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Analysis-COP26 message to business: clean up to cash in

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November 14, 2021

By Simon Jessop, Jake Spring and Ross Kerber

GLASGOW (Reuters) – The hard-fought Glasgow Climate Pact sent a clear message to global companies and executives: reassess business strategies and carbon footprints to reap monetary rewards, or lag and risk losses.

The deal announced late Saturday, ending two weeks of fraught negotiations between nearly 200 nations, pushes countries to do much more to curb climate-warming carbon emissions. That pressure will increasingly be imposed on investment and industry to bring emissions associated with their businesses in check.

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The Glasgow pact also delivered a breakthrough on rules for governing carbon markets, and took aim at fossil fuel subsidies.

Beyond the political negotiations, the Glasgow gathering brought in many of the world’s top CEOs, mayors, and leaders in industries, including finance, construction, vehicles and aviation, agriculture, renewable energy and infrastructure.

“COP26 has unleashed a wall of new private sector money,” said Gregory Barker, executive chairman at energy and aluminium company EN+ Group, by email. “For business everywhere, one thing is certain, big change is coming and coming fast.”

Two separate investment conferences on the side of the U.N. climate summit touted profits to be made for those who meet environmental conditions for the cash. Many deals were announced, including plans for a standards body to scrutinise corporate climate disclosures that will challenge boardrooms.

GOAL OF 1.5 DEGREES

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With the pact reaffirming a global commitment to containing global warming at 1.5 degrees Celsius (2.7 Fahrenheit), along with “accelerated action in this critical decade,” boards can expect tougher national pollution policies across all sectors, particularly in transport, energy and farming.

That will leave the companies without a plan to adapt to a low-carbon economy looking exposed, U.N. High-level Climate Action Champion Nigel Topping said.

“If you haven’t got a net-zero target now, you’re looking like you don’t care about the next generation, and you’re not paying attention to regulations coming down the pipe,” Topping said. “Your credit rating’s at risk, and your ability to attract and keep talent is at risk.”

Adding to the pressure, financial services firms with around $130 trillion in assets have pledged to align their business with the net-zero goal. Increasingly, they will lean on the boards of corporate climate laggards.

CARBON MARKETS

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The summit’s deal resolving rules for the global trading of carbon offset credits was applauded by business for its potential to unlock trillions of dollars in finance to help countries and companies manage the energy transition.

Observers said the agreed rules addressed the biggest worries and would likely prevent most abuses of the system.

The non-profit We Mean Business coalition, which works with corporates on climate, said the rules “have the potential to unleash huge investments”.

By putting in place the framework for a global trading system, the pact also brings the world closer to having a worldwide price on carbon – demanded as a priority by investors and companies before the talks.

A global price would allow companies to more accurately assess the value of assets, as well as costly externalities – driving more climate-aligned decisions on anything from where to build factories to which companies to buy or products to launch.

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With carbon offsets tied to efforts to preserve nature, more than 100 global leaders during the conference pledged to halt and reverse deforestation by 2030. Companies and investors also said they would ramp up forest-protection efforts.

FOSSIL FUELS

For the first time, the deal saw countries acknowledge that fossil fuels were the main cause of climate change, and called for an end to “inefficient fossil fuel subsidies”. It did not say how to determine if subsidies could be justified.

It singled out coal, the most polluting of the fossil fuels, though at the 11th hour switched from urging a “phase out” in coal-fired power to a “phase down”.

The change in wording, following objections by India, China and other coal-dependent nations, was seen by developing economies as an acknowledgement that industrialised nations are mostly responsible for the climate problem. But many in wealthy economies worried it could mean years more of unbridled emissions as developing nations grow.

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Calling the move “dangerous and damaging for the climate,” Germany’s biggest industry association warned it could hobble its industries as they are forced to abandon the cheap fossil fuel international competitors can still use.

“This concentrates emissions in countries with less stringent climate measures and unilaterally wears on companies that already need to cope with large financial burdens,” the Federation of German Industry said Sunday.

Still, the very mention of coal and fossil fuels in the Glasgow pact was hailed as progress in U.N. climate talks, which for decades have skirted the issue.

Saker Nusseibeh, chief executive of the international business of asset manager Federated Hermes said the result would put pressure on some oil companies that were “not as forthcoming as others”.

He also said “coal companies will have to think very carefully about their future plans”.

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Meanwhile, the world’s biggest economies are driving the shift.

The top two, the United States and China announced plans to cooperate on climate action, including bringing down emissions of the potent greenhouse gas methane.

Elsewhere, six countries, including France, joined the Beyond Oil and Gas Alliance, committing to halting new oil and gas drilling.

Twenty countries including the United States and Canada pledged to halt public financing of fossil fuel projects overseas, and 23 nations promised to phase out coal-fired power.

A number of companies in sectors including transport are already betting big on increased electrification, with U.S. car makers Ford and General Motors among those saying they will phase out fossil fuel vehicles by 2040.

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The Glasgow talks have “drawn attention to the great opportunities arising from a different form of development – stronger, cleaner, more efficient, more resilient and more inclusive,” said climate economist Nicholas Stern. The breakthroughs “seek to make clean and green production competitive in all these areas by 2030”.

