AUM in Action

Investor Guidance Offers Steer on Uyghur Forced Labour

A significant portion of solar and EV materials, essential to achieve emissions reduction targets, are produced in China’s Xinjiang region.

The Investor Alliance for Human Rights (IAHR), together with Anti-Slavery International and Sheffield Hallam University’s Helena Kennedy Centre for International Justice, has released investor guidance on how to address Uyghur-linked human rights risks in the green technology supply chain.  

The growth of solar photovoltaic (PV) and electric vehicle (EV) use, which is key in meeting COP28 targets to triple renewable energy capacity by 2030, is heavily reliant on the Xinjiang Uyghur autonomous region in northwest China, where critical supply chains inputs are either quarried, processed, refined, manufactured or exported.  

Since 2017, the Chinese government has placed an estimated 1.8 million people, many of whom are Uyghurs, in detention camps, prisons, and factories that are linked to this supply chain.  

“The focus when investors look at green technology is on the ability to really help climate change and make that positive impact,” Anita Dorett, Director of the IAHR, told ESG Investor. “Because the focus is so much on that, there is less focus on the human rights components – including Uyghur forced labour.” 

The guidance offers investors tools to identify businesses linked to human rights violations against the Uyghur people, exclude these businesses from their green energy portfolios, and prioritise investments that promote sustainability, innovation and supply chain resilience. 

The guidance stressed that Uyghur forced labour was a human rights issue carrying high financial, legislative and ethical risks, with potentially severe impacts for investors.  

Adapting strategy for state actors 

The International Energy Agency (IEA) has identified EVs as a key technology for decarbonising road transport, which accounts for approximately one sixth of global carbon emissions. It also flagged that cheap solar PVs are set to drive renewables and overtake coal in global electricity generation by early 2025. 

According to IEA estimates, in 2022, the Uyghur region accounted for 40% of the world’s polysilicon – an essential material in 95% of the world’s solar panels. China also processed 44% of the world’s chemical lithium and 70% of lithium-ion battery cells that year. The IEA said it expected those percentages to increase further. 

IEA’s Renewables 2023 report highlighted that China commissioned as much solar PV capacity as the entire world did in 2022. The country has offered strategic incentives for green energy industries to move production to the Uyghur region, including cheap land, subsidised electricity and access to surplus labour programmes. 

“When you then talk about Uyghur forced labour, there is a lack of appreciation from investors that this isn’t something that’s done by private actors,” Dorett said. “It doesn’t result from market forces, so it requires different strategies to deal with. Your usual strategy of addressing forced labour engagement and the questions you ask are not going to move the needle.” 

To develop the guidance, the research team interviewed 20 investors working across the UK, the US, Australia, Canada and Europe. Investor types ranged from pension funds to global fund managers, some of which were either directly invested in Chinese green technology companies or had investments further along the supply chain. 

The broad consensus that emerged from those interviews was that engagement with green technology companies on their exposure to the Uyghur region was a frustrating, and often fruitless, process. 

Investor intelligence shortfalls 

The research also found that many investors lacked a fundamental understanding of the way state-imposed forced labour programmes operate in the region, and of how this knowledge should inform their approaches. 

“Our consultations found that investors have a comprehensive understanding of how exposure to Uyghur forced labour impacts various tiers of the solar supply chain, but a less granular understanding of the risk in the EV battery supply chain,” the report read. 

Many investors also stated that it was critical for them to remain invested in green energy industries, and that divestment was typically used as a last resort. However, it was unclear what factors would trigger strategic divestment and on what timeline. 

The guidance suggested that collective investor engagement could increase leverage on forced Uyghur labour. Shared resources between companies, for example, have meant they were able to engage with a wider set of peers in the sector. 

“As government policy is coming into place on this, we need to ensure that it is critically focused on the risks of stateimposed forced labour that is very much at the core of green tech,” said Dorett. We want governments to create the right regulatory and business environment to enable rightsrespecting business conduct, rather than what’s cheapest and fastest.” 

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