In 1994 Bridgewater Associates set up Bridgewater China Partners with ambitions to be one of the biggest investors in China. The hedge fund invited a few pension funds to partner in the venture and began exploring opportunities, but a year in the set-up hadn’t invested in a single deal and was wound down on doubts that it would ever be profitable. Today the challenges of investing in China are just as real. Caught in an anecdote from one of Bridgewater’s China experts, who when recently scouting securities in the region, met the owner of a company who questioned paying dividends to someone he didn’t know.

“This is what you are dealing with: don’t be naive,” said Bob Prince co-chief investment officer at the $160 billion hedge fund, speaking to the board of the $41 billion University of Texas Investment Management Co at their September board meeting.

UTIMCO made its’ first investment in China in 2007 and now has a $2 billion-plus exposure divided between eight in-country relationships in public ($1.6 billion) and better-returning private ($800 million) investments in what UTIMCO CIO Britt Harris characterised as putting in the “small boats” first.

Yet he said China’s growing share of global GDP (currently 15 per cent) has implications for the entire world. Despite his circumspection that communism and China’s “terrible” demographics will continue to propel growth, plus key difficulties around building trusted relationships with Chinese partners that leaves most US investors approaching China through US centric firms with mixed results, he said China must “be taken seriously.”

From Bridgewater, which manages around $700 million in pure alpha and all-weather allocations for the endowment, the message was clear. China is too big to avoid; engagement is the only way forward.

Cross the river by feeling the stones

Developing a China strategy now will ready investors for what lies ahead. Although returns are important (though Prince noted at the moment Bridgewater “could do just as well elsewhere”) the most fruitful consequence of investing in China today comes from the experience and knowledge it brings tomorrow.

“If you are only looking at investments as a return stream, you are missing an opportunity,” he said.

Bridgewater invests in a diversified, balanced portfolio of assets avoiding individual stocks and private investments. In some cases, the fund also holds derivatives rather than the underlying security to still price in risk premiums across Chinese markets. The emphasis is on diversification at the asset class level to capture the economics of what is going on.

The approach gives the firm a window into discounted growth and inflation rates across markets, what risk premiums are doing and their effect on different assets, and how policy and the impact of the Chinese government running monetary and fiscal policy together, drives these forces. “This is our base builder to be informed and ready for the next decade,” said Prince who told UTCIMO’s gathered board it was only a matter of 10-15 years until China’s economic landscape has unfolded to the extent publicly traded liquid markets match the size of the US.

Bloc exposure

Investors can access China in a variety of ways from holding assets in a “degree of intimacy” that allows them to sit on boards and get involved in governance, to investing in US companies like INTEL with large exposures to China. “There are ways to bet on China without holding China,” he said. Investing in an emerging Asian bloc offers some of the most compelling opportunities under this umbrella.

China is driving growth across an Asian bloc of interconnected peripheral economies like South Korea, Singapore and Thailand that has led to an independent economic zone. Here, Prince argued, the output and contribution to global growth is comparable to the US plus Europe.

“It’s hard to wrap your head around it,” he said. “The bloc’s contribution to global growth in the last three years has been two and a half times the contribution to global growth of the US plus Europe in a period the US and Europe were growing.”

Although the cashflows, mostly going through bloc companies are huge, the securitization of those cash flows is still small and financial markets are undeveloped. The future will see continued growth of cashflows and securitization, and markets will become increasingly accessible, he said.
Analysis of the bloc illustrates that China and the wider region is no longer just an export engine. Exports are levelling off and GDP is accelerating, driven by internal economic activity from thriving entrepreneurial businesses in the zone. The region’s independence and inward focus has implications for its historical dependence on the dollar and foreshadows the emergence of an independent monetary and credit system in the RNB. “It will be the third monetary and credit system in the world. You got the dollar and the euro, and you’re going to have the RNB,” said Prince. The growth of two monetary systems to three offers investors huge opportunity, particularly around diversification, he said.

Chinese businesses have outsourced to the region driven by both the private sector and more recently China’s Belt and Road Initiative (BRI) in a shift that is visible in China’s cost of labour. Rising wages have triggered less FDI into China, which is now investing outside the country into the rest of Asia in a trend fuelled by plentiful sources of capital from savings and foreign exchange reserves.

“If you look at the track record of the rates of return on FDI into the Asia bloc its double digit returns over last five years, compared to the developed world at around 5-6 per cent,” said Prince.

