Finance

A gradual reverse migration is under way, from Zoom to the conference room. Wall Street firms have been among the most forceful in summoning workers to their offices, but in recent months even many tech titans—Apple, Google, Meta and more—have demanded staff show up to the office at least three days a week. For work-from-home believers, it looks like the revenge of corporate curmudgeons. Didn’t a spate of studies during the covid-19 pandemic demonstrate that remote work was often more productive than toiling in the office? Unfortunately for the believers, new research mostly runs counter to this, showing that offices, for all their flaws, remain essential. A good starting point is a working paper that received much attention when it was published in 2020 by Natalia Emanuel and Emma Harrington, then both doctoral students at Harvard University. They found an 8% increase in the number of calls handled per hour by employees of an online retailer that had shifted from offices to homes. Far less noticed was a revised version of their paper, published in May by the Federal Reserve Bank of New York. The boost to efficiency had instead become a 4% decline.The researchers had not made a mistake. Rather, they received more precise data, including detailed work schedules. Not only did employees answer fewer calls when remote, the quality of their interactions suffered. They put customers on hold for longer. More also phoned back, an indication of unresolved problems.The revision comes hot on the tails of other studies that have reached similar conclusions. David Atkin and Antoinette Schoar, both of the Massachusetts Institute of Technology, and Sumit Shinde of the University of California, Los Angeles, randomly assigned data-entry workers in India to labour either from home or the office. Those working at home were 18% less productive than their peers in the office. Michael Gibbs of the University of Chicago and Friederike Mengel and Christoph Siemroth, both of the University of Essex, found a productivity shortfall, relative to prior in-office performance, of as much as 19% for the remote employees of a large Asian it firm. Another study determined that even chess professionals play less well in online matches than face-to-face tilts. Yet another used a laboratory experiment to show that video conferences inhibit creative thinking.The reasons for the findings will probably not surprise anyone who has spent much of the past few years working from a dining-room table. It is harder for people to collaborate from home. Workers in the Fed study spoke of missing their “neighbours to turn to for assistance”. Other researchers who looked at the communication records of nearly 62,000 employees at Microsoft observed that professional networks within the company become more static and isolated. Teleconferencing is a pale imitation of in-the-flesh meetings: researchers at Harvard Business School, for example, concluded that “virtual water coolers”—rolled out by many companies during the pandemic—often encroached on crowded schedules with limited benefits. To use the terminology of Ronald Coase, an economist who focused on the structure of companies, all these problems represent an increase in co-ordination costs, making collective enterprise more unwieldy.Some of the co-ordination costs of remote work might reasonably be expected to fall as people get used to it. Since 2020, many will have become adept at using Zoom, Webex, Teams or Slack. But another cost may rise over time: the underdevelopment of human capital. In a study of software engineers published in April, Drs Emanuel and Harrington, along with Amanda Pallais, also of Harvard, found that feedback exchanged between colleagues dropped sharply after the move to remote work. Drs Atkin, Schoar and Shinde documented a relative decline in learning for workers at home. Those in offices picked up skills more quickly.The origins of the view that, contrary to the above, remote working boosts productivity can be traced to an experiment nearly a decade before the pandemic, which was reported by Nicholas Bloom of Stanford and others in 2013. Call-centre workers for a Chinese online travel agency now known as Trip.com increased their performance by 13% when remote—a figure that continues to appear in media coverage today. But two big wrinkles are often neglected: first, more than two-thirds of the improved performance came from employees working longer hours, not more efficiently; second, the Chinese firm eventually halted remote work because off-site employees struggled to get promoted. In 2022 Dr Bloom revisited Trip.com, this time to investigate the effects of a hybrid-working trial. The outcomes of this experiment were less striking: it had a negligible impact on productivity, though workers put in longer days and wrote more code when in the office.The price of happinessThere is more to work (and life) than productivity. Perhaps the greatest virtue of remote work is that it leads to happier employees. People spend less time commuting, which from their vantage-point might feel like an increase in productivity, even if conventional measures fail to detect it. They can more easily fit in school pick-ups and doctor appointments, not to mention the occasional lie-in or mid-morning jog. And some tasks—notably, those requiring unbroken concentration for long periods—can often be done more smoothly from home than in open-plan offices. All this explains why so many workers have become so office-shy.Indeed, multiple surveys have found employees are willing to accept pay cuts for the option of working from home. Having satisfied employees on slightly lower pay, in turn, might be a good deal for corporate managers. For many people, then, the future of work will remain hybrid. Nevertheless, the balance of the work week is likely to tilt back to the office and away from home—not because bosses are sadomasochists with a kink for rush-hour traffic, but because better productivity lies in that direction. ■ More

