Norwegian Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund that runs close to a trillion US dollars, has excluded Chinese textile firm Texwinca Holdings Ltd. over alleged “serious or systematic human rights violations”, following an investigation into the sector by its Council on Ethics.
In its recommendation the Council, which consists of legal experts that analyse the fund’s investment holdings on controversial issues, deemed the “risk of systematic labour rights violations” at the Hong Kong listed company to be “unacceptably high”.
Norges Bank Investment Management, the asset manager of the fund, announced today it would follow the Council’s recommendation and exclude the company.
GPFG (as of 2017) owned 1.01% of the company’s shares with a market value of just over NOK63m ($7.4m).
The exclusion is based on the alleged working conditions at two Vietnamese factories owned by textile firm Megawell Industrial Ltd., which is 50% owned by Texwinca.
Evidence of a litany of human and labour rights abuses were uncovered in the Council’s investigation at Megawell’s Hugo Knit and Kollan factories, including: harassment and abuse by supervisory staff, violations of fire safety regulations, and restrictions on bathroom breaks.
Conditions at the Kollan factory were allegedly so poor that employees were reported to have fainted at their posts.There was also evidence that female workers did not have their contracts renewed if they became pregnant. RI highlighted the fashion industry as a frontier ESG issue for investors last year.
The Council states in its report that Texwinca had made little effort to “clarify” the matter and had “provided limited information about its relationship with Megawell, has not allowed the factory to be inspected and has failed to make any comment on draft recommendations to exclude the company from the GPFG”.
Texwinca, according to the report, responded to the Council’s concerns arguing that the conditions at the Southeast Asian factories were “none of its business”.
But the Council countered that since Texwinca has held the “same position as Megawell’s major shareholder for more than 20 years and presents Megawell as part of its corporate structure”, it must “presume that Texwinca’s management is aware of and has accepted the working conditions at Megawell’s factories in Vietnam”.
The Council concludes that “when a company in this way disclaims responsibility for preventing norm violation and fails to provide information about conditions or its own initiatives in its operations, the risk of systematic labour rights violations becomes unacceptably high”.
Norges Bank also announced it has excluded US energy firm, Evergy Inc and Australian investment firm, Washington H. Soul Pattinson & Co Ltd. based on its “coal criterion”, a recently introduced rule that allows the giant fund to divest companies that derive 30% of their revenues or activities from coal.