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An Unjust Transition: the link between renewables and human rights abuses

How fossil fuels and forced labour taint the solar energy sector in Xinjiang, China

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The investment community has flocked to invest in the renewable energy sector to support the global transition to clean energy as governments, civil society and businesses around the world are working to meet sustainability goals and to combat climate change. Since 2004, clean energy investments globally have grown from under $37bn to a peak of $331bn in 2017, with the highest investment in wind and solar energy. While this is good news, it is critical that governments, businesses and investors ensure that the transition to renewable energy is just, and doesn’t come at the expense of either people or the planet.

China currently dominates the solar industry, with Chinese companies controlling around 80% of the world’s solar supply chain, from raw material refinement to panel production and assembly. In 2020, 45% of the world’s supply of polysilicon, the key refined material comprising 95% of solar panels, came from the Xinjiang Uyghur Autonomous Region in China. The US government and other governing bodies in the UK, Canada and the Netherlands have declared that China has committed genocide and crimes against humanity in its treatment of Uyghurs and other Muslim-majority peoples in Xinjiang, tarnishing investments in solar companies whose supply chains emanate from the region.

A recent report from Sheffield Hallam University Helena Kennedy Centre, In Broad Daylight, traces major solar supply chains - from raw materials to panel production - finding significant forced labour exposure that has tainted the entire sector. A total of 90 Chinese and international companies are affected by Uyghur forced labour through their supply chains. For example, Xinjiang Hoshine Silicon Industry Co., the world’s largest metallurgical-grade silicon producer, has for years engaged in state-sponsored labour transfer programmes to procure raw materials. Hoshine has also heavily benefited from subsidies and support from paramilitary organisation the Xinjiang Product Construction Corps, which was subject to sanctions issued in December 2020 by the US Customs and Border Protection over its use of forced labour. The report traces the large number of companies that Hoshine supplies, as shown in the chart below. Credit: In Broad Daylight: Uyghur Forced Labour and Global Solar Supply Chains

With pending US legislation in the form of the proposed Uyghur Forced Labour Prevention Act, companies will be prohibited from importing any component that comes from Xinjiang - including polysilicon - unless companies can prove there is no forced labour being used. 

Forced labour isn’t the only risk of the solar sector in Xinjiang: the report also uncovers the damaging environmental impact of solar panel production in the region. In order to create polysilicon for solar panels, raw materials must be purified at extremely high temperatures.  Unfortunately, factories in China burn an enormous amount of coal, the dirtiest of fossil fuels, for the electricity needed to maintain that heat. Heavy subsidies from the Chinese government in the Xinjiang coal industry have given China a near-monopoly on the market at all stages of the solar panel manufacturing process, effectively undercutting the solar panel production industries in Korea, the US and the EU. As more investors flock to ESG investing and seek out green, renewable energy opportunities to help rein in climate change, they are likely unaware that they may be inadvertently contributing to dangerous carbon emissions. 

Under the UN Guiding Principles for Business and Human Rights, investors may be directly linked to these human rights violations and environmental harms through their investments in companies sourcing from Xinjiang. Investors are advised to undertake human rights due diligence and use their leverage, alone and in collaboration with other investors and stakeholders, to cease, prevent or mitigate such harms. If, however, they are unsuccessful in moving companies to address these risks, they must reconsider the wisdom of maintaining the investment relationship. As a start, investors can use Appendix A (page 48) in the Sheffield Hallam University report, which provides a list of the 90 companies with details of forced labour exposures, to review their investment portfolio. 

The Investor Alliance for Human Rights has published an Investor Guidance on the Human Rights Crisis in the Xinjiang Uyghur Autonomous Region that provides practical guidance to investors on how to engage with their portfolio companies and other stakeholders to address these state-sanctioned human rights violations. The Investor Alliance is also coordinating a collective and coordinated investor initiative to engage with portfolio companies linked to or implicated through their value chains, the egregious human rights crisis in Xinjiang. For more details, please refer to our website or contact Anita Dorett at adorett@iccr.org



Anita Dorett is Director of the Investor Alliance for Human Rights



Nicole Bohannon is Programme Support Fellow for the Investor Alliance for Human Rights


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