Chinese sovereign wealth fund: questionable ethics says EWC GdfSuez
(17 October 2011) The European Works Council of GdfSuez reached a groundbreaking opinion regarding the participation of the Chinese Sovereign wealth fund in the company. The opinion can be seen as a rebuff to the efforts of the Chinese government to win international respect. This remains difficult if transparency and labour rights are not respected.
The French company GdfSuez is working on a deal to open the capital of its Gas exploration business (EPI) and oversees-LNG to the Chinese sovereign wealth fund the Chinese Investment Company (CIC), created by the Chinese Finance Ministry. The French company expects to have better access to markets in the Asia-Pacific and China. The CIC is a Chinese sovereign wealth fund, part of government. The Chinese government seeks recognition as well as legitimacy to operate in international markets. It further wants access to natural resources. The financial ambitions of the fund will be to maximize its rate of return on investment.
As the operation affects also staff in Europe (around 1500 in total employed by the companies concerned) the EWC was requested to give an opinion. Two meetings of the EWC were held, one to inform and one to consult. The European Works Council engaged the French consultancy Secafi to produce a report. This was focused mainly on the financial and legal structure of the deal but also explored the transparency and adherence to Corporate Social Responsibility that could be expected.
The European Works Council used this report to inform its opinion. It issued its opinion. It is negative. Some points of the EWC:
The opening of the capital signals a strategy to focus on Asia to seek higher rates of return and profits while it also weakens the commitment to exploration and production of gas and hence the strength of the gas chain.
The strategy holds risks for the long-term and including for Europe as investment programmes might have different aims then to ensure security of supply for the population.
However what makes the opinion especially important is that it is the first time an EWC that says no to a minority strategic investor on grounds of ethical behavior. The EWC finds that:
It has insufficient information to judge the financial capacity of the fund in the long term. There is not enough transparency regarding the basic economic data
The fund does not have criteria regarding corporate social responsibility
There are doubts as to the CIC ethical values and respect for fundamental rights for the population and for workers. It could be risk for the image of GdfSuez.
The EWC finally notes that GdfSuez reached a global agreement regarding the values to be respected and referring to the OECD principles regarding transnational companies. The EWC questions the willingness of CIC to be transparent and respect international labour rights.
For the full position of the EWC: