In focus

Engaging with companies and fund managers over forced labour in the solar supply chain


The energy transition is fraught with complexity. We want to invest in companies that can provide vital solutions to help tackle climate change, while also delivering attractive financial returns for our clients. But how do we ensure we are supporting a “just transition” – one that ensures the benefits are shared widely and avoids social exclusion? How are the companies we invest in treating other stakeholders – including staff, local communities, regulators and the environment – across their supply chains?

Human rights are an important issue for our clients and one of six priority areas within our engagement blueprint.

Unfortunately, our research into modern slavery and ethical supply chains resulted in some worrying findings about the solar industry. The supply chain is often dependent on materials, such as polysilicon, that are produced in China’s Xinjiang Uighur Autonomous Region (XUAR). The risk of forced labour in this region is high, giving rise to ethical concerns and regulatory risks.

As a result of the research, Schroders' fund managers focused on energy transition have enhanced engagement efforts with relevant companies. This includes requesting evidence of due diligence and transparency around supply chains and adjusting portfolios where necessary.

As multi-manager investors at Cazenove Capital, we have shared the research findings with third-party fund managers with relevant holdings. Many of them provided evidence of work already undertaken and some have amended their portfolios.

The research has economic, as well as ethical, implications. In June this year, the US updated the US Tariff Act with the Uighur Forced Labour Prevention Act, banning all imports from XUAR unless it can be proven that forced labour was not involved in their production. Europe and Australia are considering a similar regulation. These measures could impact profitability and share prices for companies in the solar industry and are a clear example of how ESG-related research can protect financial returns.

The opinions contained herein are those of the author and do not necessarily represent the house view. This document is intended to be for information purposes only. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Cazenove Capital does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Cazenove Capital has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Cazenove Capital is part of the Schroder Group and a trading name of Schroder & Co. Registered Office at 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. For your security, communications may be taped and monitored. 

Contact Cazenove Charities

Achieving your charity's investment objectives takes time and thought. To find out how we can help you please contact:

James Brennan

James Brennan

Portfolio Director james.brennan@cazenovecapital.com