Davos 2024: A window into the reorganisation of large-scale capital flows around the transition

Amid increased geopolitical tension, the need for this discussion has never been greater, writes Lombard Odier's Thomas Hohne-Sparborth

The new year is well and truly under way, the mountains around Davos have turned a snowy white, and the 2024 edition of the World Economic Forum is about to get underway. What can investors expect?

As in previous years, somewhere between 2,000 and 3,000 official guests will attend – many from the business community, as well as government and NGO representatives. Innumerable unofficial participants will round out the crowd, flocking to the countless satellite events taking place throughout the week.

See also: – COP28: Food system declaration is ‘absolutely critical’

Following on from last year’s theme of “cooperation in a fragmented world”, in 2024 participants will be asked to focus on “rebuilding trust”, with a focus on four key themes: opportunities to promote security and cooperation in a win-win manner for all stakeholders, growth and jobs, artificial intelligence, and the complex nexus of climate, nature, and energy.

For investors, certainly, there is much to discuss for those on the ground, and much to pay attention to for those looking in from the outside.

The common thread running through the themes at Davos is their global nature and the need for joint solutions. In a context of increased geopolitical tension, reshoring of supply chains, and increased talk of “de-globalisation”, many have questioned the Forum’s ability to retain its relevance. Yet on the flipside, perhaps against this backdrop of instability and “polycrisis”, one might argue the need for this type of discussion has never been greater.

See also: – LOIM: ‘We are on the cusp of an industrial revolution’

The conversation on these topics in Davos also follows shortly on the heel of COP28, which took place merely weeks ago, in Dubai. Despite widespread scepticism ahead of the event, and notwithstanding geopolitical turmoil, for the first time the outcome of the conference recognised the need to transition away from fossil fuels. While much of the challenge will be in the implementation, at Davos the discussion is likely to focus more heavily on the business implications of the transition to a clean energy system.

We see this transition as part of a broader set of system changes unfolding at speed and scale across our economy. Turmoil in the global economy reinforces a common pattern: Value chains are being reconfigured, driven not only by new perceptions of risk, but also by technological disruptions and newly-emerging business models. The energy transition, a resurgence in the appreciation of nature, and building momentum on climate action are potentially accelerating the change and shifting profit pools.

Albeit some of the stakeholders present at COP28 resemble those at Davos, the character of the two conferences is markedly different. The COP meetings are closely supported by the work of the International Panel on Climate Change (IPCC) – a scientific body albeit supported by an organisation comprised by government representatives. The World Economic Forum, in contrast, has traditionally had a more business-focused membership, and remains a prime opportunity for investors to see the way the winds of large-scale capital flows are blowing.  

From the agenda, that direction is increasingly clear. Environmental and economic agendas have converged, as has been clear for many years from the WEF’s annual Global Risk Report, where intensifying climate conditions, risks to biodiversity, and other nature-related risks have steadily climbed the rankings of top risks perceived by 1,200 multi-stakeholder respondents.

Accordingly, the focus on climate, nature and energy ranks highly on the list of topics for attendees to discuss. And here, the strong participation of investors and the business community should be seen as a highly welcome. Based on the estimates of the International Energy Agency (IEA) and other bodies, at least $3-5trn per year is needed in investment in energy and nature-related transitions during this decade, necessarily involving not only public but substantial private sources of capital.

Davos, for us and other likeminded investors, will be an opportunity to take stock of the multiplicity of ways in which environmental transitions are triggering much wider disruptions of our economy and investment landscapes:

  • Nature themes appear throughout the agenda and list of events, as a topic much broader than climate issues alone. Participants are likely to consider newly-emerging risks, but also new opportunities for public-private partnerships in nature-based solutions and the need to rethink value chains. Nature, forum participants may perhaps conclude, may need to be considered a new and productive asset class in its own right;
  • Conversations on the energy transition will take a palpably different tone, on the back of the COP28 outcome. Peak emissions from energy now expected in 2025, and even the IEA (which is typically conservative in its projections) is now predicting a peak in overall fossil fuel use this decade. At Davos, conversations are likely to shift from whether the transition will happen, to how investors and other stakeholders might stay ahead of it;
  • Artificial intelligence returns as a more explicit topic for discussion, not just in its own right, but as a further accelerant and driver of the transitions discussed above. New digital technologies are unlocking a technological revolution and enabling widespread optimisation of existing business models. That optimisation drives improved efficiencies, resulting not only in environmental benefits, but also enhanced economic profitability. 

Set in a Swiss mountain resort, the World Economic Forum does perhaps not provide for the most accessible of settings. Participation at Davos is inevitably limited to a smaller audience. For this reason, it is unlikely to ever be a sufficient means of tackling all the challenges its participants are asked to consider – but it does not pretend to be.

As system changes around energy, nature and climate gain unstoppable momentum, the number of platforms where these economic transitions are discussed is also proliferating. Each offers its own perspective and tone, but all might be said to add to the overall momentum.

Davos, seen in this light, has a distinctive business- and investor-oriented view. Rather than seeing that as a weakness, it is also an opportunity to recognise that the transitions unfolding around us do not just make environmental sense, but a good deal of economic and financial sense too.