Getting into Jinjiang Ode is a little difficult. The luxurious property development in central Chengdu will not allow potential buyers through its four-metre-high palatial gates without an appointment. Even finding out about the project in the south-western metropolis, home to 16m people, is tricky. The firm behind it is so confident of demand that it does not deign to advertise the flats—a confidence which is not unjustified. Chengdu has a distinct, laid-back atmosphere epitomised by its public tea gardens, in which patrons spend hours sipping hot beverages and having their ears cleaned. The leisurely pace of life and tongue-numbing local cuisine appeal to younger Chinese people, who have come in droves in recent years, says Zhang Xiaojun, a sales agent at the development. Many of them buy homes.As a prolonged downturn in China’s property market takes hold, Chengdu seems to be an outlier. By several metrics, including house prices and sales of new homes, it is faring better than almost anywhere in the country. At a national level, the central government’s response to the deepening property crisis, including an interest-rate cut announced on June 13th, has underwhelmed. China’s benchmark stock index has fallen by 8% since its peak this year in early May, when the country still appeared to be rocketing towards a full post-covid recovery. Now investors fear more developers will start to fall short of cash, defaulting on dollar debts in the process. Experts are asking how much local measures can pump up growth. Chengdu is a good place to search for answers.There is a faint air of unreality about the local market. New home sales between April and June were 30% higher than in the same period in 2019, the last year before the covid-19 pandemic struck, notes Larry Hu of Macquarie, an investment bank. In contrast, across China’s 30 largest cities, sales have fallen by 25%. Meanwhile, in May home prices in Chengdu rose by 8% compared with the previous year, the most of any large city. It has notched month-on-month rises for 17 straight months. Many Chinese cities are working through vast inventories of flats that have been built but not sold: it will take the southern city of Zhuhai more than 12 years to sell homes that have been completed or are still under construction if sales stay at the current pace. Chengdu will sell such flats in just over three years.What explains the success? Since 2016 officials in every Chinese city have been able to devise their own measures for cooling or heating local property markets. Most of the rules employed are restrictions on who can buy a flat, how many they may purchase and the size of the downpayment required. In most large cities, only people with local hukou, or residence permits, are allowed to buy homes. In Chengdu, high-level purchase controls remain in place. But officials have sought to attract families as a way of expanding the city and increasing demand for homes. Residents with two or more children are, for instance, allowed to buy additional homes, and local hukou-holders may buy up to three. Even those without a hukou may buy two. Since the start of the year, elderly parents who move to Chengdu to join their adult children may also purchase a flat.Other cities have experimented with similar policies, but enjoyed much less success. Shenzhen, the technology hub across the border from Hong Kong, has relaxed some of its restrictions. Yet property prices are still down 1.8% year-on-year. One explanation for this is sweeping layoffs in the city’s tech sector. Another is that Chengdu’s policies are more effective because they are paired with reforms to attract educated workers, which have helped boost growth. Since 2017 local authorities have handed out housing subsidies and cash rewards to talented people who move to the city in order to work in its rapidly growing industrial base, points out Sandra Chow of CreditSights, a research firm.Chengdu’s officials also did a better job of tackling the crisis of confidence that spread across the country last year. As developers went bust, many failed to finish flats. Thousands of homebuyers responded by halting mortgage payments. Many more delayed buying new homes. Officials in Chengdu went to great lengths to ensure homes were handed over, funnelling cash to developers, says Ms Chow. Even defaulting developers managed to complete homes. About 40% more apartment space was finished in the first two months of 2023 compared with the same period the year before. This probably encouraged wavering buyers to take the plunge. Other regions may have wanted to follow suit, but lacked the cash. Sichuan, where Chengdu sits, notched up the strongest growth in municipal land sales of any province in the first half of 2022, which will have freed up funds to keep builders at work.Chengdu benefited from some other factors that will be difficult, if not impossible, to replicate elsewhere, and perhaps even in the city itself. Its population rose by more than 7m from 2011 to 2021, making it one of the fastest-growing urban areas anywhere in the world. These inflows have been the biggest driver for housing demand, says Yan Yuejin of E-House China, a research firm. But urban migration has since slowed. There are simply not enough people in China for another population boom. Chengdu’s location in the south-west also meant it did not see rapid rises in prices in past housing booms. Moreover, its growing manufacturing industry continued to lift incomes. As Louise Loo of Oxford Economics, another research firm, notes, it is thus one of just a few second-tier cities that have not seen rapid price increases relative to local incomes.A few levers remain for Chengdu’s officials should things start to look peaky. They have yet to drastically ease restrictions, allowing many more people to buy homes. Market-watchers are waiting for such a development, says Guo Jie of the Local Association of Real Estate Enterprises, an industry group, for it would indicate that steam is running out and that even the best-prepared cities are being swept into the crisis. Policymakers elsewhere in the country will be watching closely, too. ■ More

