(Updated) New Hong Kong Watch report finds that MSCI investors are at risk of passively funding crimes against humanity in Xinjiang
A new report by Hong Kong Watch have found that a number of pension funds may be passively invested in at least 13 China based companies where there is credible evidence of involvement in Uyghur forced labour programs and construction of internment camps in Xinjiang.
As part of the report, Hong Kong Watch found that major asset managers are exposed passively to these companies as a result of their inclusion on Morgan Stanley Capital International’s Emerging Markets Index, China Index and All World Index ex-USA.
These companies include: Avary Holding Co. (淮安鹏鼎控股股份有限公司), Foxconn Technology (富士康), Lens Technology (蓝思科技股份有限公司), TBEA Xinjiang New Energy Co., Ltd./TBEA Xinjiang Sunoasis Co., Ltd. (特变电工新疆新能源股份有限公司), Xinjiang Goldwind Science & Technology Co., Ltd. (新疆金风科技股份有限公司), (Xinjiang Western) Hoshine Silicon Industry Co. Ltd., also known as Hesheng Silicon Industry Co. Ltd (新疆西部合盛硅业有限公司), (BGI Genomics Ltd. A (深圳华大基因股份有限公司), China Railway aka China Railway Construction Heavy Industry Co. (中国铁建重工集团股份有限公司), CITIC Guoan Construction /Group (中信國安集團公司), iFlytek Co. Ltd. (科大讯飞股份有限公司), Zhejiang Dahua Technology Co., Ltd. (浙江大华技术股份有限公司), ZTE (中興通訊股份有限公司), and O-Film Technology Co. Ltd (欧菲光科技股份有限公司).
Through passive investment via Morgan Stanley’s (MSCI) Emerging Markets Index, the report shows that Blackrock, UBS and Schroders, as well as some of the world’s largest pension funds, are exposed to these companies.
Commenting on the release of the report, Johnny Patterson, co-founder and a research fellow at Hong Kong Watch, said:
“13 companies on MSCI’s emerging markets index are either known to have directly used forced labour through China’s forcible transfer of Uyghurs, or been involved in the construction of camps. Given this Index is the most widely tracked Emerging Markets index in the world, it raises serious questions about how seriously international financial institutions take their international human rights obligations or the ‘S’ in ESG.
Our view is that firms known to use modern slavery or known to be complicit in crimes against humanity should be classed alongside tobacco as ‘sin stocks’, or stocks which investors do not touch. Governments have a duty to signal which firms are unacceptable, but international financial institutions must also be doing their full due diligence. It is unacceptable that enormous amounts of the money of ordinary pensioners and retail investors is being passively channelled into firms that are known to use forced labour.”
The full report and its finds can be read here.
Update: following engagement-post publication
Following engagement and further information from Durham Local Authority Pension Scheme, the Brunel Pension Partnership, and JP Morgan, these local government pension funds have been removed from the report after they clarified that they use active rather than passive investment in Emerging Markets and have no active holdings in the companies listed. Brunel Pension Partnership confirmed that it currently holds active holdings in one of the companies named in the report, China Railway.