Compounding high growth rates from the bloc’s high levels of output, are even more startling. “If you take the projected growth rates for the Asian bloc, in one year the incremental output will equal today’s Mexican economy. In five years, it will reproduce the Japanese economy and in ten years it will replicate the European economy.” It’s a “mind boggling” trajectory that contrasts with slowing growth in the west and zero and negative interest rates, he said.

Trade war

The emergence of an Asian bloc is also being driven by China’s increasingly testy relationship with the US, incentivising independence as a matter of self-defence. China’s expansion should also be placed in historical context, said Bridgewater’s Ramsen Betfarhad, a senior research associate at the firm who was also presenting at the UTIMCO board.

“China was a great power and it’s natural destiny is to revert back to being a great power,” he said.

In 2049, the communist party will have been at the country’s helm for 100 years and is determined to place China back in the global order. It is a narrative that explains China’s growing military presence that resonates with the US and beyond, he said.

Roll over

Today’s trade conflict is a manifestation of a longer-term ideological conflict of two different systems, said Prince.

“The big point is that this is not a trade issue. It is deeper and longer lasting and it depends on how well it is managed by both sides.”

Key clash points lie around the corner. Over the next ten years the US will roll over an estimated 25 per cent of GDP in treasury debt every year, a process that normally attracts little attention. However, the holders of most of this debt are Japan and China with an estimated $1 trillion each. If China decides not to roll over its existing holdings it will push Treasury prices down and yields up in a sell off that will drive the dollar down and the RNB higher, leading to a “capital war” of potentially spiralling consequence.

The crucial questions is how much China might decide to sell, flags Prince.

“Let’s just say, for example, they don’t’ roll over $100 billion. $100 billion in the US treasury market is material but not significant and would blend in with the size of other flows from mutual funds and pension funds. It would have a market impact, but it would not destroy the market.”

One of the reasons 2015 proved a tough year for US equities gripped by tightening liquidity and rising risk premiums, was because of China’s balance of payments and currency policy. As China tried to defend its currency peg it sold foreign exchange assets pushing risk premiums up and prices down in a policy that ended when it let its currency move to a more floating rate within bands.

“It was all going on and most of the world didn’t read about it,” said Prince. His conclusion: “China’s too big to avoid. It’s all about how you engage.”

In my most recent blog in the lead-up to the UN Secretary General’s Climate Summit, I reflected on feeling energised, a sentiment shared with many others arriving in New York. There was a distinct impression that momentum for change was growing, particularly following the success of the worldwide climate strikes. Like many others, however, I left the week feeling slightly despondent, wondering whether many people in positions of authority — in politics, business and finance — are listening.

That’s not say there wasn’t progress and positive initiatives coming out of the week. Among them, the PRI and UNEPI launched the Asset Owner Alliance, a leading group of institutional investors which have come together and committed to net-zero targets by 2050. The finance sector also announced and supported other initiatives including the new Principles for Responsible Banking.

Seventy-seven countries have now set net zero targets, although the largest emitters are noticeably absent from the list. But these individual activities do not get us where we need to go. The finance sector, investors and business must move further, faster.

Last week Climate Action 100+, the five-year investor engagement program with the world’s largest corporate emitters, of which PRI is a part, published its annual progress report, and there was plenty to be pleased about. CA 100+ is continuing to grow with over 370 investors now taking part, representing $35 trillion in AUM and focussing on 161 companies across 33 markets.

The CA100+ report highlights many examples of successful engagements, such as Equinor and BP committing to deliver strategies consistent with the Paris Agreement, Shell linking remuneration to the energy transition and Rio Tinto exiting coal. Net zero directions have emerged from corporates including Nestle, Thyssenkrupp, ArcelorMittal and BHP.

The report also focusses on Asia, the source of nearly half of all global emissions, and the deepening of frameworks and practices for investor-to-company engagement. We are starting to see some success here. One example is Petro China disclosing a climate change strategy and a plan to align with the Paris Agreement.

Again, we see good individual outcomes and the investors involved should be pleased with their progress. Yet, when we step back from the individual actions and look at the wider situation, the recent report from the Transition Pathway Initiative (TPI) provides sobering context. TPI’s analysis shows in the vital energy sector that while 70 per cent of companies have set long term targets for reducing GHG emissions, only 9 per cent have targets aligned with the IEA 2 degree scenarios. Only 40 per cent of companies undertake and disclose climate scenario analysis and disturbingly, less than 8 per cent of companies have alignment between the lobbying undertaken by their association and their stated policy position.