Federal Reserve Chairman Jerome Powell talked tough on inflation Wednesday, saying at a forum that he expects multiple interest rate increases ahead and possibly at an aggressive pace.
“We believe there’s more restriction coming,” Powell said during a monetary policy session in Sintra, Portugal. “What’s really driving it … is a very strong labor market.”

The comments reiterate a position taken by Powell’s fellow policymakers at their June meeting, during which they indicated the likelihood of another half percentage point of increases through the end of 2023.
Assuming a quarter point per meeting, that would mean two more hikes. Previous comments from Powell pointed to a possibility of the rises coming at alternate meetings, though he said Wednesday that might not be the case depending on how the data come in.
The Fed hiked at each meeting since March 2022, a span that included four straight three-quarter point moves, before taking a break in June.
“I wouldn’t take, you know, moving at consecutive meetings off the table,” he said during an exchange moderated by CNBC’s Sara Eisen. The question-and-answer session took place at a forum sponsored by the European Central Bank.
Markets took a modest hit as Powell spoke, with the Dow Jones Industrial Average off more than 120 points.

Central to the Fed’s current thinking is the belief that the 10 straight rate hikes haven’t had time to work their way through the economy. Therefore, officials can’t be sure whether policy meets the “sufficiently restrictive” standard to bring inflation down to the Fed’s 2% target.
Most economists think the rate increases ultimately will pull the U.S. into at least a shallow recession.
“There’s a significant possibility that there will be a downturn,” Powell said, adding that it’s not “the most likely case, but it’s certainly possible.”
Asked about banking stresses, Powell said the issues in March that led to the closure of Silicon Valley Bank and two other institutions did weigh into this thinking at the last meeting.
Though Powell repeatedly has stressed that he considers the general state of the U.S. banking industry to be solid, he said the Fed needs to be mindful that there could be some issues with credit availability. Recent surveys have shown a general tightening in standards and declining demand for loans.
“Bank credit availability and credit can move down a little bit with a bit of a lag. So we’re watching carefully to see whether that does appear,” he said.
Powell’s fellow central bankers at the forum also spoke forcefully about needing to control inflation.
ECB President Christine Lagarde said she feels “we still have ground to cover” and thinks “we will very likely hike again in July.” Bank of Japan Governor Kazuo Ueda said his institution could tighten its ultra-loose policy if inflation doesn’t ease up, while Bank of England Governor Andrew Bailey stressed the importance of bringing down prices and said he wouldn’t consider raising the 2% inflation target.
“It’s going to take some time. Inflation has proven to be more persistent than we expected and not less,” Powell said. “Of course, if that day comes when that turns around, that’ll be great. But we don’t expect that.” More

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Federal Reserve Chairman Jerome Powell and other global central bank leaders speak Wednesday at a monetary policy forum in Sintra, Portugal.

