Butterfly effect?

Find out what insect decline could mean for the rest of life on Earth—and how investors can make a difference

Key takeaways

    • Insect biomass is declining at a rate that indicates widespread extinction within a century, according to findings in the Biological Conservation journal.1
    • Habitat loss, pollution and climate change are some of the drivers of insect collapse, which could have knock-on effects that surge up through the food chain.
    • While clean air is a basic human (and insect) need, it is threatened by rising pollution and habitat loss, according to the UBS Chief Investment Office.3

    Insect biomass is declining by 2.5 percent a year, a rate that indicates widespread extinctions within a century, the report found.1 The rate of extinction is eight times faster than that of mammals, birds and reptiles. Insects are by far the most varied and abundant animals, outweighing humanity by 17 times. They are “essential” for the proper functioning of all ecosystems, the researchers say, as food for other creatures, pollinators and recyclers of nutrients.1

    The Guardian newspaper, citing the Biological Conservation journal, points out that one of the biggest impacts of insect loss is on the many birds, reptiles, amphibians and fish that eat insects. These cascading effects have already been seen in Puerto Rico, where a recent study revealed a 98 percent drop in ground insects over 35 years.2 The study highlighted the population of the Puerto Rican today, a bird that eats almost nothing but insects, which saw its population drop by 90 percent since the 1970s.

    The report says habitat loss, pollution and climate change are some of the main factors in this “bottom-up trophic cascade,” in which the knock-on effects of the insect collapse surge up through the food chain.

    While clean air is a basic human (and insect) need, it is threatened by rising pollution and habitat loss, according to the UBS Chief Investment Office (CIO).3

    But the world is starting to take notice.

    UBS strategist Christopher Swann says that globally “the political commitment to reducing air pollution and greenhouse gas emissions has been increasing.”

    “While the US federal government has been less enthusiastic recently in promoting green energy, many of the 50 US states have pressed ahead with rules to favor clean fuel,” according to Swann, who notes that South Dakota, for example, now derives close to a third of its electric power from wind turbines.

    What alternative are available to investors?

    Increased attention on sustainability coincides with growing interest in sustainable investing—an investment approach that incorporates environmental, social and/or corporate governance (ESG) considerations into one’s investment process. Ideally, sustainable investing enables investors to invest in making the world a better place while still pursuing competitive potential financial returns.

    Sustainable investing can typically take three paths:

    • Exclusion, which removes a portfolio’s exposure to companies or industries that are not aligned with the investor’s values
    • Integration, an increasingly popular approach that instead incorporates ESG sustainability criteria into the investment process
    • Impact investing, whereby one can invest with the intention of generating measurable environmental and social impact alongside a financial return

    Much of the existing sustainable investing universe still skews toward exclusion-based strategies. In order to provide a more forward-looking and returns-focused holistic portfolio approach, CIO has introduced a new Sustainable Investing framework. The approach emphasizes sustainability and impact goals, alongside traditional return and risk considerations.

    Is your portfolio having the impact you want?