Index Funds Exposing Asset Owners to Modern Slavery

Numerous index funds are enabling investment in companies that use Uyghur forced labour or source from suppliers that do, according to a report by UK-based NGO Hong Kong Watch and the Helena Kennedy Centre for International Justice at Sheffield Hallam University. The report alleges that many firms included in MSCI indices actively use Uyghur forced labour, while state pension funds and other asset owners and managers that use the indices are passively investing in such companies. The report further states that these companies are not listed in the Uyghur Forced Labor Prevention Act (UFLPA), which was signed into law in the US in December 2021, prohibiting the importation of any items produced or manufactured in the Xinjiang Uyghur Autonomous Region in China. Additionally, the UFLPA Entity List does not provide for an investment ban, allowing many Western pension funds to indirectly support forced labour practices in the Uyghur Region which the report says “not only defeats the purpose of the UFLPA, [but] undermines international efforts to combat modern slavery”. Asset managers including BlackRock, HSBC, UBS and Deutsche Bank are listed in the report as being exposed to index funds that include companies accused of being complicit in rights violations, with pension funds from the UK, the US, and Canada, as well as Japan’s Government Pension Investment Fund and the New Zealand Superannuation Fund, also exposed. 

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