Joining Powell at the event, presented by the European Central Bank, are ECB President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Japan Governor Kazuo Ueda.
The forum comes two weeks after Powell and his Fed colleagues decided to take what is expected to be a temporary respite from a series of 10 consecutive interest rate increases that began in March 2022. Other central banks, though, have continued to be aggressive in the fight against inflation, with the ECB and Bank of England both recently announcing rate hikes.
Markets expect the Fed to approve one more 0.25 percentage point rise at its July meeting, then go on hold as officials observe the impact that the increases are having on the economy. Fed officials at the June meeting, though, penciled in two more hikes.
Read more:Powell expects more Fed rate hikes ahead as inflation fight ‘has a long way to go’Fed Chair Powell says smaller banks likely will be exempt from higher capital requirementsListen to the music play: Fed Chair Jerome Powell admits to being a Deadhead
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Boxes of General Mills Lucky Charms cereal are displayed on a shelf at a Safeway store April 18, 2022 in San Anselmo, California.
Justin Sullivan | Getty Images

Check out the companies making headlines in premarket trading.
General Mills — Shares dropped 3.9% following mixed fiscal fourth-quarter results. The Betty Crocker and Cheerios owner beat Wall Street expectations on earnings, reporting $1.12 in adjusted earnings per share against a Refinitiv consensus estimate of $1.07 per share. But General Mills missed on revenue, posting $5.03 billion while analysts forecasted $5.17 billion.

Nvidia, Advanced Micro Devices — The chip stocks lost 3.1% and 2.8%, respectively, after The Wall Street Journal reported that the Biden administration was looking at possible new restrictions on exporting artificial intelligence chips to China. The iShares Semiconductor ETF (SOXX) slipped more than 2%.
Pinterest — Shares of the social media platform jumped nearly 5% in the premarket after Wells Fargo upgraded the stock to overweight from equal weight. The Wall Street bank said Pinterest is making the strategic move to outsource monetization to third-parties to overcome its attribution and scale challenges, including a partnership with Amazon.
Snowflake — The data cloud stock rose 1.7% in premarket trading coming off the company’s investor day on Tuesday, at which it reiterated full-year guidance. Goldman Sachs reiterated its buy rating on the stock following the event, while Morgan Stanley said it would stay overweight.
ZoomInfo — Shares of the software company added 3.9% in premarket trading after Needham initiated coverage of ZoomInfo with a buy rating. Needham said in a note to clients that ZoomInfo has “best in class unit economics.” Morgan Stanley also reiterated its overweight rating on ZoomInfo.
— CNBC’s Yun Li and Jesse Pound contributed reporting More

Earlier this month, the ECB hiked its main rate by 25 basis points to 3.5%, making the latest in a series of increases since July 2022, as policymakers strive to reel in record-high inflation in the euro zone.
“Where I do think the market should ask itself questions is about the timing or the speed of reversal of restrictive policy,” Lane told CNBC on Tuesday.

Philip Lane, chief economist of the European Central Bank.
Bloomberg | Bloomberg | Getty Images

European Central Bank Chief Economist Philip Lane on Tuesday warned markets against pricing in cuts to interest rates within the next two years.
Earlier this month, the ECB hiked its main rate by 25 basis points to 3.5%, making the latest in a series of increases since July 2022, as policymakers strive to reel in record-high inflation in the euro zone.

Headline inflation across the bloc came in at an annual 6.1% in May, down from 7% the previous month. Core inflation, which excludes volatile food and energy prices, was 5.3% year on year. Both remained well above the ECB’s 2% target.
Speaking to CNBC’s Annette Weisbach at the Sintra central bank meeting in Portugal on Tuesday, the former Central Bank of Ireland governor said the euro zone economy is in an “adjustment phase,” as higher rates feed through and wages attempt to catch up with price increases.
“Where I do think the market should ask itself questions is about the timing or the speed of reversal of restrictive policy,” Lane said.
“We will not be back towards 2% for a couple of years. We will make good progress even this year, especially in the later part of the year, but it’s not going to collapse to 2% within a few months.”
His comments echoed those of ECB President Christine Lagarde, who said in a keynote address Tuesday that the central bank had made “significant progress” but “cannot declare victory yet.”

