Parliamentary pensions should not be invested in Chinese companies complicit in human rights violations
The government must join the US in introducing an entities list banning UK investment in Chinese companies directly complicit in the oppression of the Uyghurs.
In the last year we have seen a growing consensus emerge across the House of Commons on the urgent need for the UK to reassess its strategic relationship with China. Parliamentarians from all parts of the political spectrum have joined together to back the removal of Huawei from the UK’s 5G network, to label the persecution of the Uyghurs as an ongoing genocide, and for a tougher line against China’s dismantling of Hong Kong’s autonomy.
This sea-change within Parliament has primarily been driven by the Chinese Communist Party’s increasingly belligerent rhetoric, China’s flouting of international law, and growing concerns over human rights violations within its borders and in Hong Kong.
While Parliament has moved to reflect the change in public opinion and the belligerence of the government in Beijing, many firms within the City of London continue to push for the deepening of pension investment in Chinese equities, despite claiming that they support Environmental, Social, and Governance (ESG) investing.
Even for parliamentarians, the behaviour of firms like Blackrock, which last month called for investors to consider tripling their allocation to Chinese equities, has consequences when it comes to how MPs’ own pensions are invested.
A report published by UK-based NGO Hong Kong Watch has found that over £39m of the British Parliamentary Contributory Pension Fund in 2019 was invested in the Blackrock Emerging Markets fund. In 2021, this would have meant that Blackrock invested parliamentary pensions in companies with problematic human rights records or close association with the Chinese state, including £900,000 in Alibaba, £2.9m in Tencent, and £738,000 in China Construction Bank.
For too long firms have been able to hide behind ambiguous definitions of ethical investing, marking their own homework
At a time when a number of parliamentarians are the subject of Chinese sanctions and the House of Commons has labelled China’s persecution of the Uyghurs as a genocide, we have to question whether the parliamentary pension fund should be used to support Chinese state-run banks or invested in companies that are complicit in the human rights violations taking place in Xinjiang.
Blackrock is just one of many Western firms which dedicate substantial resources on PR to extoll their ethical approach to investment, while at the same time ploughing billions into Chinese equities with little concern over human rights records or their relationship with the Chinese state.
Legal and General is the UK’s largest pension provider and manages the civil service pension scheme. Until the spring of this year, its holdings included eight Chinese companies on the US sanctions list. This list included Zhejiang Dahua Technology, who have produced facial recognition software for the Chinese Government which detects the race of individuals and offers to alerts the police when it identifies Uyghurs.
From New Zealand’s Superannuation Fund to the Norwegian Sovereign Wealth Fund, Hong Kong Watch’s report highlights that the issue is global, with pension funds across the world investing substantial sums of other people’s money into Alibaba and Tencent.
So, what should we as parliamentarians be doing?
First, we need to get our own pension fund in order. We need to ensure the Parliamentary Contributory Pension Fund is not being invested in Chinese companies complicit in human rights violations or Chinese state-run banks.
Second, we need an urgent parliamentary inquiry into the ESG industry and the City of London with the aim of establishing a common framework. For too long firms have been able to hide behind ambiguous definitions of ethical investing, marking their own homework.
Third, we should push for the government to commit to making the City of London a world leader in ESG. That means government clearly defining ESG criteria with the inclusion of human rights considerations in primary legislation.
Finally, we cannot turn a blind-eye to the funding of Chinese companies involved in gross human rights violations. The government must join the US in introducing an entities list banning UK investment in Chinese companies directly complicit in the oppression of the Uyghurs.
The UK has the capacity to be a leader in ESG investing. To reach that goal, however, will require our Parliament to lead by example.
Alistair Carmichael is the Liberal Democrat MP for Orkney and Shetland and LIberal Dmeocrat spokesperson for Home Affairs.
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