Scoot Science, a California-based ocean analytics and forecasting company, has announced the hiring of Grant Cavanaugh, who was most recently with Nephila Climate.
With a focus on aquaculture, Scoot Science has the interesting mission of supporting new sources of debt, equity and reinsurance related financing to aquaculture operations, by translating ocean dynamics into business outcomes.
As a result, it seems Scoot Science will look to put the analytics and forecasts it creates for the oceans to use in risk transfer arrangements focused on areas such as aquaculture, an area that is often missing focus within the traditional insurance and reinsurance markets.
Cavanaugh has joined Scoot Science as its Chief Investment Officer and he has already served as a director and advisor to Scoot since 2018.
Cavanaugh earned his Ph.D. in Agricultural Economics from University of Kentucky focused on risk transfer related to El Niño and similar global ocean phenomena, so the move to Scoot Science marks a return to the world of ocean related risk.
At Nephila Climate, the weather and climate focused unit of the largest insurance-linked securities (ILS) fund manager Nephila Capital, Cavanaugh supported investors as they put their assets to work behind insurance and other risk transfer structures covering earnings volatility caused by weather and climate, in the main.
Scoot Science said this work “aligns with Scoot’s ambition to connect international capital markets to ocean operations.”
Explaining that, “Despite aquaculture’s consistently high and uncorrelated returns to broader financial markets, key capital markets participants have remained largely absent in the sector due in large part to environmental risk. Aquaculture operations are inherently risky endeavors and becoming increasingly vulnerable to the unpredictable effects of climate change on the coastal ocean.”
“What is so exciting about Scoot is that they have the oceanographic tools and talent to build a solid foundation for the ocean economy of the future,” Cavanaugh explained. “More importantly, it means that many ocean operations will get the recognition they deserve as sophisticated businesses working on the frontlines of climate change, pushing the boundaries of what’s possible in sustainable food production.”
Aquaculture investments can bring solid, sustained returns for capital providers, however the risks associated with the ocean environment must be mitigated and Scoot is developing tools to provide that monitoring and data-backed information.
“Salmon farming uses some of the most comprehensive forms of data collection in the modern agricultural economy,” Scoot Science CEO Jonathan LaRiviere explained as an example. “For decades, salmon farms around the world have been collecting and archiving oceanographic data, utilizing it to focus on fish growth. However, this data has been underutilized with respect to their ocean risk. Scoot is working with farmers to capitalize on their legacy data using rigorous oceanographic analysis to identify the patterns that lead to loss events.”
Cavanaugh will lead a new Risk and Finance Division at Scoot, with the mandate to “bridge the gap that has existed between capital markets and aquaculture for the past 40 years.”
“Through providing capital markets the ability to quantify ocean risk, Scoot looks to partner with forward thinking funds, insurers and producers to help find solutions for future generations,” the company explained.
It’s an interesting area of the economy and one where insurance-linked securities (ILS) techniques, of matching well-quantified risk with diverse and efficient sources of capital, could come into its own.
Cavanaugh, who spent five years with Nephila Capital, aims to deliver on making ocean assets more insurable and also investable with his work at Scoot Science, suggesting his background in ILS will be invaluable and could result in interesting opportunities for similar investors that had backed ILS market strategies in the past.