The ECB has raised rates by 400 basis points since July 2022. Markets have priced in another 25 basis-point increase next month and are mulling a further hike in September, but some economists have speculated that the ECB may have to reverse its monetary tightening, as higher rates push the euro zone economy into reverse.
The U.S. Federal Reserve earlier this month opted to pause its rate hiking cycle, leaving its target rate unchanged. It struck a hawkish tone in pre-empting two further rises this year.
Lane suggested policymakers will need to stay the course and keep monetary conditions restrictive for some time.
“We will have a sustained period where rates need to remain restrictive to make sure we don’t have any new shock that takes us away from 2% and that durability of restrictiveness is very important,” he said.
“When I look at the horizon for the next couple of years, I don’t see rapid rate cuts, so I don’t think it’s appropriate to have rapid rate cuts price in in expectation.” More

Suppose, for a minute, that you are a finance minister in the developing world. At the end of a year in which your tax take has disappointed, you are just about out of money. You could plough what little remains into your health-care system: dollars spent by clinics help control infectious diseases, and there is not much that development experts believe to be a better use of cash. But you could also spend the money constructing an electrical grid that is able to handle a switch to clean energy. In the long run this will mean less pollution, more productive farmland and fewer floods. Which is a wiser use of the marginal dollar: alleviating acute poverty straight away or doing your country’s bit to stop baking the planet?The thought experiment is a simplified version of a dilemma facing global institutions and developing countries. On June 22nd politicians descended on Paris for a summit to design “a new global financial pact”. The aim was to work out how to spread the cost of climate change. Leaders from poor countries turned up in droves; aside from Emmanuel Macron, France’s president, no Western head of state made it. Little surprise, then, that the jamboree ended without rich countries coughing up a single extra dollar. Instead, attendees tinkered with the World Bank and the imf, the biggest of the multilateral agencies that seek to reduce poverty. The lack of action means painful trade-offs lie ahead.After all, a huge amount of money is needed to help poor countries go green. In 2000 the developing world excluding China accounted for less than 30% of annual carbon emissions. By 2030 they will account for the majority. The Grantham Institute, a think-tank at the London School of Economics, estimates that at this point poor countries will need to spend $2.8trn a year in order to reduce emissions and protect their economies. Regardless of changes to the climate, the institute thinks these countries will also need to spend $3trn a year on things like health care and education to keep up poverty-alleviation efforts. This figure could rise. Since covid-19 struck, gains in development indicators, ranging from hiv deaths to the number of people in absolute poverty, have stalled.The world is spending nowhere near such amounts. In 2019, the latest year for which reliable data are available, just $2.4trn went on climate and development combined. According to the Grantham Institute, rich countries and development banks will have to stump up at least $1trn of the annual shortfall (the rest should come direct from the private sector, and from developing countries themselves). In 2009 rich countries agreed to provide $100bn in fresh finance a year by 2020. They have missed the target every year since then, reaching just $83bn in 2020—with much of the money coming from development banks. Excluding climate finance and spending on internal refugees, aid from oecd countries has been flat over the past decade.In a recent article, world leaders including Joe Biden of America, William Ruto of Kenya and Muhammad bin Zayed of the United Arab Emirates wrote that they were convinced “poverty reduction and protection of the planet are converging objectives”. Some policies do indeed provide useful fixes for both. Sustainable agriculture cuts emissions, climate-proofs the food supply and reduces the risk of famine. Mangrove preservation sequesters carbon, stops storm surges and helps provide fishermen with a living. Across the board, damage from climate change makes development more expensive—and halting climate change makes it more affordable.But although alignment is possible, it is also rare. Spending to cut emissions will inevitably be aimed at middle-income countries, which pollute more; spending to cut poverty will be aimed at low-income places, where poor people live. Researchers at the imf, who analysed data from 72 developing countries since 1990, find that there is an unfortunate pattern: a 1% rise in annual gdp is on average followed by a 0.7% rise in emissions. The reasons for this are simple. Growing industries require lots of power. Big, mechanised agriculture requires lots of space; its growth is the main reason for deforestation. The African Development Bank (afdb) reckons that Africa needs 160 gigawatts (gw) of extra capacity by 2025. The continent now generates just 30gw or so of renewable energy. At the African Exim Bank’s recent annual meeting in Accra, the talk was about how to mine metals for the green transition, with little concern about the pollution this would involve. In theory, the next generation of industrialising countries could power their growth using renewable grids, rather than ones that run on oil and gas. Africa has more solar potential than anywhere in the world, as well as plenty of minerals that could be used for batteries. Yet although green growth is possible, it is not happening—replacing old grids and installing new technology is just too expensive for developing countries. To reach net-zero emissions by 2050, the