MSCI | Report on Chinese military-industry companies in company indices at MSCI

Status
0.45% votes in favour
AGM date
Previous AGM date
Proposal number
4
Resolution details
Lead filer
National Center for Public Policy
Resolution ask
Report on or disclose
ESG theme
  • Social
ESG sub-theme
  • Conflict and/or violence
Type of vote
Shareholder proposal
Filer type
Shareholder
Company sector
Financials
Company HQ country
United States
Resolved clause
RESOLVED: Shareholders request that the Board of Directors conduct and publish a review within the next year (at reasonable cost, omitting proprietary information) of whether and to what extent the Company includes companies that supply goods or services to the Chinese military. Shareholders and investors would be best served if the report focused in particular on index inclusion of subsidiaries of Chinese Military Industrial-Complex Companies (CMIC); subsidiaries of Chinese Military Companies operating in the United States to obtain advanced technologies and expertise in support of the People’s Liberation Army’s (PLA) modernization goals; companies denied access to U.S. technology because they are deemed a “Military End Users” (MEU) or other Chinese entity attempting to acquire items in support of the PLA’s modernization program; Chinese companies excluded from U.S. commercial markets for violating the Uyghur Forced Labor Prevention Act (UFLPA); BIS’ “Entity List” companies; and Chinese companies specializing in quantum information technologies, artificial intelligence, and microelectronics, the enhanced capability of which a new Presidential Executive Order calls “an unusual and extraordinary threat to the national security of the United States.”(1) The Board should also report on the screening processes it uses, if any, to determine whether its indices will lead American investors to fund the Chinese military, and any guidance, if any, it provides to users, including end users, of such indices
Supporting statement
SUPPORTING STATEMENT: MSCI (the Company) includes China A shares in its Emerging Markets (EM) Index. In 2019, the Company increased the weight of those shares in the index from 5 percent to 20 percent.(2) The Company in 2021 dismissed concerns that Chinese stocks are “uninvestable,” because of Chinese government regulatory crackdowns,(3) a problem that has accelerated significantly since then.
Most recently the U.S. House Select Committee on the Chinese Communist Party has warned that because of the indiscriminate inclusion of these shares in the EM Index, 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. By facilitating massive flows of American capital to these and other PRC entities linked to the PLA or to human rights abuses, [the Company] is exacerbating an already significant national security threat and undermining American values.(4)
If the Company is including in its indices shares of companies that aid and abet one of America’s chief adversaries to expand its military, increase its threatening technological capabilities and repress individual rights, the Company should at least reveal to immediate and end users of those indices the full extent to which reliance on the indices will implicate customers in such malign investment. Better, it should remove such companies from its indices.
Many analysts agree that continuing to include such companies in its indices, at least without full disclosure of the material risks involved, could bring severe legal and reputational consequences to the Company, and thereby to its shareholders.(5)

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