SWEN Capital, a European private equity impact firm, plans to top up its returns by developing the biodiversity credits market.
The firm has raised €95 million so far for the Blue Ocean Fund, which aims to achieve above-market rate returns while tackling three threats to ocean health and marine biodiversity: pollution, over-fishing and climate change.
SWEN’s primary focus is to invest in solutions that mitigate these three threats and ease the pressures on the world’s oceans, rather than actively restoring marine biodiversity. For example, SWEN has invested in OptoScale, which seeks to prevent excess fish feed polluting the ocean with a technology that measures the population and biometrics of fish in production pens and allows fish farmers to avoid overfeeding.
“The ocean is very resilient, and it can recover by itself if we alleviate the pressures on it now,” Christian Lim, co-lead of the Blue Ocean fund, told New Private Markets. “If you restore the ocean but you don’t address the issues that are causing this crisis, everything will just die again.
“Restoration is also an important strategy, but one of the challenges of restoration is generating revenues to finance restoration projects. It’s very hard to come up with a [profitable] business model to invest in the restoration of a coral reef, for example.”
One way to make ocean restoration projects profitable and scalable is to generate revenue to finance them by issuing biodiversity credits, Lim added.
“We’re looking to invest in companies that develop affordable, reliable biodiversity measurements, including measurements based on eDNA [Environmental DNA, a method of determining the presence of different organic species in a given area],” Lim said. “This type of technology is critical for biodiversity credits markets to emerge. What this technology brings is the trust that we don’t have now in this type of market. It offers measurements of the health and biodiversity of an ecosystem in a reliable, affordable and convenient way. For the biodiversity credit market to function, we need reliable information that everyone trusts.”
SWEN hopes to generate biodiversity credits from the Blue Ocean fund’s investments to generate additional returns alongside the growth of its portfolio’s valuations. But revenues from biodiversity credits are not essential to the Blue Ocean fund’s strategy, says Lim: investments that mitigate ocean damage and investments in biodiversity measurement technologies “are going to be the ones that create the most value”.
SWEN has a €120 million target for the Blue Ocean Fund and is linking 50 percent of its carried interest to the achievement of impact KPIs. Investors include Macif, a French insurance company; Crédit Mutuel Arkéa, a French bank; Ifremer, France’s national institute for ocean science; BPI, France’s sovereign investment fund; and other European and North American investors.