According to analysis by Ignites Asia, a global asset management company operates Environment, Social, and Governance (ESG) funds with at least $1.4 billion invested in 14 electric vehicle and solar energy companies that are linked to forced labor in Xinjiang.
Ignites Asia is a professional media platform under the UK’s Financial Times, focusing on news, analysis, and insights in the asset management and investment industries in the Asian region.
Based on data from Morningstar, a global capital market and fund authority, and analysis from Ignites Asia, most of the sustainable investments (totaling $1.1 billion) have flowed to CATL, China’s largest battery manufacturer.
CATL’s operations have drawn attention from U.S. lawmakers in recent years. In June, Chairman John Moolenaar of the House Oversight and Investigations Subcommittee sent a letter to the Department of Homeland Security revealing new evidence linking CATL and GHL Systems to forced labor supported by the Chinese government and ongoing genocide of the Uyghur people.
In August, Vice Chair Marco Rubio of the U.S. Senate Intelligence Committee and Moolenaar sent a letter to Defense Secretary Austin requesting CATL, associated with the Chinese military, to be blacklisted under Section 1260H.
CATL has denied these allegations. According to Morningstar data, global actively managed ESG funds have invested $789 million in CATL, with passive funds investing an additional $263 million.
Major investors include BlackRock, Nordea, and asset management firm Ninety One, investing $148 million, $93 million, and $86 million respectively.
Both Ninety One and BlackRock declined to comment when approached by the Financial Times.
Eric Pedersen, head of responsible investments at Nordea, stated that the company is aware of the risks of forced labor in the global electric vehicle supply chain but made investment decisions based on reports from multiple ESG data providers.
Experts suggest that fund companies investing in Chinese enterprises may face various risks, including reputational, compliance, and financial risks, if they fail to fully review or are unable to review the supply chains of these companies.
The report quoted Chloe Cranston, advocacy lead for Anti-Slavery International, saying asset management companies should put more effort into ensuring the ethicality of their investment portfolios rather than solely relying on ESG data providers.
Cranston added, “The only responsible approach is to divest.”