As an industry we must acknowledge that one of the key reasons that the world is so far off the curve in limiting the world to 2 degrees, let alone 1.5 degrees of warming, is that the negative corporate climate lobbying is winning the day with delay, obfuscation and denial. In turn this slows political, financial and business action.

Lobby groups and trade associations should be coordinating their industry sectors and members on TCFD compliance, brown to green transition plans and development of zero carbon business models. My own home country, Australia, provides a telling example. The Australian Prime Minister spoke at the General Assembly, telling world that Australia was taking “real action” on climate change, but was later fact checked in several quarters and found seriously wanting.

Distressingly, one area where Australia is clearly punching above its weight was revealed by the latest Influence Map report on trade groups. It lists the Minerals Council of Australia (MCA), the Business Council of Australia (BCA) and the Australian Petroleum Production and Exploration Association (APPEA) as prominent in negative trade associations on climate progress, with the MCA securing a position in the global top ten.

Coming out of New York, it seemed the millions of voices from a week before calling for action by the decision-makers weren’t enough. For every call made for policy-makers, finance and corporations to act to speed the climate transition in markets, investment and capital allocation towards zero carbon, there remains powerful, countervailing voices and obstacles against action. Civil society want these obstacles removed. Long-term investors want climate risks addressed, opportunities grasped and the creation of long-term value.

One of the objectives of CA100+, when it was formed two years ago, was to improve governance and accountability around corporate and board alignment with the Paris goals and to limit warming to below 2 degrees. Our progress report shows that only 8 per cent of the world’s largest corporate emitters have policies in place to ensure their lobbying activity is aligned with necessary action on climate change.

Companies that talk one way on climate, while behind the scenes the industry associations they fund walk the other way, undermining climate action, are increasingly facing public challenge and questions over their social licence to operate. If we are to address the climate emergency, political leaders, business, finance and civil society all need to be working together to overcome the many obstacles to transition.

Negative corporate climate lobbying has long been identified as an obstacle. It remains an obstacle. The message to corporate boards could not be clearer: you have straightforward choices — if you can’t reform these associations you need to resign from them.

Fiona Reynolds is the chief executive of PRI

Just as some of the world’s largest pensions funds sell down their fixed income holdings in favour of equities and private assets, Ontario Teachers’ Pension Plan has been buying more in 2019 as it seeks to rebalance the portfolio in the event of an economic downturn.
By the middle of the year, bonds made up 36 per cent of their C$201.4 billion portfolio, up from 31 per cent in December. That took their total fixed income exposure to 47 per cent and compares to 33 per cent in 2017. The weighted average allocation to fixed income among the world’s 20 largest pension funds is 37.2 per cent and just 19.4 per cent for North America.
Canada’s second-largest pension plan, which has been fully funded for six consecutive years, has also sought to take advantage of rising bond yields. And in the first half of 2019 that bet paid off with a total fund net return of 6.3 per cent. Their portfolio is a mix of Canadian and international government, provincial, and real-return bonds.
Chief Investment Officer Ziad Hindo said fixed income led the pension fund’s positive performance in the first half. He said increasing their allocation to bonds was part of their strategy over the last few years to have a more “balanced approach” to risk.
OTPP is one of the consistently best performing funds in the world. As at December 31, it had an annualised total fund net return of 9.7 per cent since inception. The five- and 10-year net returns were 8 per cent and 10.1 per cent, respectively.

To help fund the rebalance, the Canadian pension fund reduced their holdings in real assets in the first half, taking some money out of real estate and selling out of so-called real-rate products. They largely maintained their allocation to equities to make up 34 per cent of the portfolio.
Their bond-buying strategy comes as interest rates around the world move towards zero to help stave off recession, placing further pressure on institutional investors to find alternative sources of yield. Already this year central bankers have cut rates 32 times, according to Bloomberg, and the swap rate market suggests there is more to come over the next 12 months.
California Public Employees’ Retirement System’s CIO Ben Meng said in June that buying bonds in the absence of higher interest rates was not an option. At the time, its allocation to fixed income sat at 28 per cent. And at a September investment committee meeting, head of global fixed income Arnold Phillips said they may have to “rethink the assumptions” in asset allocation as rates shift towards zero.
Tom Tull, CIO of the $28 billion Employees Retirement System of Texas, said last month at an Investment Magazine conference in Sydney that with interest rates where they are, they were allocating more money to alternatives. And the $110 billion State of Wisconsin Investment Board has sold out of government bonds into cash, with CIO David Villa saying that they are too expensive.
But OTPP’s outgoing chief executive officer Ron Mock said the fund’s focus was to deliver “stable” returns through a “variety of market conditions.” He said the balanced portfolio approach was delivering strong returns in line with long-term objectives.

