Financial Times. 9 June 2021

Below is an article published by Financial Times. Photo:Reuters.

Uyghur rights groups pressure asset managers on Zara parent

The human rights crisis in Xinjiang has pitted Europe and the US against China — and clothing companies are caught in the middle. Now, asset managers are being pulled into the fray.

In 2019, China began sending Uyghurs from re-education facilities to factories where conditions pointed to forced labour. Many former detainees worked in apparel, footware and other textile businesses, according to a US government March 2021 report.

Xinjiang, the Uyghurs’ homeland, is China’s cotton country, comprising 20 per cent of the world’s cotton output.

Clothing companies such as H&M have already been targeted by human rights investors to eliminate Xinjiang cotton from their supplier networks. Now, in a tactic that environmentalists and other activists have deployed during annual meetings season, Uyghur rights groups are targeting asset managers.

In a letter today, Uyghur rights groups have urged BlackRock, Capital Group and Baillie Gifford to use their heft to pressure Inditex, the Spanish parent company of Zara, on its Xinjiang policies.

Inditex has failed to ensure the cotton in its supplier network is free from Uyghur forced labour, the groups said. And Inditex has refused to take tangible steps to fix the issue, they said, adding that the inaction raises reputational risks for the company.

The letter asks the largest holders of Inditex stock to consider this at the company’s next annual meeting in July.

“No one, no company in these industries can say they are ignorant of this issue because it has been widely reported,” said Zumretay Arkin, program manager at the World Uyghur Congress. She pointed to investor support for a shareholder petition at Apple last year as evidence that other asset managers take human rights risks seriously.

When other companies in the fashion industry “heard about the news of forced labour everyone started panicking and started to really look into their supply chains,” Arkin said.