irrigation, or any pesticides or herbicides.

The heart of Atlantic Sea Farms is its network of 24 kelp farmers. Since 2018, the company has chosen to work with Maine fishermen by supplying them with kelp seed, teaching them grow out techniques and providing a guaranteed purchase of their entire harvest. The arrangement allows Atlantic Sea Farms to outsource farming to individuals knowledgeable about Maine’s waters, with the necessary equipment (boats, ropes) on hand. It helps the farmers, who primarily fish or lobster, diversify their income and reduce their risk.

To date, Atlantic Sea Farm’s growth has been financed by a dedicated group of angel and institutional investors, including a loan from CEI in 2012. Given the company’s relationship with its kelp farmers, Atlantic Sea Farms was an also an excellent fit for CEI’s Catalyst Fund, which makes early-stage equity investments in food system businesses.

“Entrepreneurs need investments in infrastructure,” said Warner. “That’s where CEI first came in. Then, the Catalyst Fund equity gave us the flexibility and time to scale up our value-added products, helping to grow the impact and health of seaweed farming along the coast, with the objective of building a diversified income stream for coastal fishermen in the offseason.”

Warner and Newell are redefining how to balance economic and environmental considerations as they grow innovative businesses that depend on healthy ocean and coastal ecosystems. Like other pioneering entrepreneurs before them, one of the greatest challenges is finding the capital to finance their ideas. Educated, dedicated investors can help create new opportunities and the potential of a more ecologically sustainable and economically diverse future.

Article by Leah B. Thibault, who manages marketing and communications initiatives at Coastal Enterprises Inc. (CEI), including media outreach, public relations, social media management and storytelling.  Leah previously served as Director of Executive Administration and Special Projects for CEI Capital Management LLC, and has run her own small business as a freelance crafts pattern designer for over a decade. A highly-efficient Jane-of-All-Trades and a skilled writer and creative, Leah’s design work and writing has appeared in books, traditional and independent magazines, trade journals and web-based publications. She received her B.A. in Performance Studies from Willamette University in Salem, Oregon and holds an HR certification from the University of Southern Maine.