US Congressional report on Uyghur labour exposes shareholder risk

It is here! Welcome to day one of our Moral Money Europe conference. Today, we have on the agenda Commodity Futures Trading Commission commissioner Christy Goldsmith Romero and International Sustainability Standards Board chair Emmanuel Faber among other newsmakers. As a newsletter subscriber, you can watch online for free — just click here to register.

In today’s newsletter, I have a piece about the latest enforcement effort in the US for its landmark Uyghur human rights law, and what it could mean for investors. And Simon has the latest on global efforts to roll out carbon pricing.

Thank you for reading — Patrick Temple-West

human rights risks

US Senate report exposes Uyghur supply chain risks

A US Senate committee reported this week that vehicles made by BMW, Jaguar Land Rover and Volkswagen all included parts from suppliers whose products are banned in the US for using forced Uyghur labour in China.

Just one week after the US imposed tariffs on certain electric vehicles and other clean tech products made in China, the US Senate finance committee published a report alleging that BMW imported thousands of Mini Cooper cars with parts from a Chinese company that is on a list of banned businesses for relying on Uyghur workers. JLR and Volkswagen imported car parts made by suppliers banned in the US.

“Automakers’ self-policing is clearly not doing the job,” Democratic senator Ron Wyden said. “I’m calling on Customs and Border Protection (CBP) to take a number of specific steps to supercharge enforcement and crack down on companies that fuel the shameful use of forced labour in China.”

The report highlights how politicians in both parties are eager to bash companies for possible human rights violations in China. It also exposes human rights risks to shareholders, who have good reasons to be worried about Uyghur protection laws.

Political reports and negative news stories can be headaches, but parts banned and products detained at ports can have serious consequences for a company’s revenues.

Walmart’s shareholders are also taking notice. They will vote at the company’s annual meeting on June 5 on a proposal for a human rights impact assessment. This proposal, which was filed by Oxfam America, says the assessment would help Walmart mitigate supply chain risks, adding that “[it] can also insulate companies from being unprepared for regulatory changes”, such as the US Uyghur Forced Labor Prevention Act of 2021.

The UFLPA assumes that goods made in Xinjiang are made with forced labour and prohibits them from entering the US. As of September 2023, US CBP denied more than 2,000 cargo shipments out of concern they violated the Uyghur rule, according to a US congress report.

President Xi Jinping’s government has said work programmes for Uyghurs are fair and necessary. But the UN’s main human rights body said in 2022 that Xi’s government had committed “serious human rights violations”.

Walmart argued that it was working with a third-party and was in the process of completing a human rights impact assessment for its suppliers.

BMW said in a statement it had been warned about one of its suppliers and took steps “to halt the importation of affected products”. Its shares are trading down 7 per cent for the year, and have dipped 1 per cent this week.

JLR, which is based in the UK but owned by India’s Tata Motors, said it “immediately stopped all shipments of the two affected after-market service parts” earlier this year.

Volkswagen previously acknowledged that some of its cars destined for the US included a manufacturer on the US Uyghur banned list.

We wrote in January about the US Uyghur forced labour law and its consequences for the apparel industry, specifically Shein, which is now considering London for its public listing. 

With the US eager to enforce its law, companies need to stay vigilant. (Patrick Temple-West)

Carbon pricing

Top takeaways from the World Bank’s carbon pricing report

For decades, economists have argued that serious and far-reaching carbon pricing must be a central part of the global response to climate change. Yesterday, the World Bank published a report showing the state of international progress in rolling out this potentially crucial policy lever. Here are our key takeaways:

1. The number of carbon pricing schemes continues to grow — slowly

There are now 75 international, national or subnational carbon pricing schemes — up by two over the past 12 months. Of these, 39 are emissions trading schemes like the EU’s, in which companies in specified industries are required to buy emission permits. The other 36 schemes are carbon tax regimes, as seen in Japan and Canada. New carbon taxes were introduced over the past year in Hungary, Slovenia, Taiwan and China. In the US, however, several states dropped or suspended carbon pricing.

2. Most emissions are still not covered

Carbon pricing schemes now cover about 24 per cent of global emissions, up from 7 per cent a decade ago. Even if you include the systems that are now under public consideration, it would raise this figure only modestly, to about 30 per cent. That is a long way from the goal set by the Global Carbon Pricing Challenge, a multinational initiative launched by Canada at COP26 in 2021, which aims to have 60 per cent of global emissions covered by pricing schemes by 2030.

3. This is not just a rich-country game

Carbon pricing — especially through emissions trading schemes — is gaining traction in middle-income countries too. Indonesia has launched an ETS for coal-fired power plants, Turkey is launching a pilot phase of its ETS, and India is laying the groundwork for its own programme. Europe’s carbon border adjustment mechanism, which will impose carbon levies on imports from countries that don’t have carbon pricing schemes, is giving a new incentive for exporting nations to move on this front.

4. Prices still look much too low

According to the Intergovernmental Panel on Climate Change, the marginal cost of limiting global warming to 1.5C is at least $226 per tonne (in 2024 dollars). That suggests that carbon prices ought to be at a similar level. Broadly speaking, they’re not even in the same ballpark. The highest carbon price identified by the World Bank report was Uruguay’s carbon tax, at more than $160 per tonne. Four others — in Finland, Sweden, Switzerland and Liechtenstein — were more than $100 per tonne. Most of the rest were far lower: about half were less than $20 per tonne. (Simon Mundy)

Smart read

To understand the gender pay gap, we need to look at how we raise our daughters and sons, writes Nikki Shure of University College London.