International Energy Agency, an official forecaster, reckons developing countries would have to spend at least $300bn on renewable grids until 2030, five times their current outgoings. Green dreamsThus there is no way around the missing finance. And as the meagre progress in Paris demonstrates, an enormous increase in aid spending is unlikely. After the conference, donor countries and the World Bank now plan to suspend more repayments in the event of extreme-weather disasters, and have recycled from rich countries a modest amount of special drawing rights, a financial instrument the imf allocates to the balance-sheet of every country’s central bank. Where some of the promised finance will come from is yet to be revealed, as are the mechanics of spending it. More ambitious proposals came from African politicians, and included ideas for global taxes and a new international financial institution, as Mr Ruto put it, “not hostage to its shareholders”. They were treated as outlandish. “Taxed by whom? And for whom?” demanded Mr Macron. Even a worldwide tax on shipping, which Mr Macron supports, faces years of political wrangling. “We will forget all about it in a few months,” sighed a finance minister. “There is a clash between the global good and the national interest,” Mr Ruto said. “And the national interest always wins.” This produces two bleak trade-offs. The first concerns priorities for national governments. Given their lack of preparation and sweltering temperatures, developing countries are among the most vulnerable to climate change. In the next couple of decades, pollution and extreme heat will worsen health outcomes. Natural disasters will wreak havoc and impose vast reconstruction costs. But in the short run, governments are unsure how to grow without fossil fuels. Their economies are held back by dodgy electrical grids and insufficient energy, meaning officials are on the hunt for power. Oil, gas and other raw commodities are a valuable source of foreign exchange for countries that export. Without fossil-fuel revenues, at least a dozen poor countries, including Ecuador and Ghana, would face unmanageable debt burdens, according to reports by the imf. Governments are not always responsible with their fossil-fuel bounties—but pollutants have nonetheless paid for billions of dollars in African social spending and pension contributions in recent years.The short-term pressure to find funding for public services is intense. Last year, after paying creditors and civil servants, Zambia had just 13% of its budget remaining. The country is an extreme case, but governments in most of the developing world have little room for manoeuvre. “How do I justify to voters taking away subsidies, school funding and health care to build a waste-processing plant or a big sea wall?” asks a finance minister. “In 20 years of course it will be useful, but it is the cost now that is concerning.” The minister reckons that the cost of building a school in his capital city has doubled in the past decade, owing to the need to make facilities green and resilient. “What about when we have to choose between hospitals treating lung disease and swapping to electric buses?”The result is that developing countries are a long way from the national climate targets first offered at the cop21 meeting in 2015. New coal power plants will provide Indonesia with 60% of its electricity until at least 2030. The associated carbon release will push the country even further from the recent emissions target it submitted to cop. Between 2019 and 2027 Brazilian policymakers, seeking to avoid hydropower shortages that occur thanks to increasingly frequent droughts, plan to spend $500bn on oil and gas. “African countries need a fair exit plan from fossil fuels,” says Mavis Owusu-Gyamfi of the African Centre for Economic Affairs, a think-tank. The Matthew effectWhich brings international financiers to the next trade-off. If the aim is to cut emissions as fast as possible, or to “mitigate” climate change, then the best way to spend is to pump cheap loans and grants into big, middle-income countries. Last year Indonesia’s coal-powered energy industry released more carbon dioxide than sub-Saharan Africa minus South Africa. The country’s coal plants will be profitable until 2050, unless the government is coaxed to retire them early through cheap loans and grants. According to researchers at the imf, some $357bn will need to flow to three big middle-income countries (India, Indonesia and South Africa) each year until 2030 in order to phase out their coal power plants by 2050. Mia Mottley, the prime minister of Barbados, who served as Mr Macron’s co-host for the conference in Paris, is pushing the World Bank to offer middle-income countries the cheap rates it usually reserves for the poorest. Dollars go further in middle-income countries, since it is easier to attract private money. In Paris, Ajay Banga, the World Bank’s new president, led a group brimming with ideas about guarantees and insurance schemes that need concessional finance. Most will land in middle-income countries, where there are big private sectors and doing business is pretty straightforward. Such countries also have more desire for clean energy, which will yield a return, than for costly adaptation to protect against the effects of climate change, which does not bring in cash. “Every month, I have oil-and-gas [companies] knocking on my door. Do you know how much [of the private sector] has knocked to protect my forests? None,” says an African minister. Last year Kenya and rich countries hosted a humanitarian fundraiser for Africa. Advanced economies committed just $2.4bn out of a $7bn target. The biggest climate-finance projects to date are jet-ps—or “Just Energy Transition” packages—made up of loans and grants from banks, rich countries and private businesses, which are intended to shepherd middle-income countries from fossil fuels to cleaner energy. Indonesia’s package is worth $20bn, some $10bn of which comes from