From economy to ecological management: Portfolio theory enlightens the performance of social-ecological systems

This guest post from David Angeler (@DGAngeler), Associate Editor for Journal of Applied Ecology on the paper “Performance of salmon fishery portfolios across western North America” by Jennifer Griffiths et al. (@JenAquatic @mark_scheuerell @SteveLindley831)

Ecologists and managers are well aware of the reciprocal dependence of systems between people and nature. However, the linkages between social-ecological systems are complex and therefore difficult to measure. This limits the quantification and management of ecosystem service delivery and adds uncertainty regarding the sustainability of human use of ecosystems in times of rapid environmental change.

Purse seiner in the Chignik salmon fishery, Alaska. Credit: Jennifer Griffiths

In a recent paper in the Journal of Applied Ecology, Griffiths et al. show how a framework for economic sciences can be used to quantify the reliability of performance of ecosystem service provisioning. They provide an elegant example of the use of portfolio theory in a fisheries context. Portfolio theory has a long history in financial management. It has been used to quantify links between the risk and reward of individual assets or commodities, like for instance bank deposits or timber, and the risk and return associated with a portfolio of financial resources. That is, performance and reliability of a portfolio can be assessed from (i) the return of each potential asset of the portfolio, (ii) the variability of each asset’s return over time, and (iii) the relationship of each asset’s return with every other asset’s return over time. As economic conditions change, investments can be bought or sold, thereby maintaining a desired reward-risk balance and reliability of portfolio performance.

Spawning and rearing habitat for sockeye salmon, Chignik Lake, Alaska. Credit: Jennifer Griffiths

Griffiths and colleagues used portfolio theory to assess the function of salmon ecosystems and their services to humans. They used long-term data (1985-2005) and assessed the performance of Pacific salmon (Oncorhynchus spp.) fishery portfolios across catchments of the Western United States and Canada. “Assets” in their study were salmon runs from one or more populations within a catchment. They evaluated the variability of returns within and across individual populations to assess the performance and reliability of salmon fisheries (“portfolios”) across catchments over time. They also studied how human impact influences fishery portfolios. They found that salmon portfolios in near-pristine ecosystems at high latitudes were more reliable than at southern latitudes where human impact on catchments (e.g. dams and land-use change) was more pronounced.

Sockeye salmon migrating upstream, Happy Creek, Wood River System, Alaska. Credit: Jennifer Griffiths
Sockeye salmon migrating upstream, Happy Creek, Wood River System, Alaska. Credit: Jennifer Griffiths

The relatively high reliability in northern areas was due to a low variability of returns from the fisheries portfolios over time. Griffiths and colleagues attribute this low variability of return to population dynamics. In northern sites salmon populations show extensive life history diversity, including substantial variation in the duration of freshwater and marine life history phases and variation in migration timing even within populations of individual catchments. The resulting diversity in dynamics guarantees salmon harvest over time, and suggests, from an ecosystem service perspective, a low risk that fisheries will eventually fail. On the other hand, the lower reliability of fishery portfolio performance found at lower latitudes has been attributed to a loss of genetic and life history diversity due to habitat modification and fish hatcheries. Based on the identification of these sources to portfolio risk, Griffiths and colleagues concluded that specific management actions (habitat protection, specific harvest strategies, maintenance of a diverse disturbance regime) can be guided to improve restoration activities and maintain existing resilience.

Mature sockeye salmon headed to the spawning grounds, Wood River System, Alaska. Credit: Jonathan Armstrong
Mature sockeye salmon headed to the spawning grounds, Wood River System, Alaska. Credit: Jonathan Armstrong

The study by Griffiths and coworkers provides an instructive example of how ecosystem services can be quantified and tradeoffs among management alternatives assessed to target conservation efforts. Ecological management, particularly in the context of ecosystem service provisioning, has many parallels to financial portfolio management. Both aim to achieve high returns while minimising risk under uncertainty. Rapid environmental change outcomes are highly uncertain, yet sustained ecosystem service provisioning is one of mankind’s priorities. Portfolio theory offers a quantitative way to evaluate management options so that the portfolio makes the preferred tradeoff of reward versus risk. Portfolio theory combined with an adaptive management approach allows for a structured learning process that can be constantly re-calibrated and adjusted to changing environmental conditions. Portfolio theory allows for formally treating restoration and management efforts as hypotheses and putting them at risk. Such management experiments provide opportunities to learn about both the performance of individual assets within a portfolio and the portfolio at large. This adaptive approach contrasts with traditional conservation planning, which uses optimisation algorithms for defining fixed sets of conservation priorities based on a static view of the distribution of biodiversity elements in relation to threats.

There is need to refine management to guarantee resilience of ecosystems in a rapidly changing world, particularly those ecosystems where the social and ecological components are tightly coupled. Portfolio theory has thus far been applied in specific fisheries and forest management contexts. However, broader application of this theory seems warranted in ecology, particularly in management and conservation.

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