SNAPSHOT2 min read

Video: How the food & water system is moving into the policy spotlight

As the food system becomes prominent in the global policy agenda, Felix Odey looks at the most recent trends and what to expect in the months ahead.



Felix Odey
Portfolio Manager, Global Resource Equities

Why was the food system in the spotlight at COP28?

Until recently, the pivotal role of the food system was not reflected in COP agendas, with the focus entirely on the energy system, and energy usage in transport and industry. 

At COP28, 130 heads of state and governments signed a declaration recognising the grave threat climate change poses to our ability to produce sufficient food.

They recognised that any path to achieving the goals of the Paris Agreement must include agriculture and food systems and that it will require urgent adaptation.

This declaration is undoubtedly a positive step, but it is not enough.

Regulatory changes at a national level are what’s needed to achieve these goals.

The current price of food does not reflect the negative externalities associated with its production, transportation, and consumption.

Regulation that allows price mechanisms to reflect these environmental costs more accurately would drive yield enhancing and carbon efficient technology adoption, shifts in global diets away from resource intensive animal meats, and stimulate a reduction of waste and associated emissions from agriculture.

We do not invest based on hopes that uncertain regulation will drive company earnings.

However, under a business-as-usual scenario the food system is on track to use the world’s entire 1.5 to 2 degree carbon budget. This is expected to drive increased regulation, and potentially boost companies providing products and services that enable us to make the food system more resource efficient.

What are your near-term expectations for the food and water value chain?

The first half of 2023 bucked expectations, and even with rising rates, bank crises, and high inflation, the consumer remained resilient, and demand for agricultural inputs and equipment continued to recover.

This pivoted in the second half of the year as higher costs of capital, front loaded demand, and a less confident consumer showed in weaker volumes across the food and water subsectors, dragging on share price performance.

Today, we see again waning confidence in the consumer, and pessimism in the agricultural cycle.

The difference is that now we have already seen six months of weaker underlying demand, and weaker prices across crop and agricultural chemicals.

Likewise, we have seen destocking across the agricultural inputs, food and beverage packaging, food technology, ingredients, and vitamin space, potentially setting up for some restocking volume recovery in 2024.

Valuations and earnings expectations have also reset for much of the food and water system.

Everything except the water management, aquaculture and agricultural equipment subsectors have been trading at or near their five-year lows in terms of forward valuation.

This contrasts with the backdrop of the MSCI ACWI, which rallied an impressive 20% in 2023. The food and water universe is now experiencing its biggest discount in more than 10 years.

This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. 

Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.

This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.

All data contained within this document is sourced from Cazenove Capital unless otherwise stated.


Felix Odey
Portfolio Manager, Global Resource Equities


The value of your investments and the income received from them can fall as well as rise. You may not get back the amount you invested.