William Haseltine had a long career at Harvard Medical School where he was at the forefront of medical research and application. He educated a generation of doctors, designed the strategy to develop the first treatment for HIV/AIDS, and led the team that pioneered the development of new drugs based on information from the human genome. He addressed the Fiduciary Investors Symposium about important topics in medicine and health development including the role of technology and the intersection of medicine and ethics, and the importance of ensuring that quantum advancements in medical technology translate to improved health outcomes around the world.

Healthcare is one of the most exciting investment opportunities for asset owners, said William Haseltine, chair and president of ACCESS Health International, a nonprofit organisation he cofounded in 2007. Speaking to delegates at the Fiduciary Investors’ Symposium at Harvard University, and drawing on his extraordinary career in both science and business, he outlined the investment opportunities ahead. Healthcare provides opportunities in the short and long-term which range from high-tech to venture through to real estate. It is also continuously fuelled by rising income levels all over the world, he said.

Haseltine expressed his optimism in extending working lives, referencing his sister’s as well as his own, career. Age 78, she recently begun a ten-year post at the University of Texas, while he, at a similar age, is also “receiving a salary, writing lots of books, employed and employing people and still contributing to social security.”

Two areas of startling, transformative, progress include “our understanding of DNA and cells”, he said. Genomics is one area he has particularly focused, harnessing its power to diagnose illnesses where he notes the emergence of personalised medicine. New tools are allowing the sector to understand how genes change, determine DNA sequences leading to synthetic biology and biological manufacturing.

“Just now we are beginning to get pay off in terms of new medicines,” he said.

Elsewhere the “greatest breakthroughs” are being made in cancer medicine, mostly around using our own immune systems to fight cancer. The first phase of cancer treatment focused on cutting the cancer out, next came chemotherapy where “we realised we could kill the cancer a little bit before we killed people.” Then came revolutions around specific drugs for specific cancers, but the challenge here is that cancer changes and adapts. Now new practices centre around immunology. The challenge here is getting our immune systems to fight cancer, but not to the extend we “end up fighting ourselves” and develop auto immune diseases.

“The side-effect of immune therapy is auto immunity. We need to know how to control it,” he said.

There are many other uses of cells, he said. Like taking skin cells and “turning them into the equivalent of a fertilised egg,” or developing special tissues from cells like pieces of brain and blood vessels. Though he said these pioneering methods take years to develop.

“Are we going to be able to use our cells to turn the genetic clock back to zero and replace worn parts? I’m sure we can do it, but it will take a long time.” He said there was a “lot more information” and complexity that goes into making our body than just DNA.

Elsewhere, miniaturisation is changing medicine, allowing experts to use materials and architect them at the same level of our bodies. Robotics are also transforming our ability to develop instruments that read our intentions with life-changing consequences for paralytics, or those suffering from epilepsy.

The structure and delivery of healthcare is also on the cusp of change. In the past we have built big hospitals; in the future we will need distributed healthcare. Rather than people travel to hospitals, medical care will be delivered in the community and home. This is being driven by changes in IT that allow doctors to “know what is going on in the centre and the periphery.” A distributed healthcare system will see out-patient centres in communities, plus education and prevention centres and home care, in a structure that is less costly and what he believes is the “only way” ahead.

It equates to a huge investment opportunity, as does the integration of social care and medicine.

“A lot of the care we need is social care; we don’t always need the doctor,” he said.

He also argued that under a new, distributed healthcare system the goal is for people to be healthy with an emphasis on prevention, whereby treatment is the final option. He also envisages new personalised healthcare whereby the system is constructed to “touch life personally” with tailored programs and personalised information systems.

A full-blown trade war, and changes in monetary policy triggered by a loss of credibility in the Federal Reserve and other global policy institutions, could result in a return of the positive correlation between bonds and stocks. Investors need to be aware of the risk, warned Luis Viceira, George E. Bates Professor in the Finance Unit and Senior Associate Dean for Executive Education at Harvard Business School, speaking at the Fiduciary Investors’ Symposium at Harvard University.

