8 ★ FINANCIAL TIMES Friday6 March 2020
System forces the focus
on a shorter time horizon
“Short-termism” is easily criticised
(“ Pension fund giants team up in
attack on ‘short-termism’ , FT.com,”
March 4). GPIF, Calstrs and USS, the
three pension funds cited, have long-
term liabilities and it is entirely
appropriate for them to invest with a
long-term investment horizon. On the
other hand, pension fund trustees have
a fiduciary obligation to monitor
performance at frequent intervals and
to enforce change when it appears
appropriate.
An asset manager may be able to talk
its way out of a few quarters of
substandard performance, but trustees
would be in breach of their obligations
if they permitted the poor performance
to persist for too long. Hence, asset
managers should not be criticised for
being focused on a horizon shorter
than the clients’ liabilities. The system
forces this on them.
Dr Paul Dawson
Olancha, CA, USTrustees can demand
more from managers
As the investment industry evolves,
investing responsibly and sustainably
is becoming accessible to all investors.
Doing so is starting to become the
norm. Indeed, the FT reported recently
that net inflows to sustainable funds
almost quadrupled to more than $20bn
in 2019 compared with the previous
year (“Record sums deployed into
sustainable investment funds”, FTfm,
January 20). The growth in the market
of “sustainable funds” is tremendous,
and the funds available invest across a
range of themes and geographies and
employ varying strategies.
Policymakers are demanding that
asset owners such as pension schemes
take a more active role in considering
environmental, social and governance
issues within their portfolios, driving
some of these flows. However, ongoing
research highlights that there is a vast
disparity in the approaches taken by
fund managers, and on closer
inspection funds’ actions may not be
matching their words. This highlights
the need for trustees to cut through the
marketing to the underlying mechanics
and investments to ensure that they
are aligned with their expectations and
those of their members.
Pension scheme trustees in the UK
alone collectively control £1.6tn of
assets. With this huge firepower attheir disposal, they could be driving
meaningful change. They should not be
afraid to challenge and demand more
of managers. Sitting on the sidelines is
no longer an option. After all, they are
investing for a lifetime and their
members, the ultimate beneficiaries,
are starting to challenge how their
scheme’s assets are being invested.
Sarita Gosrani
Head of ESG Research,
XPS Pensions Group,
Leeds, UKFish stocks’ exploitation
must be regulated jointly
On fisheries, UK prime minister Boris
Johnson wants “annual access deals
with the EU in the same way as Norway
or Iceland” (“Johnson abandons
pledges to Brussels”, February 27). But
if Mr Johnson thinks that this type of
deal gives Norway and Iceland full
control over which EU nations are
allowed to fish in their waters, he is
mistaken.
As far as Norway is concerned, its
annual fishing negotiations with the EU
are still regulated by a framework
agreement negotiated in 1977. Since the
primary purpose of this agreement is to
prevent overfishing of fish stocks that
migrate between the adjacent zones of
the two parties, it establishes a
negotiating procedure that begins with
the setting of a total allowable catch
(TAC) — based on scientific advice —
for each of those stocks. Only after this
has been done does the agenda move to
the other important issue: how to
distribute these TACs between the
fishermen of the two parties.On the particular day in 1977 when
this second issue came up, it fell on the
undersigned, as deputy leader of the
Norwegian delegation, to speak for us. I
did this after the EU (then EC) had
outlined its own thinking. What it had
suggested was a distribution of the
TACs based on how much Norway and
each of the individual EC nations had
fished in the area before — thus
treating Norway as just another EC
member. Unsurprisingly this was not
acceptable to us. I made it clear that for
the EC the annual quota distribution
would have to come in two parts — first
one with us, then one between its own
members for the further distribution of
what had emerged as the EC’s quota in
its negotiations with us. On this latter
question we would not expect to have
any say.
It goes without saying that fish stocks
which migrate to and fro across the
border between two adjacent zones
cannot be subject to the “full control”
of either zone. Their exploitation must
be regulated by a joint management
system, preferably one that sets the
long-term sustainable yield of the
stocks as its most important objective.
