Under the fund’s operating guidelines, it could sell holdings in firms that do not meet its ethnical code.
At the end of 2016, the fund had a 1.29% stake worth $11 million in Hansae Co Ltd, which manufactures apparel in Vietnam and several other countries. It also owned a 1.52% stake worth $5.2 million in Hansae Yes24.
“The companies are placed under observation because of an unacceptable risk that the companies contribute to, or are responsible for, systematic violations of human rights,” the board of the central bank wrote.
A spokesperson for the two firms told Reuters they had conducted an internal investigation of working conditions at the Vietnam plant this year that resulted in efforts to improve working conditions.
[Read more on labor rights: FLA Report Identifies Ways to Mitigate Child Labor Risks in Cotton Sector]
The fund’s Council on Ethics recommended an immediate exclusion of the two firms from the portfolio, but the board of the central bank decided to put the stakes under observation.
“The Council on Ethics highlights that the companies have taken measures to improve the working conditions. The Executive Board believes that these measures provide sufficient grounds to observe the development in the future,” the bank said.
Hansae could not be reached for comment. The company’s web site says it operates 12 corporations in six countries–Vietnam, Nicaragua, Guatemala, Indonesia, Myanmar and Haiti–with more than 700 people in its headquarters and 35,000 people employed around the world.