It’s About More Than Lobster

If there’s one thing that 2020 has taught us, it’s that environmental, social and governance (also called ESG) issues are now at the forefront of public discourse. These issues are wide-ranging and cover all three pillars of ESG investing, from the large market darling FAANG (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), Alphabet Inc. (GOOGL)) stocks facing anti-trust scrutiny, to issues around investor rights and corporate governance at Google, systemic racism being protested in the wake of Black people being killed by police, to the blatant destruction of Indigenous People’s lands by mining company Rio Tinto (RIO).

Today, unfortunately, we need to talk about a similar issue facing our own Indigenous communities here at home, the Nova Scotia lobster fighting rights issue, and ask what we as investors can do about it.

First, let’s try and understand what is going on.

What is Happening in Nova Scotia?
The current issue around lobster fishing rights in Nova Scotia comes down to a question of whether Indigenous Mi'kmaw fishermen have the right to catch and sell lobsters at a time of year when non-Indigenous fishermen do not. Fisheries are an essential part of the Nova Scotia economy. While non-Indigenous fishermen are allowed to fish within a commercial fishing season (in part to protect lobster populations from being overfished), Mi'kmaw fishermen have treaty rights. These treaty rights (originally drafted in the 1700s and upheld by the Supreme Court of Canada in 1999) allow the community to make a “moderate livelihood” from lobster fishing, even outside of the commercial season.

Non-Indigenous fishermen say they fear for their own livelihood if the lobsters are caught out of season. To make their displeasure known, some people responded with violence, pushing and shoving Indigenous leaders, cutting traps, and in one instance, burning down a building where Indigenous fishermen stored their catch and equipment. 

Morningstar’s director of sustainability stewardship research, Jackie Cook points out that though the issue might seem like a local one, it does draw attention to the fishing industry globally. The industry has been plagued with a host of ESG related issues, including overfishing, the release of plastic waste, and is known to use forced labour in certain parts of the world.  These issues accumulate in seafood supply chains. In 2019, Sustainalytics included Slavery in Seafood Supply Chains as one of the 10 major systemic ESG risks to watch.

There is growing consumer awareness of the ethical attributes of seafood supply chains and a range of certification standards now inform product labelling and consumer behaviour.

Canadian Fisheries
As experts who have been tracking the fisheries industry in Canada for many years now point out, this dispute is not new but has only now caught the attention of the wider public.

“It’s a constitutional treaty right for Mi’kmaq to fish to sustain their livelihoods. That was the trade-off for taking their land, many freedoms and stripping them of their culture and language over the decades. This may appear like an isolated incident, however, it is emblematic of the systemic and perpetual negative impacts in Canada encroaching indigenous boundaries for exploitation, whether it’s here on the East Coast, or logging, fishing and mining, across the country,” points out Bonnie Lyn de Bartok, Founder and CEO of The S Factor.

She points out that the Canadian fisheries industry certainly doesn’t have a sterling record in terms of ESG. “Overfishing has been a problem in the region for decades, and has done irreparable damage to local ecosystems, which in turn impacts the Indigenous communities that depend on them for their survival,” she says.

Companies Must Support Reconciliation
At the outset, investors need to understand that though the name separates the environmental, social and governance pillars of ESG, the truth is that the three are symbiotic. As Cook points out, in the case of issues like this one, the social aspect is very much a part of solving pressing environmental problems, as issues like overfishing and the health of the ‘Blue Economy’ and the important role of Indigenous peoples worldwide have a direct impact on our business and economic decisions. 

As Shannon Rohan, Chief Strategy Officer at SHARE points out, Canadian companies have an important role to play in supporting reconciliation and respect for Indigenous rights and title, as reinforced by the Truth and Reconciliation Call to Action #92 for corporate Canada.

Stakeholder Buy-In Crucial for Projects
Across sectors in Canada, stakeholder buy-in should be an essential part of any business plan.

A recent Morningstar Executive Forum discussed how disruption would be the only way forward for Canadian oil, which has also seen conflict with Indigenous communities, and this disruption is possible without agreement across stakeholders. “I don’t see a clean path; it will take multiple efforts on multiple fronts. We need Alberta and Saskatchewan on board. We also need to engage with some industry bodies. We need gatherings of industry, First Nations, investors, communities, government and labour,” Robert Walker, chair, ICGN & principal, LVC Strategies said.

The same can be said of the fisheries industry.

In the case of the Nova Scotia conflict in particular, de Bartok points out that companies should be able to recognize, acknowledge and act on the fact that properly consulting with stakeholders, and following these best practices – that operating in a way that has as minimal an impact on their communities as possible – is better not just for their communities and their employees, but for their businesses as well.

What Should Investors Do?
Though this issue may seem far from the investment community, the truth is, there are steps investors can take.

“Investors can start by asking which companies in their portfolios are significantly involved in the lobster trade. Some public companies are members of fishery and industry associations, the Fisheries Council of Canada, or seafood sustainability labelling programs, like OceanWise or the Marine Stewardship Council,” de Bartok says.

SHARE, which works to help investors file shareholder proposals with companies, also recommends that investors ask major Canadian grocery retailers who are involved in the lobster industry through trade associations or purchasing arrangements to do two things: First, in keeping with their own commitments to reconciliation, companies should make clear that the actions of non-Indigenous fishers in Nova Scotia over the past weeks is unacceptable. Second, investors have an important role to play in advocating for greater transparency of seafood supply chains broadly, including for lobster.

“At this time, too little is known about where Canadian grocery retailers are sourcing their lobster. Consumers and investors have an expectation of transparency around the nature and source of their products – particularly when it comes to the food supply,” Rohan points out. It is important to note that this recent dispute has reached consumers, with some stores declining to buy lobster from Nova Scotia in support of the Indigenous community.

SHARE also intends, as articulated in a blog post, to put questions to some of Canada’s leading food retailers: ‘How much do we know about the Nova Scotia fishery supply chain?’ ‘Which major companies buy Nova Scotia lobster?’ ‘Do seafood sustainability labels have any human rights analysis?

If these questions are not satisfactorily answered, and eventually come up for vote through shareholder proposals, investors should be ready to vote.

“Bottom line, if it’s not proactively managed – investors should be held to account as well. With activist stewardship on the rise, investors cannot leave the risk of disruptions such as this one exposed in their direct investments, funds or portfolios,” de Bartok says.

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