Key takeaways as discussions develop at Davos

Rich Nuzum, Global Chief Investment Strategist, shares key takeaways so far.

Over half of the world’s voting population[1] is heading to the polls this year according to the Economist. The changing nature of global geopolitics – and knock on impacts on climate, agriculture and security policy – is firmly in focus.??

The sheer number and reach of elections across the world’s major global economies this year presents a raft of new uncertainties to governments, corporates and investors alike. The US election is perceived as a centrifugal force to the way in which global policy – and security issues – develop from here. ?

Against this backdrop, China has shown up in force with 140 delegates and 10 ministers attending.? The nation’s return to the World Economic Forum (WEF) Annual Meeting in Davos this year has been met with optimism as delegates consider – and fret about – future policy pathways post the US election.

On core themes – climate, agriculture and food security – delegates are considering the ways in which global policy could develop around evolved axes of coordination and cooperation.

Acknowledging that we are heading above a 2 degrees Celsius warming scenario[2], according to the UN, means delegates are exploring routes to accelerating adaptation and innovation, and the focus is on agriculture as the new "hard to abate" sector.

Record temperatures and unprecedented weather events in 2023 have imbued discussions with a sense of urgency. Climate change is accelerating ahead of previous models, which now point towards the very real prospect of a 2.5 to 2.9 degree warming, and potentially catastrophic outcomes, according to the United Nations Environment Programme (UNEP).

However, there are reasons for longer term optimism; the cost curves of renewable electricity continue to fall relative to fossil fuels and there is a growing sense that we now have the technology and market dynamics required to move away from reliance on coal, oil and gas.[3]

Agriculture is the next stone to be turned over by policymakers, a hard to abate sector where people and water usage are as critical as carbon emissions to long-term sustainable food production. Globally, smallholder farmers represent 85% of all farms, many of whom are operating at or below the global poverty line of $300 a year[4]. Delegates are actively considering social and health impacts for both farmers and consumers, alongside environmental factors.?

[1] 4.2 billion people are able to vote in an election 2024. Source: Article in the Economist 11/13/2024 Is the Biggest Election Year in History.

[2] Current pledges under the Paris Agreement put the world on track for a 2.5-2.9°C, Nations must go further than current Paris pledges or face global warming of 2.5-2.9°C, from UNEP, November 2023.

[3] Renewable energy projects (especially solar PV and wind) are already more affordable than fossil fuel-based alternatives. IEA article: 2023 marks a step change for renewable power growth over the next five years

[4] Small farms' role in the EU food system. European Parliament Briefing.

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