Baroness Morrissey: Time to talk about “investor hypocrisy and the need for investors to rethink their dealings in areas where there are clear human rights abuses”, including China

If ESG is to mean anything, it must surely start with human rights, not ignore or downplay them, Helena Morrisey says

Speaking at Hong Kong Watch's report launch at Conservative Party Conference on Sunday evening, Baroness Helena Morrissey, the Chair designate of AJ Bell and one of the city's leading lights, spoke about why ESG investors must start taking their human rights commitments seriously, particularly in the context of China. 

Baroness Morrissey said it is time to “call out investor hypocrisy” and that investors must “rethink their dealings in areas where there are clear human rights abuses.”

She referred to a range of international standards to illustrate that investors have a responsibility to protect human rights including the UN principles for responsible investing, the UN Guiding Principles on Business and Human Rights, the elaboration in 2017 of a reporting framework on business and human rights, and just over a year ago, the development of further guidance for investors.

She continued: “Now I tell you all of this … to make it absolutely clear that the consideration of human rights for investors is not new, it is not something investors can claim not to have had time to think about, neither is it something they can say is just very vague or nice to think about, nor is it subordinate to other ESG principles. The fact is that ESG has often just been interpreted as the E for Environment. But there is nothing to suggest … that human rights are less important than climate change.”

She then turned to the issue of investment in China specifically, saying that our exposure to China “cannot be reconciled with ESG principles, with socially responsible investing, with upholding democracy. We do this in other areas. There are tough anti-money laundering laws to stop the financing of terrorism and drug dealing, even if that might be very lucrative… but institutional investors, the signatories to the UN PRI, are today investing in countries that are known to be abusing human rights.”

She considered the example of HSBC and said: “I have been working with that company on a number of issues on diversity and inclusion, and the people I am working with are among the most committed on that issue. But their top management are trying to ingratiate themselves with the CCP, freezing assets of Hong Kong democratic campaigners, not allowing those who have moved people to access their pensions. They are saying that they are abiding by the rules, obeying orders, but surely if there is one thing we have learnt through history, it is that this is no defence. These are lines which cannot be crossed if we are to have ‘courageous integrity’.”  

Baroness Morrissey underlined that Xi Jinping’s regulatory crackdown, ‘common prosperity programme’, and the Evergrande crisis provides an opportunity for investors to take stock and could be a moment for those “who have turned a blind eye to atrocities to exit.”

She said: “The common prosperity regime coupled with the chicken coming home to roost problem in the overly indebted property sector should put people off and get them thinking about what they’re doing about their money. We must take this moment, as the commercial case is undermined, to talk very loudly, to reassert the importance of human rights and challenge the investment community. If ESG is to mean anything, it must surely start with human rights, not ignore or downplay them.”

Other members of the panel included former Conservative Party leader Sir Iain Duncan Smith MP and Nus Ghani MP, they both underlined the responsibility for government to ensure that supply chains are ethical and that investors comply with their human rights commitments.

Talking about the challenge posed by the rise of China, Sir Iain said: "This is now the issue of our age, and the one that we will be measured against in generations to come, as the test which we stood up to or we failed...”

He continued: "The trouble with business is that business can think only about the bottom line... but there is a wider concept when dealing with autocracies that you have to bear in mind, it is fine when you are in the free world... but when you move to invest in an autocratic regime that demonstrably cares nothing for their own citizens... then you really must do so with your eyes wide open. I'm afraid that this report shows that big name businesses and banks are deliberately hiding from the reality about their money and investment yields returns."