This is what Norway’s framework
agreement with the EU does. But it
means that neither party can have its
cake and eat it too.
Helge Vindenes
Padstow, Cornwall, UKBrainard has no way
of producing inflation
Fed governor Lael Brainardhas
proposed Japan-style “yield curvea
control”, where the Fed sends short-
term rates to zero, then puts caps on
medium-term yields as well, as a kind
of credible promise that it will keep
rates lower for longer. Japan ended up
in a liquidity trap.
As you have reported, Ms Brainard
also has athree-point plan or the nextf
crash: “First, the Fed should act
quickly. Second, it should commit to
capping interest rates on Treasuries
over the short and medium term.
Third, it should offer forward guidance
that it intended to overshoot its
inflation target until it had reached an
average of 2 per cent over time.”
We are into Wizard of Oz territory.
Ms Brainard has no way to produce
inflation. There is no way back to
equilibrium from a liquidity trap. Debt
is out of control. Pay no attention to the
lady behind the curtain.
Cathal Rabbitte
Villars sur Ollon, SwitzerlandThe British love a good spy story.
From James Bond to George Smiley,
from the Scarlet Pimpernel to Richard
Hannay, chilling tales of agents
negotiating the shadowlands of the
cold war, or foilingthe murderous
plans ofrevolutionaries, have long
enjoyed a following of avid readers.
On one level the attraction is
obvious. Nail-biting storylines set
against a contemporary political
canvass make for compelling reading.
Yet, according toJohn le Carré, there
is also something else at play. The
master spy novelist, who has spent
decades operatingin the no man’s
land between fact and fiction, between
secrets and spies, was quick to offer an
expert diagnosis when askedthis
week to explain the British fascination
for espionage. In the end it comes
down to two strands of the British
character: “Latent imperialism and
hypocrisy.”
Spoofery, he added in a discussion
at the German embassy in London,
encapsulates many of the frailties of
human nature — not being “real” to
oneself. It also taps into profound
flaws in the British establishment,
such as the reluctance to look at their
own, which proved so deadly with the
failure to unmask double agents such
as Kim Philby.
Spying has also beenenduring and
essential to British exercise of power.
Mr le Carré (real name David
Cornwell) cited Rudyard Kipling’s
character Kim and his covertactivities
during the “Great Game” tussle
between Britain and Russia in Asia.While a work of fiction, Kipling’s
novel reflected a reality. Required to
manage huge expanses of territory
and people with limited resources,
imperial administrators leaned
heavily on spycraft and intelligence.
The system has operated for
decades — and may now be in
increasing demand as the UK readies
itself for life after Brexit, when limited
resources will affect the pursuit of
“Global Britain”. Mr le Carré believes
that spooks will certainly not be short
of work. However, he adds that the
game is now played on a much bigger,
more complex scale than when he was
learning spycraft in the early decades
of the cold war.
Mr le Carré has recently returned to
those years through work, withtwo of
his sons, on a television adaptation of
The Spy Who Came In From The Cold,
the 1963 novel that established his
name and is a classic of the spy genre.
Yet his focus is also very much on the
present. Brexit remains a source of
anguish and deep concern for a self-
identifying British patriot who sought
refuge from ableak, damaging
childhoodin German culture.
Mr le Carré says he is also alarmed
at the prospect of a morally aimless
“Etonian society” emanating from the
top of government. It is a subject he
confronts in his most recent book,
Agent Running in the Field, in which the
school of future moguls, mandarins
and monarchs gets an expletive-laden
bashing. One wonders whether Mr le
Carré, a former Eton teacher, might be
working off some issues.The book raises a potential dilemma
he sees facing UK secret services today
in a world where “our allegiances are
fluid”. What should they do if they
uncovered definitive proof of some
supreme skulduggery — White House
connivance with Russia, say — that
was almost too dangerous, or too
embarrassing, to act upon? “What do
you do? Just quash it?” he asks.
Such questions are not totally
alien to Mr le Carré. He was
recruited by the intelligence services
while at Oxford and kept an eye on
fellow undergraduates. One of them, a
close university friend, was present at
this week’s event and took the chance
to ask whether the author had spied
on him. “I wish,” came the dismissive,
if not wholly conclusive-sounding,
reply.
