Originally published August 1, 2023 2:00 pm PDT
U.S. financial giants BlackRock and MSCI are under congressional investigation for their investment decisions regarding Chinese companies, according to a recent press release from the U.S. Select Committee on the Chinese Communist Party.
The firms stand accused of profiting from investments in blacklisted Chinese companies that threaten U.S. national security or support human rights abuses.
Chairman Mike Gallagher (R-WI) and Ranking Member Raja Krishnamoorthi (D-IL) stated in a letter to the CEOs of BlackRock and MSCI, “It is unconscionable for any U.S. 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.”
The probe comes after a rigorous examination of the firm’s investment decisions.
“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 release states.
The committee’s review of BlackRock alone found that the asset manager, which had $9.43 trillion in assets under management as of June 30, has invested more than $429 million into blacklisted Chinese companies, though they add that “the true scale is likely much larger,” Pensions & Investments reports.
The lawmakers further clarified the gravity of the situation in the letters, writing, “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.”
The investigation also seeks to uncover whether the two firms are facilitating massive flows of American capital to Chinese entities linked to the PLA or to human rights abuses.
The lawmakers argue that such actions “are exacerbating an already significant national security threat and undermining American values.”
The Select Committee has requested extensive information from both BlackRock and MSCI, including a detailed breakdown of the companies included in MSCI indexes, the factors considered when adding companies to indexes, and their policies regarding conflicts of interest.
Furthermore, the committee seeks transparency on whether these financial firms perform due diligence on all PRC companies included in their indexes, specifically those listed on red-flag lists, and how they provide this transparency to the public and investors.
This investigation signifies a significant development in U.S. lawmakers’ efforts to counter China’s economic influence and ensure that American investors are not unknowingly contributing to Chinese entities that pose threats to national security or violate human rights.
The outcome of this investigation will likely have profound implications for both the firms in question and the wider financial industry.
BlackRock is an official partner of the World Economic Forum (WEF), which predicts that the United States “won’t be the world’s leading superpower” by 2030. WEF partners like BlackRock, which owns controlling shares of virtually every major corporation (here, here), “are the driving force behind the Forum’s programmes,” according to the group’s website.
