Milarex

Salmon Farming

Aquaculture is a core sub-category in Summa’s Resource  Efficiency theme where we are actively looking for attractive  investments. Aquaculture, and in particular salmon farming,  is also a critical part of the supply chain of one of our current  portfolio companies, Milarex.

Aqua
Milarex

Salmon Farming

A fundamental problem in healthcare is that healthcare providers typically are paid based on volume of services, not accounting for value and quality. Combined with poor transparency, this leads to increasing costs and unwarranted variance in both outcomes and cost between providers, regions and countries. Payment that only reward volume is also a key inhibitor of organizational innovation and adoption of new technology in health care.

Salmon Farming

Seafood farming is already a large industry worldwide, but  may in the future play an even greater part in addressing the  problem of declining fish populations. According to UNCTAD,  90% of the world’s wild fish stocks are either fully exploited  or overfished.

Farming operations, however, often create environmental  issues of their own. Key to the long-term sustainability of  the industry is that new solutions are found to mitigate harmful externalities. Purchasers and consumers will play an

important role in holding the industry accountable. This is a  focus area for Milarex, for example, whose strategy explicitly  addresses SDG 14: “Life under water”. Currently, 87% of  Milarex’s raw materials carries sustainability certificates from  either Aquaculture Stewardship Council (ASC), Global GAP or  Marine Stewardship Council (MSC). Milarex’s stance reduces  their supply chain risk and helps prompt industry actors to  increasingly adopt best practice methods.

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Round fish farm cage in Norwegian Sea

SDG as a Guidance for

Investing in Aquaculture

Producing over a million tons of salmon a year,  Norway provides 50% of the world’s supply, and the salmon farming industry is Norway’s second largest  export industry with sales of about EUR 10bn.

The industry has shown high growth over several  decades. Such growth is expected to continue, and the SDGs provide guidance as to why the industry  is future-proof and where the risks reside:

%
Norwegian percentage of the worlds Salmon Supply
Bn
Norway 2nd largest export (EUR)

SDG related Trend

Population Growth

  • Attention to SDG 2, Zero Hunger, has increased as the industry scales up. Global population growth requires  further growth in aquaculture. Animal protein production  uses significant input raw material that could be used for  human consumption. Salmon has the highest conversion  of feed into protein produced, requiring only about 1.3 kg of feed to produce 1 kg salmon, with the main ingredients from sustainable and vegetarian input.
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SDG related Trend

Healthy Proteins

  • Interest in SDG 3, Good Health and Well-being,  is also a strong consumer trend. Fish is rich inOmega 3, which improves longevity and health, and  there is a clear trend for consumers to substitute  fish and vegetarian options for red meat.
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SDG related Trend

Food Regulations

  • SDG 12, Responsible Consumption and Production, has a  strong focus in Norway. Regulation of food production is very  strict, and hence treatments of salmon disease, which has  become an issue within the industry, are restricted compared  to other countries. While there has been criticism of the  input factors in salmon feed, the Norwegian industry does not use antibiotics (which is common in raising livestock),  and the regulation of feed is strict to avoid health safety risk.
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SDG related Trend

Climate Action

  • SDG 13, Climate Action, is helped by the replacement  of other protein sources by salmon. Salmon production  does not require deforestation and increased  agricultural land, since production is done at sea or in buildings. Salmon, unlike livestock, does not emit  methane gas nor deplete fresh water resources.
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SDG related Trend

Fish health

  • The effect of salmon farming on SDG 14, Life Below  Water, is mixed. Though regulation is the strictest in the  world, the industry is still plagued with fish-transmitted disease and high fish mortality, and the treatments can  have negative effects on their surroundings. For the  industry to scale further, these issues have to be solved.
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Oppertunities

Regulation is strict, and consumers are quite sensitive  to problems that arise for certain producers. Hence,  the risk within ESG and compliance is significant for  producers that do not comply with regulation of feed,  disease, and treatment management, or that do not have a high-quality value chain—one where, for example,  consumer health could be affected by Listeria bacteria.

While the investment opportunities can be found across  the entire value-chain, the industry is still producing  using largely the same methods and technologies as  many years ago. The high-growth areas are hence in the  shift to new methods—making use of closed cages, big  data, and surveillance—and in solutions that improve  SDG 14, e.g. salmon lice and waste treatments.

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