A report from the U.K.-based watchdog group Hong Kong Watch is criticizing three major Canadian pension funds for investing in Chinese businesses involved in human rights violations.
The report says the Canadian Pension Plan Investment Board, the British Columbia Investment Management Corp. and the Ontario Teachers’ Pension Plan have invested more than $12 billion in companies reported to be involved in human rights abuses, including the Chinese government’s persecution of the country’s Uyghur minority group.
Since 2014, the Chinese government has pursued policies targeting members of the majority Muslim Uighur community, including the creation of internment camps believed to hold more than a million people and the forcible sterilization of Uyghur women. In January, U.S. President Joe Biden’s administration described the tactics being used by the Chinese government as a “genocide.” In February, Canada’s parliament passed a resolution that described the persecution using the same term.
Among the private equity investments made by all three of the investigated pension funds, the report highlighted Tencent Holdings Ltd. and Alibaba Group Holding Ltd. — two companies with strong ties to the Chinese government. As the owner of China’s most popular social networking app, Wechat, Tencent provides a significant amount of the data used in the government’s internal mass surveillance program. Tencent has also been linked to the government’s persecution of Uyghur minority group. And Alibaba has developed facial recognition software that specifically targets Uyghurs.
The BCI also made a $45 million in Hangzhou Hikvision Digital Technology Co. Ltd. The company holds patents on technologies to track and detain Uyghurs.
According to Sam Goodman, the author of the report and a senior policy advisor for Hong Kong Watch, Canadian pensions “talk a good game when it comes to [environmental, social and environmental] and ethical investment, but there remains a clear lack and transparency when it comes to ensuring pension funds are not financing human rights abuses.”
As noted by Hong Kong Watch, several pension plan investments have been made to organizations with which American firms are forbidden to conduct business. In November 2020, former President Donald Trump’s administration released a list of companies that had been linked with organizations linked to the Chinese People’s Liberation Army and its work developing China’s military, intelligence and security apparatus. The move received broad support from both major parties. The list was also expanded by the Biden administration last week.
According to Hong Kong Watch, the CPPIB has invested in four Chinese companies included on the list of PLA-linked organizations. The report also noted that the BCI has invested in nine businesses included on the list.
Canadian pension funds should be re-assessing their investments in Chinese state-owned enterprises and companies that are closely aligned with the Chinese Communist Party, says Goodman. “Passive index funds focusing on emerging markets make it easy for pension investors globally to fail in their responsibility to undertake human rights due diligence in the companies they invest in.
“We believe that human rights and China more broadly should have a greater weighting as an ESG issue. The Canadian government should follow the example of the U.S. and introduce an entities list of companies that restricts Canadian investment where there is evidence of complicity in gross human rights violations or clear links to the People’s Liberation Army,“ he adds
Hong Kong Watch may be calling on the Canadian government to prevent further investment in companies linked to the oppression of Uyghurs, another organization — the United Nations — is calling for investors to take responsibility themselves. In March, the UN working group on business and human rights began investigating reports of Uyghurs being forced to work in menial positions.
In a press release, Surya Deva, the vice-chair of the working group, said that many businesses across the world are tied to businesses complicit in the oppression of Uyghurs. “Businesses must not turn a blind eye to this and must conduct meaningful human rights due diligence in line with the UN guiding principles to identify, prevent, mitigate and account for human rights abuses caused, contributed to or directly linked to their operations, products or services in Xinjiang and in other Chinese provinces.”
The Canadian Investment Review reached out to the three Canadian pension funds for comment on the report. The BCI declined to comment. The CPPIB also declined to comment, but also noted the report was based on the pension fund’s 2020 investment disclosures, rather than its latest one. And at the time of publication, the Ontario Teachers’ didn’t respond to the request for comment.