Canada Should Guard Against Pension Investments in Chinese Companies Involved in Rights Abuses, Say MPs

The logo of the Canada Pension Plan Investment Board on electronic devices. (T. Schneider/Shutterstock)

Canada lacks measures to prevent public pension funds from investing in companies in the People’s Republic of Chinese (PRC) allegedly involved in human rights violations, stated a recent report from a House of Commons committee that is calling for the implementation of protective measures.

“There are currently no measures which prevent those pension funds from investing in companies in the PRC responsible for, or complicit in, human rights violations,” the Special Committee on the Canada–People’s Republic of China Relationship (CACN) stated in its Dec. 13 report.

Major institutional investors overseeing public pension funds, like the Canada Pension Plan Investment Board (CPPIB) and the Public Service Pension Plan Investment Board, operate independently from the government based on their own investment strategies. The CACN noted that in this capacity, these pension institutions may conduct due diligence in line with their respective investment policies before making decisions. While this may involve consideration for human rights matters, there is currently no mandatory requirement to do so.

The CACN report, titled “The Exposure of Canadian Investment Funds to Human Rights Violations in the People’s Republic of China,” stems from a series of five committee meetings conducted between Nov. 29, 2022, and June 19, 2023. The focus of these sessions was to delve into the exposure of Canadian investment funds to equities and bonds from China associated with human rights violations.

These meetings follow reports by the UK-based human rights organization Hong Kong Watch in June 2021. The NGO revealed increasing investments by Western governments, corporations, and investors in China despite the Chinese Communist Party’s ongoing abuse of the Uyghurs and other Turkic Muslims in Xinjiang Province.

In a report, initially published in November 2022, Hong Kong Watch named 12 Canadian pension funds, including three federal and six provincial pension funds, investing in at least 13 Chinese companies allegedly involved in Uyghur forced labor programs and the construction of internment camps in Xinjiang.

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The CACN’s study came at a time when numerous countries were implementing legislation to address forced labor and human rights abuses in supply chains. These laws included import bans, transparency requirements for companies, and mandatory human rights due diligence to prevent violations. Canada has also enacted its supply chain transparency legislation, the Fighting Against Forced Labour and Child Labour in Supply Chains Act.

Recommendations

To counter the absence of safeguards in pension fund investments, the CACN proposed several policy recommendations. Among them is the suggestion that Ottawa explore potentially creating an official list of companies considered unsuitable for investment.

The committee also urged the federal government to collaborate with provinces in creating a list of Chinese companies that would be off-limits for Canadian public pension funds to invest in, based on their perceived risks to national security, corruption, or severe human rights violations. Canada should also work with the United States and other allies to develop common approaches to human rights implications of public pension plan fund investments, it said.

Additionally, the CACN said the government should, by 2024, introduce legislation to enhance enforcement measures, with the goal of eliminating forced labor from Canadian supply chains and fortifying the prohibition on importing goods produced by forced labor.

The CACN also suggests that the government introduce legislation requiring federally regulated public pension plans to conduct and report enhanced due diligence for all investments in authoritarian states. This legislation should include penalties for non-compliance, it said.