Investors taking a sustainable approach to capital allocation may be re-evaluating putting their money in Hong Kong after the city implemented a national security law, an analyst said on Friday.
“That is the area of international capital flows that could be quite significant,” said Andrew Collier, managing director of Orient Capital Research, a research firm.
Sustainable investment factors or “ESG” in the environmental, social and governance ratings of a company. These strategies vary and are subjective, but generally aim to make socially conscious investment decisions.
Hong Kong has seen more than a year of protests that sometimes turned violent when residents rejected the erosion of freedoms in the city. Critics say the recently implemented national security law gives the central government in Beijing broad powers to suppress dissent in Hong Kong.
United States Secretary of State Mike Pompeo called the law “draconian” and said it “ends with the freedom of Hong Kong.” Before China’s law was implemented, the United States Senate passed a bill that would impose sanctions on individuals or companies that “materially contribute to China’s failure to preserve Hong Kong’s autonomy.”
“It is one thing for Congress and Trump to make political statements. It is another thing for funds themselves in Europe and in the United States to take a position based on the view of supporting an increasingly oppressive political climate,” Collier told “Street Signs “from CNBC. Asia.”
On Tuesday, HSBC investor Federated Hermes said in a statement that he was concerned about the bank’s support for the new law.
“We hope that companies support improvements in protections for citizens and do not support their removal,” said Roland Bosch, leader of the financial services sector at Federated Hermes. Bosch is responsible for corporate commitments in Europe and the US.
HSBC did not immediately respond to a request for comment from CNBC.
This could be the tip of the iceberg, Collier said. He suggested that unions could boost other funds. For example, the funds from retired teachers will likely “not be very happy with what is happening in Hong Kong,” he added.
Large funds may begin to readjust investment protocols and operations in Hong Kong, affecting the city’s position as an international financial center, Collier said.
In early June, Aviva Investors had expressed similar concerns about HSBC and Standard Chartered before the law was implemented.
The firm, one of the main shareholders of both banks, said it was “uncomfortable” with public support for the law. He said he hopes “both companies confirm that they will also speak publicly if there are future abuses of democratic freedoms related to this law.”
The banks declined to comment to CNBC when that statement was reported.
– CNBC’s Abigail Ng contributed to this report.
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