Preserving the wildlife population

Population sizes of wildlife decreased by 60 percent globally between 1970 and 2014, and much of that is due to human activity, according to the World Wildlife Federation (WWF).¹ The issue extends beyond just mourning the loss of animals. Wildlife depletion threatens human society as well, says the WWF.

According to the latest edition of the WWF’s Living Planet Report, all economic activity ultimately depends on services provided by nature. As we better understand our reliance on natural systems, it’s clear that nature is not just a “nice to have.”

The report, which tracks the state of global biodiversity by measuring the population abundance of thousands of species, shows that the Earth’s overall population of animal vertebrates declined by about 60 percent between 1970 and 2014.¹ Vertebrates are creatures possessing backbones or spinal columns, including mammals, fish, birds, amphibians and reptiles.

“Exploding human consumption” has caused a massive drop in the global wildlife population in recent decades, the conservation group says. Prior to the explosive population boom of the 20th century, humanity’s consumption was smaller than the Earth’s rate of renewal. But the report notes that ecosystems are now quickly being depleted, with forests, coral reefs, wetlands and mangroves all shrinking.

A UBS Chief Investment Office (CIO) report on agricultural yield states that a global population of 9.7bn people is projected by 2050, meaning increased consumption of land-intensive food such as meat will require 70 percent more food to be produced than today. The report also notes that agriculture accounts for roughly 70 percent of global water withdrawals and nearly one-third of greenhouse gas emissions.²

UBS analyst Rudolf Leemann says that “agribusinesses that adapt sustainable farming practices will be able to grow more with less land, water, fertilizer and other costly inputs. With increasingly scarce resources and more severe weather fluctuations due to climate change, investments that support sustainable agribusiness should help to ensure more resilient, long-term growth while preserving natural resources.”

An approach to incorporating considerations about the environment or other social or governance issues into investments is sustainable investing (SI).

SI typically takes three paths: exclusion, integration and impact investing.

Exclusion removes exposure to companies or industries that are not aligned with an investor’s values.

Integration is where ESG factors come into play. ESG stands for environmental, social and governance, and integration describes the incorporation of these non-financial criteria into core investment processes.

Impact investing invests with the intention of generating measurable environmental and social impact alongside a financial return.

Much of the existing SI 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.

¹ “Living Planet Report 2018: Aiming higher,” The World Wildlife Federation, 29 October 2018.

²  “Longer Term Investments: Agricultural yield,” UBS Chief Investment Office, 27 March 2017.

ESG/Sustainable Investing Considerations: Sustainable investing strategies aim to consider and in some instances integrate the analysis of environmental, social and governance (ESG) factors into the investment process and portfolio. Strategies across geographies and styles approach ESG analysis and incorporate the findings in a variety of ways. Incorporating ESG factors or Sustainable Investing considerations may inhibit the portfolio manager’s ability to participate in certain investment opportunities that otherwise would be consistent with its investment objective and other principal investment strategies. The returns on a portfolio consisting primarily of ESG or sustainable investments may be lower or higher than a portfolio where such factors are not considered by the portfolio manager. Because sustainability criteria can exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors who do not use such criteria. Companies may not necessarily meet high performance standards on all aspects of ESG or sustainable investing issues; there is also no guarantee that any company will meet expectations in connection with corporate responsibility, sustainability and/or impact performance.

Research from CIO GWM is provided by UBS Financial Services Inc. UBS Financial Services Incorporated of Puerto Rico is a subsidiary of UBS Financial Services Inc. In Canada, research from CIO GWM is provided by UBS Investment Management Canada Inc.

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