Viceira told delegates that funding liabilities and finding returns looked “as tough as ever” as all asset classes (including alternatives) remained expensive. Today’s environment is in stark contrast to 25 year ago, when buying government bonds netted 8 per cent returns. “This was an amazing world to be in. Today it is more like 2 per cent,” he said. This in turn has led to much flatter yield curves and more volatility in long term rates, he said.

Another change in today’s climate compared to previous decades is a new type of bond risk. In the 70s, 80s and 90s there was a high correlation between fixed income and equities. If the economy was “tanking,” investors would typically flee to liquidity and quality in commodities and cash, rather than government bonds. In contrast, in the last 20 years there has been a negative correlation between stocks and bonds that has seen investors flee from equities into bonds. We are now used to seeing government bonds as a type of hedge, he said.

This has important implications for how investors position their portfolio in the years ahead. Asset allocation is the first driver of performance, and the fundamental correlation between equities and bonds is front of mind for all investors. As bonds have become a hedge that allows pension funds to match their liabilities, so the negative stock/bond correlation has exacerbated risk in what Viceira described as a “perfect storm.”

In every past recession, inflation tended to rise and with it real interest rates as governments pulled monetary policy levers to try to cap rising prices. At this point, investors fled to cash and commodities rather than bonds in a strategy that drove bond prices down and yields up, and moved bonds positively with equities. In this scenario, bonds were not a good hedge, he said.

Since 2000, different trends have been at play. When the economy weakens with recession, inflation falls and interest rates tend to fall too. This has led to a flight to quality to fixed income, pushing prices up and yields down.

“You can see from this how the macro economy is connected to capital markets.”

The behaviour between the equity and bonds markets today amounts to a “huge change” in market dynamics, and something that investors positioning their portfolios for the next 10 years need to keep centre stage.

Viceira also noted the change in importance of supply and demand shocks, and the changing role of monetary policy. In earlier decades, supply shocks acted as a driving force to changes in growth and the business cycle. Monetary policy is also a key source of change. It used to be that monetary policy was primarily focused on curbing inflation with “aggressive counter inflation policies” hiking rates as soon as inflation reared its head. That has all changed. Now the focus is on fighting recession, and monetary policy has become more gradual and accommodating so that interest rates are not deployed at the first sign of inflation anymore.

In today’s market conditions, equities don’t do well, but because inflation also tends to fall, fixed income becomes sought after. In previous decades, supply shocks where the dominant force characterised by low output and higher inflation. In yesterday’s economic environment, fixed income was also a risky asset, he said. Yet today, fixed income does better in a recession, pushing bond prices higher. As interest rates are cut so it exacerbates the negative stock/bond correlation.

Change on the horizon

Viceira flagged that supply shocks, and growing criticism of the credibility of monetary policy, could impact today’s low inflation and flat yield curves in the years to come. The Federal Reserve is facing continued pressure on its credibility.

“There is a strong effort in the US to undermine the Fed,” he said. “We are also seeing this in other economies.”

For example, the ECB is under growing pressure regarding its rate cutting and monetary stimulus plans. This could result in changes of policy that result in bond markets moving in sync with equities once again, leaving equities and bonds down, and interest rates up. “This could happen,” he warns. Another factor that could change the current status quo is a supply shock.

It won’t be the energy shock of old. The world is less dependent on oil and many countries now produce their own.

“Energy is not the driving force of inflation any longer,” he says. Instead, this could come via a full blown trade war and, he warns, “prices are already changing.” The price of a basket of electric goods is rising because of tariffs. This could trigger inflation, rising interest rates and a return of the positive correlation between bonds and stocks.

“This is the worse way to bring interest rates to more normal levels,” he says “It would be a nightmare for everyone in the room. It would be much better to bring demand up in a world where demand is weak.”

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Rebecca Henderson, the John and Natty McArthur University Professor at Harvard University who co-teaches Reimagining Capitalism at HBS, says inequality is equal to climate risk in its potential impact. And she told delegates at the Fiduciary Investors Symposium at Harvard University when a system no longer generates freedom and prosperity it must be changed.

Fifteen years ago, Rebecca Henderson, the John and Natty McArthur University Professor at Harvard University, observed that climate change and all its implications represented a “train coming down the track.” Today, a new train is also fast approaching, this time in the shape of global inequality, she told delegates at the Fiduciary Investors’ Symposium at Harvard University.

