Finance
Balancing climate finance and financial stability is a scorching dilemma | East Asia Forum
Author: Editorial Board, ANU
Asia has been sweltering through one of its most intense heat waves in memory. In April, Vietnam and Laos saw their hottest temperatures on record, and in India hundreds have died in extreme heat conditions. Elsewhere, there are ominous signs. The North Sea is five degrees hotter than normal and the Baltic Sea eight degrees hotter. A heat dome over Texas and Mexico has baked the region for weeks. Climate change, in other words, is most definitely here. The need for urgent action worldwide has never been more obvious.
And yet even as the atmosphere races ahead of the climate models, and the need for urgent action intensifies, ambition and implementation lag behind. The United Nations Environment Programme’s 2022 climate report was ominously titled ‘The closing window’. It argued forcefully that the world is letting the chance to meet the Paris Agreement goal of only 1.5 degrees of warming slip through its hand.
The science is unequivocal: action must be ramped up dramatically. Easier said than done, comes the reply from diplomats and policymakers. The fundamental problem is the same as it has been since the climate change emergency was first identified: cutting domestic carbon emissions benefits the entire world, but the costs are borne solely by the country who cuts them. Without a worldwide carbon price, many countries are likely to shirk.
In recognition of this fact, there has always been an acknowledgment that developing countries will require assistance to meet emissions reductions targets, in the form of climate finance from developed countries. The sums are considerable. Nicholas Stern and Amar Bhattacharya estimate that US$1 trillion of climate finance will be required annually by 2030, more than three times current levels.
At the same time, the macroeconomic environment for massive spending on the scale required is darkening. Interest rates are rising, inflation remains stubbornly high and the legacy of COVID-19 borrowing weighs heavily on the balance sheets of governments around the world. Corralling the necessary money from donor countries to finance ambitious action in developing countries will be difficult.
But if getting the money from donors is a challenge, there is also a major — and underappreciated — problem for recipient countries, one that has been illustrated and underlined by recent developments in the global economy.
An open door for foreign investment swings both ways. The rise in interest rates in the West has seen capital flow from developing countries back into developed ones, where the rate of return is now more respectable. This has put pressure on exchange rates and exacerbated the debt problems of many developing countries that cannot borrow in their own currency.
The need for financial stability is acutely felt by policymakers and central bankers in the developing world, particularly in Asia, where memories of the Asian Financial Crisis are still strong a quarter of a century later. Given that the massive amounts of money required for climate change action cannot realistically be met by domestic savings in most developing countries, taking effective action means importing capital, and hence increasing currency account deficits.
As M Chatib Basri and Adam Triggs argue in this week’s lead article, the tension between prudent macroeconomic policy on the one hand and financing effective climate action on the other has the potential to derail efforts to avoid catastrophic global warming. ‘If developing countries are to import the foreign savings needed to fight climate change’, they point out, ‘the rich world and the institutions it controls will need to work with them to reduce financial instability’.
There are a number of steps that can be taken, as Basri and Triggs note: international and regional financial institutions need to be reformed so that countries can more effectively make use of the financial security that they can offer; institutions themselves need to ensure that their own resources are more effectively marshalled to guarantee stability in the face of massive flows of climate finance; and rich countries can continue to make new arrangements like bilateral currency swap lines to ensure that the financial safety net is sufficient to facilitate a huge ramp-up in international capital flows to address climate change.
It may not seem immediately obvious that a pressing concern in fighting climate change is addressing the global financial architecture. But the institutions and rules that make up that architecture will be called upon to support a truly unprecedented flow of money from rich to poor countries. It is a pressing task for policymakers to ensure that they are fit for the task.
The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.
Is the dragon slain? Or just wounded?
Inflation has been the scourge of the economy for the last three years. It spiked from a benign 1.4% when President Biden took office in 2021 to a searing 9% some 18 months later. The Federal Reserve took aim with speedy interest rate hikes, and it seemed to work. By September, inflation was down to 2.4%, almost in the normal zone.
Then, an upward blip. The latest data shows inflation ticked back up to 2.6% in October. That could be a spot on the X-ray that turns out to be nothing. Or it could signal that inflation is making a comeback, which would scramble the outlook for interest rates, financial markets, and the policies of the incoming Trump administration.
The inflation uptick in October wasn’t a fluke based on hurricanes or other one-time anomalies. Most important goods and services categories rose, including food, energy, rent, and vehicles. This came one month after the Fed basically declared victory over inflation. In September, the Fed reversed monetary policy and started cutting interest rates, signaling that the time had come to worry more about keeping growth humming than about getting prices down.
The Fed is staying the course for now. It cut short-term rates again on Nov. 14 and may do so again at its next policy meeting in December. But the odds of more rate cuts are dropping, with policymakers waiting for more lab results in the form of forthcoming inflation data.
“Inflation might soon be front-page news again,” Capital Economics announced in a Nov. 13 analysis. The forecasting firm argues that the currently inflationary trend is OK, but the future outlook is more worrisome — in large part because of what Donald Trump plans to do once he takes office next January.