other governments at cheap rates. South Africa has won $8.5bn in concessional finance, though Cyril Ramaphosa, the country’s president, unsurprisingly thinks the country deserves still more. Such plans offer a good bang per buck. If Indonesia sticks to its jet-p promises, rather than its national energy plan, it will limit annual power emissions to 290 megatons in 2030. This will involve shutting multiple coal plants and becoming one of the few countries in the world with emissions close to those required for a world with only 1.5°C of warming.Grants are development finance’s gold-dust. With a limited amount to go around, the concern is that low-income countries, which have come to rely on cheap financing, are going to miss out. Ministers in such countries are worried about a lack of finance for their energy transition. Without support, they will be left with stranded assets from investment in fossil-fuel facilities, for which there will be little demand. But they are more worried about having to whittle down spending on health and education. Ultimately, they may have little choice. In 2021 less than a quarter of grants and cheap loans from development outfits went to the poorest countries, down from almost a third a decade earlier. Eighty poor countries, including Nigeria and Pakistan, together received just $22bn in mitigation and adaptation aid in 2021. Last year bilateral aid to sub-Saharan Africa fell by 8%. In Paris, the presidents of both Kenya and Chad held up events in order to criticise rich countries’ paralysis on debt relief. “We would appreciate a little understanding,” complained Mr Ruto. To scant surprise, they did not back Ms Mottley’s campaign for more generous lending to middle-income countries. In private, they also complained about Western hypocrisy. European leaders demand poor countries stop subsidising fossil fuels, and skip developing gas and coal as domestic energy sources altogether, all the while bringing coal power plants online at home and increasing imports of gas from Africa. The world’s biggest provider of climate and development finance, the World Bank, is caught between the two aims. Janet Yellen, who as America’s treasury secretary has outsize influence over the institution, spent much of a tour of Africa last year bemoaning the quality of its climate finance. The Centre for Global Development, a think-tank, finds that the 2,500 climate-finance projects the Bank has set up since 2000 have had almost no discernible impact on emissions, or how well prepared countries are for a hotter world. Despite the projects’ stated green intentions, most of the spending went on work that served the Bank’s poverty-alleviation aims. Indeed, part of the reason for the Bank’s troubles when it comes to climate change is that it is geared towards poverty alleviation. It is planning to set up a new system to track the impact of money it spends on climate change. Yet there are a number of suggestions for how it could go further. These range from devoting extra lending to climate change, which already receives more than a third of its total, to changing the criteria by which its bankers get bonuses, from the amount of loans they get out the door to the amount of private-sector finance they crowd in. Such proposals feed fears among low-income countries that fixing the World Bank risks diminishing the flow of funds for poverty alleviation. Financial troubleBehind the scenes in Paris, faultlines solidified. Some in international finance think climate is now the priority. They argue that if there is no planet on which to live, poverty alleviation is besides the point. “We have been talking about development for 40 years,” says Vera Songwe of the Grantham Institute. “This is a luxury we do not have with climate.” The hope is that some countries will get rich off the green transition. Regardless, all countries need to eliminate net emissions, this camp argues, including those in Africa, some of which emit next to nothing. Vast amounts of finance should be diverted to those that currently emit the most. Compromises should be made to get private capital on board. Multilateral development banks need new criteria by which to judge their lending, and governments help spending their climate finance effectively. Others disagree. “Please do not make [climate finance come] at the expense of basic investments in human capital,” says Mark Suzman, chief executive of the Gates Foundation, a charity. The green transition, argues this group, will only work if a productivity boost from gains in health and education for skilled workers lays the groundwork. The group’s members wonder if middle-income countries need quite as much help as they claim. The poorest countries should get climate finance for adaptation, they argue, rather than stuff that comes with emissions limits attached.What counts as adaptation finance is an early flashpoint in this debate. The development camp counts spending to increase “climate resilience”, which includes things like schools with storm drains, as well as teaching children about green tech. The climate camp calls some of this “greenwashing”. The idea that international financiers are having this debate between themselves—rather than giving the main say about what to do with such cash to developing countries—is making local ministers furious. Even smaller institutions are taking sides. The Asian Investment and Infrastructure Bank, an outfit led by China, is considering shifting all of its lending to climate finance. Unlike the World Bank, it is not beholden to poverty alleviation. “It [poverty alleviation] will become a second-order priority,” shrugs one official. While reporting this article, your correspondent spoke to more than 20 economists, financiers and policymakers involved in the debate. When asked whether climate or development should be the ultimate priority, their allegiances were evenly divided. As the world gets hotter and poverty becomes no less pressing, the schism will only widen. ■ More

