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Index Providers Rebut NGOs’ Myanmar Military Claims

Three firms defend methodologies and governance processes following complaints over their perceived contravention of OECD responsible business guidelines.

Index providers MSCI, FTSE Russell and S&P Dow Jones Indices (DJI) have refuted claims they have allowed ESG-labelled investments to be directed toward firms linked to Myanmar’s military regime. 

The complaint issued by non-profit Inclusive Development International (IDI), human rights campaigner Alternative ASEAN Network on Burma and activist group Blood Money Campaign of Myanmar said the providers had failed to uphold human rights due diligence responsibilities and were violating the Organisation for Economic Co-operation and Development’s (OECD) Guidelines for Multinational Enterprises on Responsible Business Conduct. 

A spokesperson for S&P DJI told ESG Investor the report “is misleading and inaccurate”, adding that, as an independent index provider, the organisation “does not structure, sell, market, or issue any investment products based upon its indices which follow rules-based, published methodologies and are anchored on a robust index governance process”. 

The provider also shared evidence of previously removing infrastructure company Adani Ports and Special Economic Zone from its sustainable indices due to their commercial relationship with Myanmar’s military in April 2021.  

In a statement provided to ESG Investor, MSCI stressed its indexes “follow transparent and rules-based methodologies”, while FTSE Russell asserted it “employs a robust governance framework to approve new indices and changes to the methodologies of existing indices”. The latter has also previously published a summary of its approach to assessing corporate human rights issues within sustainable investment indices. 

The complaint against the index providers argued that they had not used their “considerable leverage” over companies listed on its ESG indexes to address serious human rights risks and impacts stemming from business’ ties to the Myanmar military. 

“Under the international framework on business and human rights, [the three index providers] have a responsibility to use that leverage to ensure that the companies they are promoting as ‘responsible investments’ are not involved in human rights abuses,” said Natalie Bugalski, Senior Legal and Policy Director at IDI.  

“Instead, they’re directing enormous sums of ESG-labelled capital to companies that are enabling violence and repression in Myanmar, without any attempt to prevent or mitigate this abuse.” 

IDI has named 23 Myanmar military-linked companies the index providers are alleged to have listed in ESG indexes. This includes companies it deems to be weapons dealers, as well as tech firms it claims are serving the military-controlled national police force, including Alphabet, Apple and Meta. 

“None of the three [index] firms has given any indication that it has taken steps to fulfil its human rights responsibilities,” Inclusive Development International said. 

The complaint against S&P DJI was filed with Dutch National Contact Point for Responsible Business Conduct, MSCI with the US, FTSE Russell with the UK. These contact points are government offices tasked with handling complaints alleging non-compliance with OECD Guidelines for Multinational Enterprises. 

Funds failing on human rights 

In February 2021, Myanmar’s military took control of the nation in a coup and imprisoned a large portion of its civilian leadership. UN human rights experts have said Myanmar’s military is responsible for crimes against humanity and urged businesses and investors to sever ties with the military. The death toll attributed to the coup was estimated at more than 4,500 as of this month. 

According to IDI, ESG indexes provided by the three firms have “systematically fail[ed] to accurately capture and reflect companies’ human rights track records”. It claimed this puts investment funds at risk of being modelled on indexes including companies linked to serious human rights abuses, including in Myanmar. Inclusive Development International commenced engagement with MSCI, FTSE Russell and S&P Dow Jones Indices a year after the coup.  

A report co-published by IDI in 2022 found such funds held at least US$13.4 billion worth of shares in companies linked with the Myanmar military leadership. 

Earlier this month, a report from the Business and Human Rights Resource Centre revealed top fashion brands had also fallen foul of contributing to Myanmar military regime driven human rights abuses. This research counted 401 allegations of labour and human rights violations in Myanmar’s garment sector alone. 

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