His adventures — in life and on the
pages — over the subsequent decades
have bred a less misty-eyed view of
the true nature of the intelligence
world thansome readers might have.
Mr le Carré recalls the story f theo
chipped green safe that stood in the
office of Britain’s top spy.
Unopened for years, no one seemed
to know what great secrets it held.
Only when the service moved offices
was the safe sprungto reveal... a
pair of trousers belonging to Rudolph
Hess, Hitler’s deputy, along with a
note from a past leader requesting
that they be analysed as they“may
give an idea of the state of the German
textile industry”.[email protected]How Brexit
brings the spies
in from the cold
Notebook
by Frederick Studemann
With reference to your report
“Cyprus attacks Ankara’s refugee
stance” (March 3): Nicos Anastasiades,
the president of Cyprus, was right to
ask who is creating the refugee
problem. But perhaps he should be
looking to his EU partners for the
answer.
For all the accusations of “blackmail”
against Turkey, the Cypriot leader
conveniently glides over the EU’s role
in the present crisis. The retreat of
Nato and Cyprus’s EU allies from Syria
has given the Assad regime, backed by
Russia, carte blanche to pursue its
murderous campaign against civilians
in Idlib. The vacuum of western
leadership in Syria has enabled the
humanitarian crisis we see today.
Turkey is already under enormouspressure to support its 3.6m refugees —
the most hosted by any country in the
world — with access to healthcare,
education and employment. With the
Assad regime hell bent on wiping out
the buffer zone agreed in last year’s
Sochi agreement, Turkey has been left
with few good options. The prospect of
another million or more refugees
arriving and the disintegration of any
safe haven in Syria for their eventual
return posed an almost existential
problem for Ankara. Military
intervention against Bashar al-Assad’s
regime was viewed as its least bad
response.
President Recep Tayyip Erdogan’s
recent decision to open the borders for
refugees into Europe is undoubtedly a
ploy to force the EU to act in Syria — orshare the burden of inaction. But until
European leaders recognise the
severity of the crisis facing their
Turkish ally, their loud recriminations
will continue to fall on deaf ears in
Ankara.
Mr Erdogan’s previous interventions
in Syria and Libya have dismayed
many in Europe. But the latest
humanitarian crisis in Idlib calls for
understanding for Turkey’s
predicament and the integral role it has
played in addressing the refugee
problem. As another crisis looms, now
is the time for Europe to step up and
give Turkey its full support.
Sir Richard Ottaway
Bletchingley, Surrey, UK
Chairman, Foreign Affairs Select
Committee 2010-Ankara has been left with few good options
Letters
F R I DAY6 M A R C H 2 0 2 0Email: [email protected]
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to the FT Editorial Complaints Commissioner: [email protected]OPINION ON FT.COM
Martin Sandbu
Wealthy Americans need not fear Bernie
Sanders’s love of Nordic socialism
http://www.ft.com/opinion‘We still love you, sir’The European Commission’snew cli-
mate law —designed to ensure net zero
emissions in the EU by 2050 — has had
an inauspicious unveiling. Climate
activist Greta Thunberg was among the
signatories of anopen letterdescribing
the proposal as a “surrender” of the
environmental fight. On the opposite
side, diplomats have expressed con-
cerns about proposals to give Brussels
almost unilateral power on climate
targets. Balancing ecological ambitions
and politics is difficult, but there are
clear steps the commission can take.
The most striking suggestion in the
draft document is a proposal to deploy
a “delegated act”, a powerful legal
instrument, in the fight against climate
change. This would allow Brussels to
raise mandatory targets every five
years from 2030 almost unilaterally.
Climate activists have been under-
whelmed by the “2030 perspective”:
the first new emissions target will only
come into effect in a decade. The draft
also failed to provide proposals for
2030 emissions levels. They are due to
be released inSeptember. Member
states including France and Italy argue
that this offers little time for debate
before international climate talks in
November. They have called for a June
release. Activists are also concerned
that the proposed law fails to suggest
binding obligations on the 2030 tar-
gets. Such commitments can play a key
part in ensuring that targets are met.
