Published: July 2, 2021
Canada’s Public Pension Fund has invested millions of dollars in companies accused of bolstering China’s military-industrial complex – the US government has barred Americans from investing their money because they allegedly pose a security threat. Huh.
The Canada Pension Plan Investment Board has invested $3 million in shares of a company that makes components for Chinese warships, and another $2 million in a company affiliated with a maker of fighter jets and unmanned drones, its most recent holdings. according to the disclosure.
Canada’s former ambassador to China described pension investments as disturbing.
“It is completely unacceptable for a Canadian fund to invest in a company that manufactures ships or aircraft for the (Chinese) military,” said Guy Saint-Jacques, who served as ambassador from 2012 to 2016. “It should call for a full review of where the investment went in the light of the US-made list.
US President Joe Biden signed an executive order on June 3 extending a Trump-era ban barring US investments in 59 Chinese companies the US government says have ties to that country’s military and surveillance apparatus.
A White House statement said the companies named in Biden’s executive order “undermine the security or democratic values of the United States and our allies.”
While Americans are prohibited from investing directly or indirectly in these companies, the Canada Pension Plan Investment Board holds millions of dollars worth of shares in one of those firms and in a subsidiary of the other.
The Toronto Star and the Guelph Mercury Tribune found that the board has held shares of China Shipbuilding Industry Group Power (CSIGP) – one of the companies first added to the US blacklist in 2020 – since at least March 2019. Holdings in the Chinese shipbuilder grew from 394,000 shares by March 2020 to 862,000 shares, valued at approximately $3 million by March 2021.
The investment board also holds more than three million shares of investment firm AVIC Capital since at least March 2019. While AVIC Capital itself is not listed in the Biden executive order, corporate records indicate its largest shareholder — Aviation Industry Corp. China (AVIC) – is one of the Chinese companies facing US sanctions.
The Aviation Industry Corporation of China is a state-owned conglomerate that, among other things, produces aircraft used by the People’s Liberation Army Air Force.
According to the latest holdings disclosure from the CPP Investment Board, AVIC Capital’s shares were worth approximately $2 million at the end of March 2021.
Although he would not comment on specific holdings, Michel Leduc, the board’s global head of public affairs and communications, said its investments are “very dynamic and they are changing rapidly.”
He added that when there are large investments in individual firms, the board also holds shares in index funds, which “expose the fund’s share of up to 10,000 securities at any given time.”
“It doesn’t mean that at any given time we invest in 10,000 securities, but it’s certainly equivalent to that, and they tend to be very, very small amounts — a million dollars or two, sometimes Even less. In terms of a half-trillion dollar fund,” Leduc said.
Leduc noted that the public disclosure, reviewed by the Star and Mercury Tribune, was as of March 31, and may have changed since then. It is unclear how many, if any, shares of both companies remain in the board’s portfolio, which is funded by a portion of Canada’s every working paycheck.
In June 4 news conferenceChinese Foreign Ministry spokesman Wang Wenbin said the Biden administration’s move “has not only harmed the legitimate rights and interests of Chinese companies, but also harmed the interests of global investors, including US investors.”
According to Human Rights Watch, an AVIC-developed unmanned drone operated by the United Arab Emirates was used in an attack south of Tripoli, Libya, in late 2019 that killed eight civilians and injured another 27.
In 2014, an armed Chinese Shenyang J-11, an AVIC-built fighter based on a mid-1980s Soviet fighter, intercepted a US military patrol aircraft in international waters. Rear Admiral John Kirby said that at one point the fighter had come within 10 meters of the American aircraft, at one point to perform a “barrel roll” to show that he had weapons on board.
The company was previously barred from US investments following Trump’s 2020 executive order.
Shipbuilding Industry Group, CSIGP, is a subsidiary of China State Shipbuilding Corp., which produces ships used by the Chinese Navy. Both were among 59 entities banned from US investments.
Parent company China State Shipbuilding Corp. was also flagged off by the US Department of Commerce in December 2020, and now US businesses must obtain government permission to export it and other blacklisted companies.
The company was among 77 people on the Commerce Department’s list at the time “for seeking and attempting to acquire goods of American origin in support of programs of the People’s Liberation Army.” Several of its subsidiaries were also added because they “involved in China’s efforts to assert its illegal maritime claims in the South China Sea, as well as to intimidate and coerce other coastal states from accessing and developing offshore marine resources.” efforts are involved.”
Canada’s former ambassador, Saint-Jacques, said investing in companies that supply China’s military could back Canada. He said China has territorial disputes with several neighboring countries, including one with Japan over islands in the East China Sea.
“Every time we finance the development of a new naval ship, it is a ship that is likely to end up in the South China Sea or in a collision with Japan, which is an ally,” he said. “I think it’s completely reprehensible.”
Citing the arrest and trial of Canadians Michael Kovrig and Michael Spavor, Saint-Jacques also questioned the prudent to invest in times of Chinese aggression, and warned that nothing could stop Beijing from halting Canadian investments in China. is.
He said that many fund managers are very concerned about returns.
This sentiment was shared by Alistair McGregor, a New Democrat lawmaker who last year introduced a private member’s bill calling for ethical investments from the CPP investment board. The bill was defeated by the Conservatives and Liberals in March.
McGregor said he doubted the Canadian public would approve of his pension fund investing in China’s military industry, and he noted the outrage following news that the fund had invested in companies running private prisons in the US. Korsivik in 2019.
“I think it’s pretty clear that we need another layer of monitoring on how the Canada Pension Plan Investment Board is investing our money,” McGregor said.
When asked about the possibility of additional oversight, Leduc said that the current law, first written in 1997, stipulates the board’s responsibilities “extraordinarily required by lawmakers to evolve and evolve with the passage of time”. It was well written.”
“Our investments are treated in terms of two sides of the same coin: risk and return. 10 Policymakers at the provincial and federal governments understood at the time that ‘risk’ is not just a number on a spreadsheet, but a qualitative one. Dimensions such as (environmental, social and governance) are involved in risks that affect the sustainability of any investment.
“A poor human rights track record is a way of getting a business off the ground, so we work hard to understand them,” he said.
It is possible to enjoy good investment returns without buying into Chinese firms, says the head of a Danish pension fund that last year divested from Chinese state-controlled firms.