In June 2021, the Non-Governmental Organization Hong Kong Watch began releasing reports claiming that Western governments, corporations, and institutional investors were escalating their investments in the People's Republic of China (PRC), despite the country's ongoing human rights abuses, particularly against Uyghurs and other Turkic Muslims in the Xinjiang Uyghur Autonomous Region (Xinjiang). The research specifically examined Canadian pension funds and found that some of Canada's major public pension funds, including the Canada Pension Plan Investment Board, the Caisse de dépot et placement du Québec, and the British Columbia Investment Management Corporation, had investments in PRC-based companies implicated in human rights violations. These included Chinese technology firms that are blacklisted by the United States due to their connections to internment camps in Xinjiang, as well as other major tech companies like Alibaba and Tencent that are complicit in oppression within the PRC.

In considering the legislative and regulatory framework for Canadian public pension funds, the House of Commons Special Committee on the Canada–People’s Republic of China Relationship (the Special Committee) noted that there are currently no measures which prevent those pension funds from investing in companies in the PRC responsible for, or complicit in, human rights violations. Broadly, the main objective for most public pension funds is to maximize returns, without undue risk, in order to provide for future retirement benefits for plan beneficiaries. Large institutional investors that manage public pension funds, like the Canada Pension Plan Investment Board and the Public Service Pension Plan Investment Board, operate independent from the government, and pursuant to their enabling legislation, set their own investment strategies, as well as investment, risk and sustainable investing policies. In doing so, those institutional investors pursue an asset diversification strategy with investments in both domestic and foreign markets, including in the PRC. Pursuant to their respective investment policies, they carry out due diligence prior to making investment decisions, which may include the consideration of environmental, social and governance factors (ESG), including human right matters. However, there is currently no requirement to do so.

The Special Committee heard that increasingly, institutional investors are considering ESG factors in their evaluation of investment risks and returns. However, the availability of reliable and standardized corporate information in countries like the PRC can invariably limit the effectiveness of due diligence work. Further, investments in passively managed index funds expose public pension funds to investments in companies in the PRC. Several expert witness, notably Hong Kong Watch, cited examples of passive investments held by Canadian public pension funds in companies complicit in human right abuses.

In its study, the Special Committee heard several recommendations from witnesses on how to address these issues, ranging from very prescriptive measures, such as establishing a restricted entities list that public pension funds must adhere to when making investment decisions, to less prescriptive measures like enhanced ESG and due diligence requirements, and increased transparency and accountability in publishing all investment holdings.