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Climate finance could make or break the COP26 summit. Here’s why

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November 1, 2021

By Kate Abnett and Susanna Twidale

LONDON (Reuters) – At the U.N. climate conference, expect one theme to drown out the cacophony of pledges from countries and companies around the world: money.

The COP26 summit, which began on Sunday in Glasgow, will attempt to complete the rules to implement the 2015 Paris Agreement – which aims to limit global warming to 1.5 degrees Celsius above preindustrial times – and secure more ambitious commitments from countries to meet its targets.

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Underpinning progress on both issues is money. Climate finance refers to money that richer nations – responsible for the bulk of the greenhouse gas emissions heating the planet – give to poorer nations to help them cut their own emissions and adapt to the deadly storms, rising seas and droughts worsened by global warming.

So far, the money hasn’t arrived.

Developed countries confirmed last week they had failed to meet a pledge made in 2009 to provide $100 billion a year in climate finance by 2020. Instead it would arrive in 2023.

“Their credibility is now shot,” said Saleemul Huq, an adviser to the Climate Vulnerable Forum of 48 countries, adding that the broken finance promise could “sour everything else” at the Glasgow talks.

“They are basically leaving the most vulnerable people on the planet in the lurch, after having promised that they’re going to help.”

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The Alliance of Small Island States, whose influence at past U.N. climate talks has outweighed its members’ size, said: “The impact this has had on trust cannot be underestimated.”

SYMBOLIC TARGET

The reaction made clear the struggle that countries will face at COP26 as they negotiate divisive issues that have derailed past climate talks.

The $100 billion pledge is far below the needs of vulnerable countries to cope with climate change, but it has become a symbol of trust and fairness between rich and poor nations.

Vulnerable countries will need up to $300 billion per year by 2030 for climate adaptation alone, according to the United Nations. That’s aside from potential economic losses from crop failure or climate-related disasters. Hurricane Maria in 2017 cost the Caribbean $69.4 billion.

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European Union climate policy chief Frans Timmermans said delivering the $100 billion was one of his three priorities for COP26, alongside finishing the Paris rulebook and securing more ambitious emissions-cutting targets.

“I think we still have a shot at getting to $100 billion,” Timmermans told Reuters. “It would be very important for Glasgow to do that, also as a sign of trust and confidence to the developing world.”

Italy said on Sunday it was tripling its climate finance contribution to $1.4 billion a year for the next five years. The United States committed in September to double its contribution to $11.4 billion per year by 2024 – which analysts said was far below its fair share, based on size, emissions and ability to pay.

The COVID-19 pandemic has heightened frustration among the poorest countries over the missing climate cash. The $100 billion is a tiny fraction of the $14.6 trillion that major economies mobilised last year in response to the pandemic, according to the World Economic Forum.

“One thing that the pandemic showed is that if the priority is big enough, the spending can follow,” said Lorena Gonzalez, a senior associate for climate finance at the World Resources Institute.

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A flurry of mini-deals on climate finance are also planned for the two-week COP26 summit, in an attempt to rebuild trust.

The EU, United States, Britain, Germany and France will announce a funding project to help South Africa phase out coal-fuelled power faster and invest in renewables. Other announcements are expected from development banks and the private sector.

(For graphic on Climate finance – https://fingfx.thomsonreuters.com/gfx/ce/xmvjolmejpr/Pasted%20image%201635504661169.png)

REBUILD TRUST

Finance will dominate the agenda for negotiations at COP26 on the rulebook for the Paris Agreement.

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Countries will start talks on setting a new post-2025 climate finance commitment, which poorer nations say must have enough checks and balances to ensure that, this time, the money arrives.

Another sticking point will be on rules to set up a carbon offsets market under the Paris Agreement – an issue that derailed the last U.N. climate talks in 2019.

Developing countries want a share of proceeds from the new carbon market set aside to fund climate adaptation projects, such as storm shelters or defences against rising seas. Some richer countries are opposed.

“Those markets need to put 1%, 2% – this is nothing – into adaptation. But this is a no-go for the same countries who are preaching adaptation finance,” Mohamed Nasr, climate finance negotiator for the African group of countries at COP26, told Reuters.

Securing private finance for adaptation projects is challenging, since they often do not generate a financial return. Public support has also lagged. Of the $79.6 billion in climate finance that donor governments contributed in 2019, only a quarter went on climate adaptation, according to the OECD.

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(Reporting by Kate Abnett in Brussels and Susanna Twidale in London, additional reporting by Fransiska Nangoy, editing by Giles Elgood)

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Delta flight from South Africa to Atlanta diverted to Boston for “technical specifications”

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November 28, 2021

(Reuters) -Delta Air Lines said a flight from South Africa to the United States was temporarily diverted from Atlanta to Boston on Sunday for technical reasons.

Flight 201, an Airbus A350, from Johannesburg was initially set to arrive at Hartsfield–Jackson Atlanta International Airport on Sunday but was instead routed to Boston’s Logan International Airport, Delta said.

The diversion “has to do with technical specifications of our A350 aircraft and the payload of this particular flight,” the company said in an email.

