Supply Chain Council of European Union |

The elephant in the room

Upon reading a Guardian article entitled ‘Virtually entire’ fashion industry complicit in Uighur labour, say rights groups, my first thought was “wait until you see the fund industry”.

You may spend $40 on a t-shirt or $400 on a pair of shoes, but what about the $40,000 that’s allocated to Chinese companies in your broad emerging markets ETF?

Three of the biggest emerging markets ETFs — Vanguard Emerging Markets Stock Index [VWO], iShares Core MSCI Emerging Markets [IEMG] and iShares MSCI Emerging Markets Index [EEM] — have between 37% and 42% direct exposure to China with $140bn in combined assets under management. 

As a result, on the day Luckin Coffee’s fraud became public and the stock crashed, it wasn’t the Chinese funds that were most exposed but the emerging markets funds that had high allocations to the region. China’s economic heft seemingly gives it impunity to commit human rights atrocities. We are unintentionally funding that every time we invest in a broad emerging markets fund with 40% exposure to the region.

ESG funds are no different. Both the iShares ESG MSCI EM ETF [ESGE] and Nuveen ESG EM Equity ETF [NUEM] — two of the world’s largest EM ESG ETFs — have 37% and 40%, respectively, allocated to China.

ESG is an empty notion if we simply exclude tobacco, alcohol and gambling companies but have a 40% exposure to a country that has detained one to three million people in modern-day concentration camps. As China’s human rights practices become more widely known, investors can no longer ignore the elephant in the room.

“As China’s human rights practices become more widely known, investors can no longer ignore the elephant in the room”


By using a freedom-aligned strategy, there is a way for investors who believe in the long-term benefits of freedom to express those preferences, while having more consideration about their emerging markets allocations.  

In the Freedom 100 Emerging Markets ETF [FRDM], country selection and weights are based on quantitative third-party personal and economic freedom metrics. 

Top holdings include Taiwan Semiconductor — in July the company helped TAIEX rally to an all-time high — as well as Samsung Electronics — which has ended manufacturing in mainland China. Other main holdings include Polish video game developer CD Projekt and MediaTek — a Taiwanese semiconductor producer set to benefit from US China tensions as a key technology provider. 

As a result of freedom-weighting, there is currently no allocation to China, Russia, or Saudi Arabia. Securities are chosen based on size and liquidity, and state-owned enterprises are excluded. It’s our way of providing an alternative for investors who want to invest in emerging markets without directing capital to the world’s most autocratic regimes.

“It’s our way of providing an alternative for investors who want to invest in emerging markets without directing capital to the world’s most autocratic regimes”



For more detail on the Life + Liberties indexes, and a wealth of other topics, listen to Perth’s interview on Opto Sessions, available from wherever you get your podcasts.


Leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders.



Perth Tolle is the founder of Life + Liberty Indexes, a company that specialises in freedom-weighted equity index strategies based on human rights and economic freedom. Her company launched the world’s first freedom-weighted emerging markets ETF in partnership with Alpha Architect in 2019.

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