The ruling that Heathrow airport’s
third runway was unlawful last month
stemmed from a2016 obligation.
The delegated act is also a potential
political stumbling block, with accusa-
tions that it is a “power grab” for the
European Commission. Particular
resistance is to be expected from coal-
heavy Poland, the only member state
to reject the 2050 net zero goal set last
year. Such controversial measures
could stoke tensions between richer
and poorer states, already heightened
by divisions over funding, immigra-
tion, judicial independence and more.
The commission’s first step should be
to publish a 2030 emissions target in
the coming months rather than in Sep-
tember. It should also consider creating
interim targets for the next decade.
Incentivising countries to make prepa-
rations to decarbonise their economies
sooner, through technologies which are
already available, is vital. Waiting 10
years to act risks reliance on break-
through innovations to meet targets.
At the same time, the EU must work
to support member states which are
most dependent on emissions-heavy
fuel sources and industries. The draft
law mentions the need for “a successful
and just transition”: this should factor
in the radical alterations needed to how
governments, business and individuals
operate. Delegated acts may be needed
to motivate recalcitrant member
states, but the commission must do its
best to mitigate their cost.
The EU should also considerthe
global context. A paper released by the
Institute for International Finance this
week said that sustainable financing
was being undermined by the wide
variety of measures used by different
governments. It proposed that
policymakers such as the G20 devise
mechanisms for global alignment.
With such authorities distracted by
Covid-19, the bloc should consider how
its new standards match with other
regulatory frameworks.
In a statement announcing the new
law, European Commission President
Ursula von der Leyen described cli-
mate neutrality as “European destiny”.
This is not a bromide: the EU has taken
an admirable lead in the climate fight.
But its success is not inevitable. It will
require more ambition, political savvy
and an effort to ensure all members see
the value of the Green Deal.Proposals are at once too heavy-handed and insufficiently ambitious
EU’s climate law faces
criticism on all fronts
Recep Tayyip Erdogan’s pivot to Mos-
cow has proved to be a humiliating
experience. The Turkish leader
spurned his western allies after their
perceived lack of solidarity following
the failed coup against him in 2016 and
the ensuing crackdown. After amass-
ing yet more presidential power in a
constitutional overhaul, Mr Erdogan
sought kinship with his Russian coun-
terpart, Vladimir Putin. He invited
Russia to build Turkey’s first nuclear
power plant and pipe gas to Europe
through the country. He incensed Nato
partners by buying aRussian air
defence system, which could help the
Kremlin counter US stealth aircraft.
Yet Turkey this week came close to a
dangerous military confrontation with
Russian forces in north-western Syria,
where the objectives of Ankara and
Moscow collide (as they do in Libya).
Mr Erdogan wants to maintain an
enlarged buffer zone in Idlib to protect
civilians and prevent a further surge of
refugees across the border into Turkey.
Mr Putin is helping the Syrian regime
in asavage offensive o retake controlt
of the whole of Idlib and crush the
rebellion against Bashar al-Assad once
and for all.
Ankara stepped up its operations
after34 Turkish troops ere killed in aw
single attack last week. But, denied
Russian permission to deploy its air
force against Syrian forces and lacking
operational air defences of its own, Mr
Erdogan knows this is a war he cannot
win. The Turkish leader saved faced by
agreeing a ceasefire in talks with Mr
Putin in Moscow yesterday. It could
prevent an escalation for now and will
offer some respite for the 3m people
trapped in horrendous conditions in
Idlib. But Russia and Turkey are still on
collision course and previous deals
between them have collapsed. Fighting
could easily erupt again.
The Turkish leader thought he
would regain leverage and prestige by
joining Mr Putin’s anti-liberal club. But
he has been played by the Kremlin, as
his domestic critics have pointed out.
No wonder he stifled debate in Turkey
after last week’s attack by shutting
access to social media.
Mr Erdogan allowed Mr Putin to
drive a wedge between Nato members.