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“This can happen on ultra-long-haul flights when optimal operating conditions can’t be met,” it said.

The Federal Aviation Administration told Reuters it would investigate the situation.

The flight, which was initially scheduled to land in Atlanta at 8:15 EST (1215 GMT), was rescheduled to land at in Boston at 9:27 a.m. before departing for Atlanta at 10:40 a.m., it said.

The company did not cite the newly discovered Omicron variant of the coronavirus, which has been detected in South Africa, as a reason for the temporary diversion.

More than a dozen passengers on a flight from Johannesburg to Schiphol that landed Friday tested positive https://www.reuters.com/world/europe/dutch-set-announce-findings-omicron-cases-among-safrica-travellers-2021-11-28 for the new variant, Dutch authorities said on Sunday.

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(Reporting by Peter Szekely in New York and David Shepardson in Washington; Editing by Heather Timmons and Mark Porter)

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Chip shortage to cost Daimler Truck billions in revenues – Automobilwoche

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November 28, 2021

BERLIN (Reuters) – Daimler Truck Chief Martin Daum expects the global chip shortage to hit revenues by several billion euros this year and sees the problem continuing into next year, Automobilwoche reported on Sunday.

The world’s largest commercial vehicle maker, to be spun off from Daimler on Dec. 10, has outlined cost-cutting measure aimed at boosting profit margins as it struggles with chip shortages hurting the entire sector.

Daum said there would be a significant financial hit.

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“It is a huge sum,” Daum told Automobilwoche, saying the company would sell a “mid five-digit number” fewer vehicles than it could have.

With an average price of 100,000 euros ($113,170) per vehicle, this means several billion euros in lost revenues, reported Automobilwoche.

“We also have many vehicles sitting in the factory where just one part is missing. These deliveries are a priority because they are already sold,” said Daum.

He also told Automobilwoche that supply problems are likely to continue in 2022.

($1 = 0.8836 euros)

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(Reporting by Madeline Chambers, Editing by Louise Heavens)

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It’s raining dividends, hallelujah! Canadian banks set to post strong results

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November 28, 2021

By Nichola Saminather

TORONTO (Reuters) – Canada’s top six banks are expected to resume raising dividends and share buybacks after nearly a two-year hiatus and report strong quarterly earnings this week, which could boost the sector’s appeal to yield-hungry investors even as stocks trade close to all-time highs.

The market will also be looking for clues on the banks’ expected expense growth into next year as wage pressures intensify, and long-awaited improvements in net interest margins as interest rates rise.

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The “big six” Canadian banks – Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia (Scotiabank), Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank of Canada – on average have a dividend yield of 3.3%, according to Reuters calculations.

That compares with the global sector median of 2.5%, according to Refinitiv data.

The dividend increases, which would be the first since the country’s financial regulator imposed a moratorium in March 2020 that was lifted earlier this month, could range from 10% for Scotiabank at the lower end to 34% at National Bank, Gabriel Dechaine, an analyst at National Bank Financial, wrote in a Nov. 22 note describing the coming hikes as a “dividend growth tsunami.”

The banks are also expected to announce repurchases of about 2% of their outstanding shares on average.

“It’s going to be a significant (dividend) increase, and will help them reduce excess capital on their balance sheets,” said Steve Belisle, portfolio manager at Manulife Investment Management. “That flows through to better ROE (return on equity).”

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Even without the higher dividends or buybacks, Canadian bank shares have rallied to record highs, driven in part by better-than-expected earnings due to the release of reserves set aside to cover loan losses that haven’t materialized.

LOAN GROWTH ACCELERATION

The Canadian banks will be reporting their fourth-quarter earnings, with Scotiabank kicking off the results on Tuesday.

Analysts expect adjusted earnings for the top six lenders to jump about 37% from the year-earlier period, helped by a pick-up in business and credit card lending, strong mortgage growth and continued reserve releases.

An acceleration in loan growth is expected, as savings built up during the COVID-19 pandemic have lifted consumers’ and businesses’ purchasing power even at higher prices, with the broader economic recovery adding fuel to the fire, said Philip Petursson, chief investment strategist at IG Wealth Management.

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The one blot on the horizon may come in the form of non-interest expenses. They could be 1% higher than in the third quarter, with much of the anticipated rise driven by variable compensation, and up 4% in fiscal 2022 on rising labor costs and continued investments in technology, CIBC Capital Markets analysts wrote in a note.

Earnings from capital markets earnings could also decline, although higher-than-expected trading revenues could help offset lower investment banking fees, some analysts said.

Profits are expected to be 6.6% lower than in the third quarter, largely due to releases of reserves, which are difficult to estimate and have driven better-than-expected results in past periods, and could again lead to positive surprises, analysts said.

The banks’ improving revenue growth, strong capital positions and expectations for returns on equity to remain in the mid-teens for longer than expected are positives, National Bank’s Dechaine said.

Wealth and asset management units are also likely to have seen further growth, as consumers continued to deploy cash piles they’ve amassed during the pandemic, Petursson said.

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“It’s really hard to see where the warts would be on the banks’ earnings,” he added.

(Reporting by Nichola Saminather; Editing by Denny Thomas and Paul Simao)

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