Some inequality is good, observed Henderson referencing examples like entrepreneurship and fast-growing businesses streaking ahead of the pack. However, inequality is a problem under two circumstances: where it is a sign of a redistribution of wealth “rather than some people doing better but everyone else doing ok,” and when it starts to hurt aggregate demand.

“Arguably we have both problems now,” she said.

Although worldwide inequality has fallen, thanks mostly to growth in emerging economies like China where hundreds of millions of people have been pulled out of poverty, in the west it has risen dramatically. Most of that is in the US and the UK where the “people at the bottom” are not seeing any gains and falling behind. When the people at the bottom stop believing their life will improve, they grow less tolerant of others getting rich, and “of people who don’t look like them,” she warns. This breeds a feeling that elites have “rigged the game” in their own favour. It also breaks down trust in governments and institutions, leading to populism.

Solutions to inequality

Solutions to inequality are hard to come by. Massive, government-led investment in education, housing or infrastructure is the obvious magic wand. But a policy-led response requires a willing government prepared to put addressing inequality at the top of the agenda, and many governments are “seemingly unable to do anything,” she says. Collective pressure on political institutions could be one solution.

“When I say pressure, I don’t mean pressure to implement policies. I mean pressure to run decent institutions” she says. A proven solution to poverty is found through a balance of free markets and free politics that allows markets and politics to work in balance.

Well-known investor strategies to try and counter inequality like engaging with portfolio companies to pay fair wages and offer employee benefits make a “huge difference” – but they don’t solve the problem. Shadow workers remain outside that umbrella, and employee skills are changing.

“One of the big changes in the world is that the value of high-end skills has gone up in absolute terms,” she says. It means highly skilled workers are earning much more than others, as they are more productive. This leaves the unskilled workforce far behind, and no longer seeing the returns they used to.

“AI and automation make this worse,” she said. Elsewhere, young people struggle to compete, and immense competition makes it difficult to get to the top. Meanwhile education and social ladders are blocked.

Getting the investor community to work together is also a tough challenge. In the “prisoner’s dilemma” investors tend to wait for others to go first. Investing to try and counter inequality is expensive, and investors have returns to make.

“There is a serious collective action problem,” she said, adding that investors also question if they can make a difference when it comes to tackling inequality. The challenges of collective action (and the need for that to be backed up by government policy) are visible in the fight for sustainable palm oil. Many firms have clamped down against using unsustainable palm linked to de-forestation in their supply chains. However, a majority of firms have never signed up to the initiative. Moreover, without government action nothing really changes.

“You need governments involved because you need penalties,” she said.

In a first step, individual firms and investors should begin to invest to improve equality.

“Investors can help firms transition by investing in companies trying to take the high road.”

They can instruct their asset managers to only invest in firms paying better and freeze out those that aren’t, in a “collusion” across the economy. However, she also noted the damaging impact of a yawning productivity gap. This leaves the most productive firms in the average industry more than twice as productive as the least productive firms. Much of that productivity is driven by governance, with publicly listed firms typically more productive than family-held firms. In the top tier, productivity is driven by team-work and promotion based on ability, she said.

Firms that have engendered relationships based on trust with their workers and paid decent wages are most inclined to change. These are “high purpose firms” driven by morals and passion that have the confidence to take risks. A strong voice for labour is another essential requisite in the change process.

“Inequality is accelerating because there is no organised voice on the other side. If we don’t improve our institutions and policies, we lose the whole game.”

Investors also need to be able to measure improving equality, she said. “Finding the right metrics and time frame is hard.” Another challenge comes from the uneven playing field. Companies may increase their wages and invest locally, but without overarching policy, their competitors aren’t subject to the same standards. “It would help if everyone in the industry did the same thing,” she said.

Henderson ended on an encouraging tone. Post WW2, Germany embarked on a new model that combined labour and business in support of education, sills and fair wages that still works today. Further afield in Mauritius, business and labour have worked together since independence in 1968. “A first requirement of development is decent jobs for people at the bottom, and this has helped make Mauritius one of most successful countries in Africa.”

When a system no longer generates freedom and prosperity it must be changed. Change is possible because we have the resources and technology to do it and should be tackled firm by firm, industry by industry, country by country, she said. “It feels to me like we are just waiting,” she said. “Everyone knows what needs to happen; they are just reluctant to move.”