Quantifying the Financial Impact of Sustainable Practices in Norwegian Salmon Aquaculture

Abstract

This paper examines the relationship between corporate sustainability and stock price performance in the Norwegian salmon farming industry, which has experienced substantial growth due to increasing global demand and Norway’s favorable farming conditions. Previous literature has identified fundamentals and salmon spot prices as key determinants of stock price movements in the industry. However, the future growth of the industry depends on effectively addressing sustainability challenges, particularly related to salmon lice, disease outbreaks and farm escapees, which have significant consequences for both animal welfare and the local environment. There is a lack of studies investigating whether the market rewards good management of these challenges.

Using a quantitative approach with fixed effects regressions on panel data from 2014 to 2020, the findings in the study suggest that investors value sustainability in salmon farming. Our models include salmon lice, escapees, salmon mortalities, suspected and confirmed cases of disease, and feed conversion ratio as independent variables. This study shows that increases in reported salmon lice and salmon mortality have a statistically significant negative impact on stock prices. The findings support the inclusion of non-financial metrics in stock value analysis, and it reinforces the importance of sustainable corporate strategies in the industry.

Although the models employed explain only a small portion of the variance in stock price, this study highlights the importance of further research on the financial value of sustainability practices in the industry.