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Global environmental, social and governance (ESG) funds have allocated a staggering £1.4 billion to companies with alleged connections to forced labour practices in China’s Xinjiang region, reveals a groundbreaking analysis by Ignites Asia.
The investigation uncovered that £1.1 billion of these sustainable investments are concentrated in Contemporary Amperex Technology (CATL), the world’s largest manufacturer of electric vehicle and energy storage batteries. This revelation raises serious questions about the due diligence processes of fund managers investing in Chinese supply chains.
The Republican-led US House Select Committee on the Chinese Communist party highlighted new evidence in June linking CATL to state-sponsored forced labour and human rights violations against Xinjiang minorities. These findings were bolstered by research from the Helena Kennedy Centre for International Justice, which expressed concerns about CATL’s 2022 expansion into the region.
Active global ESG funds hold £789 million in CATL investments, while passive funds contribute £263 million. Industry giants BlackRock, Nordea, and Ninety One emerge as the largest investors, with holdings of £148 million, £93 million, and £86 million respectively.
Industry experts argue that ESG funds investing in companies linked to forced labour undermines their fundamental purpose. Sam Goodman, senior policy director at China Strategic Risks Institute, emphasises that green investment should not compromise human rights, describing it as a “false economy” to suggest otherwise.
The situation is further complicated by China’s influence over asset managers, creating what Anita Dorett, director at the Investor Alliance for Human Rights, describes as a “chilling effect” that may deter divestment. She advocates for sector-wide action rather than individual company approaches to address these ethical concerns effectively.
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