But it was his Nato allies that Mr
Erdogan turned to last week for assist-
ance after incurring the troop losses.
Having defied Washington over the
Russian air defence system — which is
not yet deployed — he implored the US
to deploy Patriot missiles instead.
Now Mr Erdogan is helping the
Kremlin to drive a wedge between
European states by encouraging refu-
gees and migrants to cross Turkey’s
borders. That has certainly caught the
attention of EU leaders shaken by the
refugee influx in 2015-16 that sowed
division and emboldened far-right par-
ties. He has exposed the vulnerabilities
of a bloc that remains incapable of
devising a new asylum policy.
The3.6m Syrian refugees n Turkeyi
are a huge burden and the country
deserves support. Ankara legitimately
expects the bloc to abide by its prom-
ises to accept more transfers of Syrian
refugees. But seeking backing from
Europe while holding a “knife to its
throat”, as Dutch premier Mark Rutte
put it, will not succeed. In any case,
Europe has no intention of fighting
alongside Turkish forces. Having
shamefully washed its hands of the
Syria problem, it cannot give Mr
Erdogan what he really needs.
The Turkish leader likes to make
Europe quake with his refugee threats,
but it is the Russian leader who is call-
ing the shots. Europeans and Ameri-
cans have abdicated responsibility for
the Syria catastrophe. Mr Erdogan’s
behaviour has given them another
excuse not to reconsider.A renewed Syrian ceasefire offers relief but is unlikely to resolve crisis
Erdogan’s pivot to Putin
has left Turkey weaker
$360bn hit to oil majors
may be tip of an iceberg
In this era of inconvenient truths
related to climate change, stranded
assets can be added to the list. Indeed,
for many, but certainly not all, they are
there already. Patrick Jenkins rightly
observes that “in our warming world,
stranded energy assets are a growing
concern” (Inside Business, March 3).
The potential $360bn hit to the value
of the leading oil companies under a 2C
global warming scenario is huge. But it
may be simply the tip of a melting
global iceberg that not only threatens
the market value of the energy sector,
but would also bring damaging ripple
effects to the capital base of the
financial sector that provides funding
and insurance to these assets. This, in
turn, affects the portfolios of asset
managers and pension funds with
direct or indirect exposure to stranded
assets — and makes this a matter of
both corporate governance and
investor stewardship.
Whether it comes from central bank
regulators or accounting standard
setters — or both — investors would
benefit from clear and objective
standards that can help them assess
both the near and long-term financial
impacts of stranded assets to guide
their investment decisions. Many
leading institutional investors,
including investor bodies such as the
International Corporate Governance
Network, have recognised that climate
change is a critical systemic risk that
threatens healthy markets, economies
and societies.
It may be a bitter pill to swallow, but
without better understanding and
concrete behaviour change relating to
energy financing and the valuation of
stranded assets, the investment
community may be speaking nobly,
but simply kicking the can down an
unsustainable road.
George S Dallas
Policy Director,
International Corporate Governance
Network (ICGN),
London EC1, UKExample of an expert who
could also ‘speak human’
As an academic, I can only agree with
Michael Skapinker (“Why ‘garbage
language’ should not be banished from
workplaces”, FT.com March 3) when he
points to the tension between, on the
one hand, insiders’ frequent resort to
jargon-laden shorthand when
conversing with their colleagues and,
on the other, the requirement that they
should also communicate clearly with
“outsiders”.
He’s also absolutely right to forgive
Mark Zuckerberg for his use of “voice”
without an article or a possessive
pronoun. After all, one of the most
illuminating books I’ve ever read
(indeed, one that could usefully be
read by any FT reader) isExit, Voice,
and Loyalty: Responses to Decline in
Firms, Organizations, and Stateswritten
back in 1970 by Albert O Hirschman —
himself a brilliant example of an expert
who could also “speak human”.
Tim Bale
Professor of Politics,
Queen Mary University of London, UKMARCH 6 2020 Section:Features Time: 3/20205/ - 18:46 User: charlotte.middlehurst Page Name:LEADER USA, Part,Page,Edition:USA , 8, 1