(Reporting by Simon Jessop, Jake Spring and by Ross Kerber in Boston; Additional reporting by Victoria Waldersee in Berlin; Writing by Katy Daigle; editing by Barbara Lewis)

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Bukele steps up El Salvador’s bet on sliding bitcoin; buys another 150 coins

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December 5, 2021

SAN SALVADOR (Reuters) – El Salvador President Nayib Bukele said the Central American country had acquired an additional 150 bitcoins after the digital currency’s value slumped again, enlarging his bet on the cryptocurrency despite criticism.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down about 30% from the year’s high of $69,000 on Nov. 10. Bukele said last week that El Salvador had acquired 100 additional coins to take advantage of the currency weakening.

Late on Friday, Bukele announced the government had stepped into the market again.

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“El Salvador just bought the dip! 150 coins at an average USD price of ~$48,670,” Bukele wrote on Twitter.

Until Nov. 26, El Salvador had 1,220 bitcoins.

In September El Salvador became the world’s first nation to adopt bitcoin as legal tender, a move that generated global media attention but also attracted criticism from the opposition and foreign financial institutions.

The International Monetary Fund (IMF) said on Monday that El Salvador should not use bitcoin as legal tender, considering risks related to the cryptocurrency.

(Reporting by Nelson Renteria; Writing by Drazen Jorgic; Editing by Daniel Wallis)

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Bitcoin falls 9.2% to $48,782

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December 4, 2021

(Reuters) – Bitcoin dropped 9.29% to $48,752.15 at 22:01 GMT on Saturday, losing $4,991.54 from its previous close.

Bitcoin, the world’s biggest and best-known cryptocurrency, is down 29.3% from the year’s high of $69,000 on November 10.

Ether, the coin linked to the ethereum blockchain network, dropped 3.61% to $4,070.52 on Saturday, losing $152.28 from its previous close.

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(Reporting by Juby Babu in Bengaluru; Editing by Daniel Wallis)

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Trump’s social media venture says it has raised $1 billion

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December 4, 2021

By Krystal Hu and Juby Babu

(Reuters) – Donald Trump’s new social media venture said on Saturday it had entered into agreements to raise about $1 billion from a group of unidentified investors as it prepares to float in the U.S. stock market.

The capital raise, details of which were first reported by Reuters on Wednesday, underscored the former U.S. president’s ability to attract strong financial backing thanks to his personal and political brand. He is working to launch a social media app called TRUTH Social that is at least several weeks away.

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Digital World Acquisition Corp, the blank-check acquisition firm that will take Trump Media & Technology Group Corp public by listing it in New York, said it will provide up to $293 million to the partnership with Trump’s media venture, taking the total proceeds to about $1.25 billion.

The $1 billion will be raised through a private investment in public equity (PIPE) transaction from “a diverse group of institutional investors,” Trump Media and Digital World said in a statement. They did not respond to requests to name the investors.

Trump Media inked its deal with Digital World to go public in October at a valuation of $875 million, including debt. The social media venture is now valued at almost $4 billion based on the price of Digital World shares at the end of trading on Friday. Trump supporters and day traders snapped up the stock.

Many Wall Street firms such as mutual funds and private equity firms snubbed the opportunity to invest in the PIPE. Among those investors who participated were hedge funds, family offices and high net-worth individuals, Reuters reported on Wednesday. Family offices manage the wealth of the very rich and their kin.

Some Wall Street investors are reluctant to associate with Trump. He was banned from top social media platforms after the Jan. 6 attack by his supporters on the U.S. Capitol amid concerns he would inspire further violence. The Capitol attack was based on unsubstantiated claims of widespread fraud in last year’s presidential election.

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“As our balance sheet expands, Trump Media & Technology Group will be in a stronger position to fight back against the tyranny of Big Tech,” Trump said in a statement on Saturday.

The deal also faces regulatory risk. U.S. Senator Elizabeth Warren asked Securities and Exchange Commission Chairman Gary Gensler last month to investigsate the planned merger for potential violations of securities laws around disclosure. The SEC has declined to comment on whether it plans any action.

Trump Media and Digital World said the per-share conversion price of the convertible preferred stock PIPE transaction represents a 20% discount to Digital World’s volume-weighted average closing price for the five trading days to Dec. 1, when Reuters broke news of the capital raise.

If that price averages below $56 in the 10 days after the merger with Digital World has been completed, the discount will grow to 40% with a floor of $10, the companies added. Digital World shares ended trading on Friday $44.97.

Trump had 89 million followers on Twitter, 33 million on Facebook and 24.5 million on Instagram at the time he was blocked, according to a presentation on his company’s website.

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Investors attending the confidential investor road shows were shown a demo from the planned social media app, which looked like a Twitter feed, Reuters reported.

FIRST-QUARTER ROLLOUT

Since Trump was voted out of office last year, he has repeatedly dropped hints that he might seek the presidency in 2024.

Special purpose acquisition companies such as Digital World had lost much of their luster with retail investors before the Trump media deal came along. Many of these investors were left with big losses after the companies that merged with SPACs failed to deliver on their ambitious financial projections.

TRUTH Social is scheduled for a full rollout in the first quarter of 2022. It is the first of three stages in the Trump Media plan, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news and podcasts, according to the news release.

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In a slide deck on its website, the company envisions eventually competing against Amazon.com’s AWS cloud service and Google Cloud.

(Reporting by Juby Babu in Bengaluru and Krystal Hu in New York; Editing by Daniel Wallis and Cynthia Osterman)

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