Lordstown Motors Corp Chief Executive Steve Burns poses with a prototype of the electric vehicle start-up’s Endurance pickup truck, which it will begin building in the second half of 2021, at the company’s plant in Lordstown, Ohio, U.S. June 25, 2020.
Lordstown Motors | Reuters

Check out the companies making headlines in midday trading.
Lordstown Motors — The embattled electric truck maker dropped more than 17% after filling for bankruptcy. Lordstown is also suing Taiwanese manufacturer Foxconn over a $170 million funding deal.

Walgreens Boots Alliance  — Shares tumbled 9.3% after the retail pharmacy chain lowered its full-year earnings guidance to $4 to $4.05 per share from its previous forecast of $4.45 to $4.65 per share. Walgreens also reported adjusted earnings per share for its fiscal third quarter of $1, missing a Refinitiv forecast of $1.07.
Delta Air Lines — Shares rose 6.8% after the airline put its forecast for full-year earnings at $6 per share, at the high end end of the previously set range. Delta said it has been helped by strong demand and customers opting for more expensive fare classes.
American Equity Investment Life — The insurance firm’s stock popped about 17.2% following a report by Bloomberg News that Canadian investment firm Brookfield was close to making a deal to buy American Equity Investment Life for approximately $4.3 billion.
Cruise stocks — Carnival climbed 8.8%, reversing course after tumbling Monday. The cruise line reported a smaller than expected loss for its second quarter, while also giving strong guidance. Royal Caribbean and Norwegian advanced 4.3% and 5.7%, respectively, after also taking a leg down on Monday.
Generac — The generator stock climbed 8.8% after Bloomberg News reported that Generac CEO Aaron Jadgfeld said the company was seeing a “dramatic increase” in demand in the Texas region.

Roblox — The gaming platform popped 6.7% after Bank of America reiterated its buy rating, saying the stock is a leader in the Metaverse category.
Meta Platforms — The big technology stock added 3.1% after Citi reiterated its buy rating. The firm said its particularly optimistic about Reels.
Kellogg — Kellogg traded 1.7% higher on the back of an upgrade to buy from neutral by Goldman Sachs. The Wall Street firm said shares were mispriced given the growth potential for investors.
Nike — The athletic retailer added 1.7% after Oppenheimer reiterated its outperform rating ahead of earnings later this week.
Frontier Communications — Shares rose 8.1% on the back of Wolfe Research initiating coverage of the stock at outperform. Wolfe said the company has leading speed and reliability.
Coterra Energy — Coterra added 1.3% on the back of an upgrade from JPMorgan to overweight from neutral. JPMorgan said shares are attractively valued.
Unity Software — The gaming software stock jumped 15.4% after Wells Fargo initiated coverage of Unity with an overweight rating. Negative sentiment about the metaverse has overshadowed the stronger aspects of Unity’s business, Wells Fargo said in a note to clients.
Saia — The transportation stock rose 6.3% on the back of Evercore ISI upgrade to outperform from in line. The firm said risk seems skewed to the upside.
Wingstop — Shares gained 3.9% after Northcoast upgraded Wingstop to buy from neutral, citing the potential for the growth story to keep it as an industry leader.
Cars.com — Shares advanced 5.9% following JPMorgan’s initiation of the online auto marketplace at overweight. The firm called the stock a safe place to hide in this tough macroeconomic environment.
— CNBC’s Jesse Pound and Michelle Fox contributed reporting More