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Global hedge fund titans BlackRock and MSCI Inc have drawn the ire of the US Select Committee on the Chinese Communist Party (CCP) amid concerns about the multibillion-dollar investment institutions making investment decisions that “fuel” China’s military modernisation and advancement.
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Announced overnight following “rigorous examination” of BlackRock and MSCI’s Chinese investments decisions, chairman of the bipartisan US Select Committee on the Chinese Communist Party (CCP) Mike Gallagher and ranking member Raja Krishnamoorthi announced an investigation into the two firms.
Chairman Gallagher and ranking member Krishnamoorthi uncovered that BlackRock and MSCI invest or enable the investment of Americans’ savings into dozens of blacklisted Chinese companies that threaten US national security or support the Chinese Communist Party’s human rights abuses.
Gallagher and Krishnamoorthi state in their respective correspondence to BlackRock and MSCI: “Our review has shown that, as a direct result of decisions made by (BlackRock/MSCI), these Americans are now unwittingly funding PRC (People’s Republic of China) companies that develop and build weapons for the People’s Liberation Army (PLA) – the PRC’s military – and advance the CCP’s stated mission of technological supremacy.”
Chairman Gallagher and ranking member Krishnamoorthi wrote to request extensive information from the financial behemoths, including:
- A list of all the companies included on MSCI indexes, and for each company, list the indexes on which that company is included;
- A detailed description of the factors they consider when including companies in indexes;
- All policies, procedures, and related guidance documents pertaining to conflicts of interest and how (BlackRock or MSCI’s) oversight committee and other governing bodies have applied such policies, procedures, and related guidance with respect to the engagements with public or private entities based in or with significant operations in the PRC; and
- A full list of indexes provided, specifically identifying each index that includes any company identified in this letter, and a detailed summary of these indexes, including a breakdown of US investor exposure, as of 30 June 2023, 1 January 2023, and 1 January 2022.
In addition to these requests, the lawmakers also requested a response from BlackRock and MSCI to the following questions:
- If they are able to perform thorough due diligence on all PRC companies included in their indexes, including those listed on the USG red-flag lists or any other red-flag lists. And if so, how and through what means do they do so? If not, what is their process for determining whether to include those companies in their indexes?; and
- What transparency do they provide to the public and to investors regarding the inclusion of red-flag companies in their indexes?
“By facilitating massive flows of American capital to these and other PRC entities linked to the PLA or to human rights abuses, (BlackRock/MSCI) is exacerbating an already significant national security threat and undermining American values,” Gallagher and Krishnamoorthi added.
Going further, Gallagher and Krishnamoorthi said: “It is unconscionable for any US company to profit from investments that fuel the military advancement of America’s foremost foreign adversary and facilitate human rights abuses. We, therefore, seek additional information regarding this deeply troubling matter.”
BlackRock manages trillions of dollars, drawing from Americans’ hard-earned pensions and savings, and MSCI directs the investments of funds from millions of Americans’ bank accounts. The organisation is also one of the global leaders in the rollout of “environmental, social and/or governance (ESG) objectives, themes, and related considerations as a principal means for selecting investments” with mutual funds, iShares ETFs and closed-end funds in market around the globe.
BlackRock, as an organisation, prioritises “acting at all times in the best long-term interests of our fund investors. We undertake our investment stewardship activities to protect and enhance the economic value of the companies in which we invest on their behalf”.
MSCI draws on over 50 years of expertise in research, data and technology with an emphasis on bringing “greater transparency to financial markets” and “enabling sustainable investing, environmental sustainability” and “diversity, equity and inclusion” as part of their governance and social practices.
