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New coronavirus a deadly wake-up call for all on illegal global wildlife trade

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      By Yijia Chen, CFAESG Quantitative Research Analyst, Calvert Research and Management

      Washington - The new coronavirus outbreak is believed to have originated at a market in the central city of Wuhan, Hubei Province in China, where dozens of wildlife animals were sold including rare and endangered species. It is the latest proof that illegal wildlife trade has become a grave matter of public health - with repercussions capable of upsetting major financial markets.

      To prevent the further spread of the virus and control the population migration during the Lunar New Year period, Chinese authorities locked down at least 12 cities in China, cancelled planes and trains leaving those cities, and extended the national holidays nationwide. Given China's vital role in the connected global economy, this has already had an impact on global portfolios as well, particularly as the virus has spread beyond China's borders.

      Coronavirus - cause and comprehension

      Given the similar epidemiology and clinical characteristics, many observers compare this novel coronavirus disease, now dubbed COVID-19, to the 2003 SARS-CoV (Severe Acute Respiratory Syndrome) epidemic and the 2012 MERS-CoV (Middle East Respiratory Syndrome) epidemic.

      All three coronaviruses are capable of causing severe infections in humans, and are all thought to be driven by the spillover of bat-adapted CoVs into an intermediate host. The viruses do not sicken the bats, but make the viruses themselves more virulent and highly transmissible. For SARS-CoV, the intermediate host is believed to be palm civets, while camels play the role of intermediate host for MERS-CoV. For this coronavirus, some research suggest pangolins, considered the most trafficked mammals in the world and threatened with extinction,1 may be the intermediary.

      Global illegal wildlife trade booming

      The trade in illegal wildlife products (including protected species) is estimated to be worth between $7 billion to $23 billion annually, according to a 2014 UN report.2 The demand of wild mammals is growing fast in developing Asian countries, either for meat or for traditional medicine. The demand in the US and Europe is also booming, most of which involves the use of reptiles as exotic pets.

      The consumption of protected species has already been outlawed in most countries, but most enforcement activities to combat international wildlife trafficking are only conducted at ports of entry, rather than in domestic markets.3 The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITIES)4 focuses on international trade when wildlife is moving between countries. Enforcements within the domestic markets are often regulated distinctly by each country, with front-line officers in some countries worse armed than poachers.

      The search for solutions

      A permanent ban on illegal wildlife trade could be one of the solutions to the spread of viruses such as this one. As the coronavirus spreads, China's legislature, the National People's Congress, has said it will update wildlife protection laws and regulations to "toughen the crackdown on wildlife trafficking."5 However, total bans are also controversial because they risk fueling an intractable, uncontrolled and highly priced illegal trade, sustained by the rising incomes and social status of the growing middle class.6

      The global demand for wildlife animals is the source of the problems. Discouraging such demands, for example, through wisely directed education campaigns that aim to discredit ingrained cultural beliefs, could diminish the entire supply chain of illegal wildlife trade, and, thus, mitigate the acute public health risks.

      Regardless, this is another example of how global issues not directly related to investing are nevertheless topics that Responsible Investors need to take into account.

      Bottom line: Ending the illegal wildlife trade and discouraging the demand for wildlife animals will contribute to mitigating acute public health risks.