In a May 12 letter to BlackRock Chairman and CEO Larry Fink, the National Legal and Policy Center (NLPC) asked the firm to divest its customers’ money from the 137 Chinese companies currently listed on American stock exchanges.
Of the 137, there are 11 that are at least 30% owned by the Chinese government and all are “under the influence and ultimate control of the Communist Party of China,” NLPC said in a May 13 statement.
Wikipedia describes Washington D.C.-based NLPC as “a right-leaning 501(c)(3) non-profit group that monitors and reports on the ethics of public officials, supporters of liberal causes, and labor unions in the United States.”
As of March 31, 2020, BlackRock, the world’s largest investment manager, said it managed approximately $6.47 trillion in assets on behalf of investors worldwide. The Federal Retirement Thrift Investment Board (FRTIB), responsible for the federal government’s Thrift Savings Plan (the largest defined contribution plan in the world), currently contracts BlackRock to manage the TSP’s F, C, S, and I Fund assets.
The FRTIB on May 13 announced it would delay, pending further study, a planned investment from the I (International) Fund in the Morgan Stanley Capital International All Country World Ex-U.S. Investable Market Index after the Trump Administration nominated three new members and U.S. Labor Secretary Eugene Scalia sent a letter to FRTIB telling the Board “to immediately halt all steps associated with investing the I Fund” in the MSCI index.
BlackRock, NLPC notes, recently divested itself of certain companies producing thermal coal in response to demands by anti-fossil fuel activists. In the letter, NLPC Chairman Peter Flaherty cited this “precedent” and argued that Chinese companies “that manufacture equipment for Xi’s surveillance state or that are dominated by the People’s Liberation Army raise even bigger ethical questions.”
“China is the world’s worst human rights abuser and greatest threat to world peace through its military buildup and increasingly imperial ambitions,” Flaherty writes.
“Some investment managers argue that factors like human rights should not be considered in investment decisions because they have a fiduciary duty to investors to obtain the best possible return. Of course, you have specifically rejected this argument by applying a host of ESG litmus tests to BlackRock’s investments,” the letter continues.
“In light of your self-appointment as moral arbiter for corporate America, you cannot now pick and choose which moral imperatives you will honor and which you will ignore. Unless BlackRock divests from Chinese companies, your ‘leadership’ will amount to empty virtue-signaling,” the letter concludes.
The letter specifies China’s response to COVID-19 allowing for its worldwide spread, its attempts to blame the virus on the United States, the “brutal suppression” of dissent in Hong Kong, the confinement of more than one million Uyghurs to detention camps, the building of a “surveillance state,” and its “macabre organ harvesting program.”
NLPC also cited the risks to American investors who entrust their savings and retirement funds to BlackRock, pointing out that “Chinese companies in which you invest your customer’s money are opaque. They do not submit to Public Company Accounting Oversight Board audit standards. They are not compliant with Dodd-Frank.”
“Moreover, American retail investors have been repeatedly burned when U.S.-listed Chinese firms have been taken private at lower valuations and relisted on foreign exchanges.”
BlackRock had not responded to a request for comment regarding the NLPC’s letter as of press time. This story will be updated if a response is received.