How did a tech company that produces surveillance cameras used in Chinese detention camps end up in 'socially responsible' ESG funds?
Some rank-and-file investors who thought they were putting money into socially responsible companies may in fact have been funding parts of an Orwellian surveillance regime — in China.
“Hikvision takes these concerns very seriously and has engaged with the U.S. government regarding all of this since last October,” said a Hikvision spokesperson. A number of ESG investors such as Aberdeen Standard Investments and Comgest have amassed holdings in Hikvision, whose market capitalization has surpassed $33 billion, despite alleged human-rights issues. Around $388 million in Hikvision shares was held among 34 ESG-focused funds, identified through Morningstar Direct, which trawled recent regulatory filings to catalog investors ostensibly buying only shares of companies that adhere to social-responsibility criteria.
Hikvision’s links to the Chinese government extend in other directions, too. Regulatory filings show China’s supervisory body for state-owned enterprises holds a 42% stake in Hikvision via the China Electronics Technology Group , which, in turn, runs the Integrated Joint Operations Platform, a predictive-policing platform.
The role of the ESG Some say ESG investors, by dint of their investment philosophy, should be activists. To sell or push for change? Some investors say they can do more good by maintaining stakes in Hikvision and shaping its actions from within, instead of divesting outright. They point to how Hikvision has looked to assuage investor concerns around its commercial ties with Xinjiang’s authorities in recent months, even as some doubt the company’s willingness to follow through on its assurances.
“Hikvision followed the open and regular bidding procedures to participate in Xinjiang projects. The bidding documents are public and available to anyone, including investors. Hikvision executives maintain regular, open, and transparent lines of communication with investors and have not withheld material information from them at any point,” said a Hikvision spokesperson.
Calvert Research and Management held Hikvision shares valued at $37 million as of March 31 but has since said it sold all of its exposure to the Chinese surveillance company. “If you’re dealing with companies that you know have serious human-rights problems, you have an affirmative obligation to confront those problems, and evaluate what the companies do. And if the company simply says its too hard or it’s too expensive, you ought to make a decision to divest it, or put them on notice,” said Posner, conceding that efforts to assess and measure human rights remained in their infancy.
That may be partly due to difficulties in quantifying how a company ranks on the social dimension, which, market participants observed, can range widely from workplace health and safety to the use of forced labor.
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