Throughout my career, I often said “corporate responsibility is social responsibility.” Nothing exemplifies an attempt to make that a reality today as much as ESG, or “Environmental, Social, and Governance” criteria, that an increasing number of companies and corporations are signing up for.
Essentially, if a company signs up for ESG, it agrees to conduct itself in a way that respects the environment, contributes to local communities, and is honest and transparent in its financial practices. This enables conscientious investors to invest their money in companies that don’t violate their values and contribute to making the world a better place.
ESG began approximately fifteen years ago with companies operating by its standards collectively worth around $17 billion. Today, that number is nearly $20 trillion. The power of the ESG community cannot be underestimated.
Americans Unwittingly Fund Communist GenocideThe reality is that China, under the rule of the Chinese Communist Party (CCP), is engaged in genocide of the Uyghur people in its Xinjiang province. As Under Secretary of State, I wrote three letters to CEOs, the governing boards of American universities, and civil society partners on this tragedy, and their responsibility for ensuring their organizations were not unwittingly supporting it with their investments or supply chains.
The Hole in ESGDuring my time at the State Department, we championed the Trust Principle. The idea is simple: if you are going to participate in our markets, you must also agree to abide by a set of trust principles that we, in the free world, respect. This includes things like transparency, integrity, respect for human rights, the environment, rule of law, etc.
The authoritarian alternative is the Power Principle, which relies on bullying, cheating, and coercion.
By insisting that all participants in our markets abide by the Trust Principle, we were able to defeat China, Inc.’s 5G master plan, which was on the brink of wresting control over international 5G networks and handing it to the CCP. The bully backed down.
ESG must now do the same thing. That will mean simply living up to its own standards. When you think about it, ESG itself is based on the Trust Principle. For a company to qualify for ESG, it must comply with ESG standards. In many ways, those standards align with the Trust Principle I championed at the State Department.
But among those principles are transparency and reciprocity. If we’re going to shine the light of transparency on Xinjiang, we must reciprocate and also shine it on ourselves.
After the Holocaust, the world said, “never again.” Did we mean it?
An Appeal to the World Economic ForumThen there are forums like the World Economic Forum (WEF), which is the preeminent gathering for government and corporate leaders who seek to uphold the high standards outlined in ESG.
WEF asset managers collectively manage trillions of dollars. They have the power, the wealth, and the prestige to speak out.
But they’ve said nothing.
Is remaining silent on Xinjiang “in the global public interest”? Can any of us claim “moral and intellectual integrity” is at the heart of everything we do when we not only turn a blind eye to genocide, but passively profit from it?
Call to Action: Wake Up ESG!The truth is many have been silent for decades. The free world not only turned a blind eye to the CCP’s crimes, but we financed them by providing access to our capital markets. We not only sent over a treasure trove of our best investment bankers, lawyers, money managers, private equity investors, and venture capitalists, but we funded China, Inc. through our pension funds, university endowments, foundations, mutual funds, and bond portfolios. We all did—on a bipartisan basis. We espoused the Trust Principle with our words, but constantly sat by as it was violated and abused by those who only value the Power Principle.
Now, we must do something about it.
So I call upon the ESG community, the World Economic Forum, and financial managers like Black Rock, to wake up, to be consistent, and to practice what you preach with respect to China. Do not turn a blind eye to the CCP bully. Stand up to the Power Principle with the Trust Principle.
The ESG community—including the World Economic Forum—is a powerful group, one that has a great human heart. If it spoke out against CCP human rights abuses with one voice, the world would take notice.
As one former CEO to other CEOs, I call on you to make your supply chains clean.
To financial institutions: you have a moral responsibility, and a fiduciary duty, to disclose if you’re investing in Chinese companies, particularly ones that are involved in the surveillance state, human rights abuses, and military-civil fusion—especially if they are involved in an emerging index like the MSCI or FTSE emerging index funds, as they recently added 250 Chinese companies to the mix as of last June.
Whether or not we meant “never again” will be confirmed in Xinjiang.
No one should bend the knee to the CCP. We have the moral high ground of democratic values. Our Trust Principle is greater than their Power Principle.