At least two elements of Trump’s agenda are inflationary: new tariffs on imports and the mass deportation of undocumented migrants. Tariffs are taxes that raise the cost of imported goods directly. Deporting migrants would reduce the size of the labor force, especially targeting lower-wage workers. Replacing them with workers who might demand higher pay — or with costly machines — would raise costs one way or another, with producers passing as much as they could on to consumers.
A third inflation concern is Trump’s desire to cut taxes further, which can have a stimulus effect by putting more money in people’s pockets, boosting spending and demand and sometimes leading to higher prices.
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“Given all that President-elect Trump has promised to do quickly — such as hike tariffs, cut taxes further and slash immigration — one can easily foresee a re-acceleration of inflation next year,” Bernard Baumohl, chief global economist at Economic Outlook Group, wrote on Nov. 13. “The Federal Reserve is now in a real quandary.”
Finance
Vallourec SA (VLOUF) Q3 2024 Earnings Call Highlights: Strategic Moves and Financial Resilience …
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EBITDA Margin: Maintained a healthy margin similar to previous quarters.
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Full Year EBITDA Outlook: Reiterated at EUR800 million to EUR850 million.
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Cash Generation: EUR130 million in Q3, reducing net debt for the eighth consecutive quarter.
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Net Debt Reduction: Over EUR1.2 billion reduction since 2022.
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Q3 Group EBITDA Margin: Close to 19%.
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Tubes Volumes: Reduced to 292 kilotons in Q3.
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Mine & Forest Segment EBITDA: Expected slightly below EUR100 million for the full year.
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Net Debt Reduction in Q3: EUR124 million.
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Full Year Mine Production Expectation: Approximately 5 million tonnes, down from 6 million tonnes.
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Q3 Cash Flow: Total cash generation of EUR130 million.
Release Date: November 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Vallourec SA (VLOUF) maintained a healthy EBITDA margin in Q3 2024, driven by strong international OCTG market performance.
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The company generated significant cash flow, reducing net debt for the eighth consecutive quarter, totaling a reduction of over EUR1.2 billion since 2022.
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Vallourec SA (VLOUF) announced its first strategic acquisition in nearly a decade with Thermotite do Brasil, enhancing its position in the offshore line pipe market.
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The company is progressing well with its optimization program in Brazil, which is expected to significantly contribute to closing the profitability gap.
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Vallourec SA (VLOUF) plans to announce a dividend proposal for its 2025 AGM, marking the first dividend in 10 years, reflecting strong financial health.
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The US OCTG market experienced softness, impacting Vallourec SA (VLOUF)’s overall performance.
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The global iron ore market softened in Q3, leading to lower prices and sales volumes in the Mine & Forest segment.
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Vallourec SA (VLOUF) lowered its full-year mine production expectations to approximately 5 million tonnes, down from 6 million tonnes.
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Q3 2024 saw a reduction in tonnage sold and a slight decrease in average realized prices, leading to a year-over-year decline in revenues and EBITDA.
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The company faces potential challenges from the new tax environment in France, which could impact shareholder remuneration strategies like share buybacks.
Q: Is a share buyback still an option for shareholder remuneration given the new tax environment in France? A: Philippe Guillemot, CEO: While we never exclude any ways to return excess cash to shareholders, the potential tax implications in France make share buybacks less attractive. We plan to return cash to shareholders with a payout ratio of 80% to 100%, starting from Q3. The dividend proposal will be announced in February, based on Q3 cash generation.
SHEPHERDSTOWN, W. Va., November 15, 2024–(BUSINESS WIRE)–JSB Financial Inc. (OTCPink: JFWV) reported net income of $2.0 million for the quarter ended September 30, 2024, representing an increase of $1.3 million when compared to $643 thousand for the quarter ended September 30, 2023. Basic and diluted earnings per common share were $7.64 and $2.33 for the third quarter of 2024 and 2023, respectively. The third quarter results include the recognition of an interest recovery totaling $1.3 million, a recovery to the allowance for credit losses on loans totaling $252 thousand and a recovery of legal fees totaling $17 thousand on prior nonperforming loans. Excluding the impact of these notable items, pre-tax income of $959 thousand for the third quarter of 2024 was $187 thousand more than the same period in 2023.
Net income for the nine months ended September 30, 2024 totaled $3.4 million, representing an increase of $1.1 million when compared to $2.3 million for the same period in 2023. Basic and diluted earnings per common share were $13.33 and $8.46 for the nine months ended September 30, 2024 and 2023, respectively. Annualized return on average assets and average equity for September 30, 2024 was 0.87% and 17.65%, respectively, and 0.66% and 13.17%, respectively, for September 30, 2023. Excluding the impact of the notable items in the third quarter of 2024, pre-tax income of $2.7 million for the nine months ended September 30, 2024 was $96 thousand lower than the same period in 2023.
“We are pleased with our performance for the third quarter, which includes one-time recoveries on nonperforming loans totaling $1.5 million. Additionally, our team continued to create, deepen and expand our customer relationships which resulted in an increase in total deposits of 10% when compared to the second quarter and 17% year-over-year,” said President and Chief Executive Officer, Cindy Kitner. “During the third quarter, we saw stable loan growth, which was funded through loan maturities and deposit growth, and we continue to have strong credit quality metrics including past dues, nonaccruals, charge offs and nonperforming loans, all of which remained at historically low levels.”
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