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Unique: Traders urge firms on human rights in Xinjiang

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© Reuters. FILE PHOTO: People walk past an H&M store in a shopping district in Beijing

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By Ross Kerber and Victoria Waldersee

BOSTON / LISBON (Reuters) – A group of religious and socially conscious investors and other funds are putting pressure on Western companies over alleged human rights abuses in China's Xinjiang region, highlighting the challenges facing brands trying to maintain business relationships amid mounting tensions.

The group of 50+ investors, backed by the Interfaith Center on Corporate Responsibility, said it was in the process of contacting more than 40 companies, including H&M, VF Corp (NYSE :), Hugo Boss and Zara owners Inditex (MC :), requests more information about their supply chains and calls on them to end situations that could lead to human rights abuses.

Anita Dorett, program director for the Investor Alliance for Human Rights, which compiled the request to the fashion brands and other big business names, said she was concerned that some companies had removed language from their websites about forced labor guidelines, or promised to get more cotton from Buying Xinjiang for fear of backlash from Chinese social media and corporations.

"Companies do not prioritize resources to penetrate and map their supply chains. As investors, we want transparency and accountability," Dorett said in an interview. She added, "It's up to you. If you don't know what is going to happen, who is going to do it?"

"COMMERCIAL RETALIATION"

For the past week, H&M, Burberry, Nike (NYSE :), Adidas (OTC 🙂 and other Western brands have been hit by consumer boycotts in China after raising concerns about forced labor in Xinjiang.

The wave of boycotts coincided with sanctions imposed by Britain, Canada, the European Union and the United States for alleged human rights violations in Xinjiang.

China denies all allegations of abuse.

The alliance of investors alleged that companies removing or postponing statements related to Xinjiang did so out of fear of commercial retaliation by the Chinese government. It is also said that compliance rules are being developed in other markets, including the European Union, requiring them to fully disclose their supply chains.

The human rights section of the H&M website hmgroup.com no longer contained a link to a 2020 statement on Xinjiang on Friday. The instruction can still be accessed through the direct address of the page.

Inditex's statement on forced labor on its website was no longer available as of last Thursday.

H&M and Inditex did not immediately respond to a Reuters request for comment on the investor group's approach.

H&M has declined to comment on the removal of details from its website. Inditex did not respond to requests for comment on the removal of information from its website.

VF Corp's original statement on Xinjiang was no longer available. A new statement has been posted in a different section of the website. A VF spokeswoman said Tuesday the company had "not changed our position, policies or practices," but did not address the new location of its statement.

Hugo Boss said on Chinese social media last week that he would continue sourcing Xinjiang cotton. Company spokeswoman Carolin Westermann said on her website on Friday an undated English-language statement that "HUGO BOSS has not yet purchased any goods from the Xinjiang region from direct suppliers" and that the Chinese statement has not been approved.

Westermann reiterated the company's position on Tuesday, adding that it was "in active engagement with NGOs and other key stakeholders, including investors, to further elaborate on our standards, values ​​and sustainability initiatives."

GROWING PRESSURE

Among investors, environmental, social and governance funds have seen large inflows, got companies in place and new financial disclosures on what were once considered marginal issues that were best left to governments.

Sustainable fund assets hit a record $ 1.7 trillion in 2020, based on data from fund manager Morningstar.

The Investor Alliance for Human Rights has more than 160 institutional investors and other organizations as members who currently represent more than $ 5 trillion in assets under management, according to its website.

The New York-based Interfaith Center on Corporate Responsibility, which supports the approach to corporations, has a diverse membership including religious groups, public and union pension funds, and a number of other asset managers.

The investor alliance does not include the top US fund groups BlackRock Inc (NYSE 🙂 and Vanguard Group Inc. With assets of $ 16 trillion, both companies are major shareholders in many of the pressurized companies in China, based on refinitive data.

Both companies have stepped up their ESG efforts by disclosing more details about their exposures and voting proxies to portfolio companies and by introducing new ESG funds for the selection of holdings.

A BlackRock spokesperson noted a recent paper that said, "Failure to address human rights risks can affect a company's entire value chain, which can affect shareholder value."

A Vanguard spokeswoman said she "takes human rights issues very seriously, including allegations of forced labor. If a company's business practices or products endanger the health or safety of people, they too can pose long-term financial risks to investors."

(This story corrects the spelling of Xinjiang in the 13th paragraph; removes the reference to the asset manager in the 19th paragraph.)

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