US socially responsible investment house Zevin Asset Management has ditched its holdings in Chinese and Hong Kong firms in response to social and investment risks linked to China’s “authoritarian” government.
Sonia Kowal, president at the majority woman-owned investment firm, told Responsible Investor that the divestment, which took place last month, amounted to $11 million or around 1.6 percent of Zevin’s assets under management.
Zevin held two companies – tech conglomerate Tencent and insurance giant AIA – across all three of its strategies.
Kowal told RI: “While the scale of our investment/divestment itself obviously won’t move any needles, we hope to show other larger investors, especially those that profess to integrate ESG, the reasoning behind our move, and perhaps it will lead them to question their own behaviour.”
The decision to divest was prompted in part by the war in Ukraine, which resulted in widespread divestment of Russian assets in the weeks following the invasion.
Describing it as “a wake-up call”, Zevin wrote in a statement on its website: “Investments in authoritarian governments can be a big risk for investors because of the associated lack of checks and balances, anti-democratic tactics, financial coercion, and physical intimidation of citizens.”
The asset manager did not directly invest in Russia before the invasion because of risks associated with Putin’s rule but admitted: “We had not followed the same approach with China, despite its increasingly repressive regime, because its economic importance presented a different picture than Russia.”
Zevin already excluded companies that were majority-owned or controlled by the Chinese Communist Party but felt this no longer went far enough.
It pointed to the deterioration of China’s human rights record under president Xi Jinping, including the crushing of Hong Kong pro-democracy activists and continued abuses of the Uyghur population.
Investment risks linked to the “political crackdown on various companies and industries deemed not submissive enough to Chinese government” was also cited as a reason for the action.
Zevin also noted that engagement is “not an option” when it comes to China, where the regime “poses a unique problem that inhibits us from deploying the usual tactics”.
In recent years a number of investors, including major Dutch pension funds, have divested Chinese companies with links to the oppression of minorities in Xinjiang province.
The Boston-based firm also said it would aim not to invest in companies that are “key enablers of human rights abuses by the Chinese government”. It acknowledged, however, that its action was “imperfect” and not a “panacea,” pointing to its continued exposure through multinational supply chains.
Regardless, Zevin concluded that continued direct investment in the country was “untenable, both from a financial and social perspective”.
The firm signed off its statement: “We hope that this policy is temporary and that we will be able to invest in Chinese companies when the country finds itself on a more sustainable path in the future.”