An Environmental, Social and Governance Fund run by global executives has allocated at least $1.4 billion to 14 electric vehicle and solar companies linked to forced labor in Xinjiang, according to an analysis by Ignites Asia. are.
At a time when Chinese and foreign companies operating in the region are under increased scrutiny, the results of this study raise the risk of fund companies failing to conduct thorough due diligence on their portfolio companies’ Chinese supply chains and failing. Experts say this has been highlighted.
Most of this sustainable investment, totaling US$1.1 billion, is invested in Contemporary Amperex Technology, the world’s largest EV and energy storage battery manufacturer, according to Morningstar data analyzed by Ignites Asia.
CATL’s activities have attracted increasing attention from politicians and academics in recent years.
This article was previously published by Ignites Asia, a title owned by FT Group.
In June, the Republican-led US House of Representatives Select Committee on the Chinese Communist Party announced it had found new evidence linking CATL to the Chinese Communist Party’s state-sponsored forced labor and human rights abuses against ethnic minorities in Xinjiang.
This follows a report by researchers at the Helena Kennedy Center for International Justice at Sheffield Hallam University in the UK, which found that CATL’s expansion into the Xinjiang region in 2022 could lead to potential links with forced labor in its supply chain. He said his concerns about sexuality have increased.
CATL denied the allegations, calling them “baseless and completely false.”
Actively managed global ESG funds have invested $789 million in CATL, while passive funds have invested $263 million, according to Morningstar data.
The largest investors were BlackRock, Nordea and NinetyOne with $148 million, $93 million and $86 million, respectively.
NinetyOne and BlackRock both declined to comment.
The BGF Future Transportation Fund, actively managed by BlackRock, invests in future transportation technologies and takes ESG criteria into account in decision-making, and has invested $48 million in CATL as of September.
Nordea 2 – Global Responsible Enhanced Equity Fund and Ninety One Global Environment Fund have invested $37 million and $86 million, respectively, in CATL as of October.
Erik Pedersen, Head of Responsible Investment at Nordea Asset Management, said: “We are aware of the risks associated with forced labor in the global EV supply chain and have conducted our own research and initiatives in that context, as well as produced an investment report.” Media and multiple ESG data used by the company Provided by your provider.
“The last public statement the company made was in November 2024, denying any relationships with suppliers in the region in response to a letter from the U.S. Congress.
“CATL subsequently disclosed in September 2021 that it had a past investment relationship with Jiangxi Shimura as a minority shareholder, and sold its entire interest to Narushima Capital in March 2023,” Pedersen said.
“There can be no sustainable investment if it is based on forced labor in Xinjiang,” said Chloe Cranston, head of thematic advocacy at Anti-Slavery International.
“We are at risk of making the mistakes of the past in the transition to clean energy, and many communities could have their livelihoods destroyed because of it,” she said.
Sam Goodman, London-based senior policy director at the China Strategic Risk Institute, suggested that allocations to such companies call into question the very reason ESG funds were created in the first place.
“The whole concept of ESG was created by global asset managers who realized that they could make more money and manage more assets if they invested in a green and ethical way.”
He added that it is wrong that different aspects of ESG investing are “in conflict with each other” and that green investing should not be done at the expense of human rights.
“People who present it as a trade-off are creating a false economy,” Goodman said. There is “more than enough scope” to adhere to both principles, he added.
Goodman said fund companies that outsource their due diligence to third-party index issuers often “don’t pay much attention” to the risks involved.
“If we can’t properly audit these companies to understand the scope of their supply chains and the labor sourcing within them, why should we invest in them at all?” Goodman said.
Anti-Slavery International’s Cranston said given the scrutiny on how ESG funds invest, they should go the extra mile to ensure their portfolios are ethically invested, rather than relying on ESG data providers. He emphasized that this should be the responsibility of the asset management company.
“The only responsible thing to do is divest,” Cranston added.
Few asset managers and data providers speak out publicly about these challenges, and pressure from the Chinese government has resulted in a lack of transparency about the operations of their portfolio companies in China.
Anita Doret, director of the Investor Alliance for Human Rights, said China’s actions had a “chilling effect” that discouraged asset managers from selling or speaking out.
She said: “Some of them have customers or offices in China and they have to be very concerned about the safety of their employees.”
He added that a small number of fund houses had “quietly exited” companies involved in Xinjiang forced labor.
Dorett suggested that a “sector-wide sale” would be most effective, making it difficult to pinpoint individual companies.
“If you do it company by company, it becomes much easier to target one company and set an example.”
*Ignites Asia is a news service for professionals in the asset management industry published by FT Specialists. Trials and subscriptions are available at ignitesasia.com.