ESG Hypocrisy: Why do Some Public Pensions Not Exclude Companies that Promote Sex Trafficking?

Posted on 06/26/2021


ESG is a popular term and buzzword in the world of institutional investors. The current focus of ESG for most U.S. and European pensions is “E”, which stands for environment. The social factor can be controversial with some issues like banning alcohol or gambling stocks. However, there is consensus among many governments and public opinion that sex trafficking is bad and inhumane. Why are public pensions focusing on banning private prisons and shunning oil companies, but ignoring companies that facilitate sex trafficking? Is it because tech companies have better public relations, or that they make good returns for investors?

By its nature, social media as an industry is a key facilitator in sex trafficking. One may think that Craigslist or the extinct “Backpage.com” are the key means of sex trafficking. Backpage.com was closed in 2018 after it was seized by the U.S. Department of Justice and its CEO Carl Ferrer admitted to charges including conspiracy to facilitate prostitution and money laundering.

According to the Human Trafficking Institute’s 2020 Federal Human Trafficking Report, the majority of online recruitment in active sex trafficking cases in the U.S. in 2020 took place on Facebook.

Public Pensions

Public pensions such as the California Public Employees Retirement System and the California State Teachers Retirement System are direct investors in Facebook Inc. In fact, according to an SWFI analysis on U.S. public pensions, many have Facebook stock as a top holding in their public equity portfolios as of 2020.

Facebook Could Face a Mound of Lawsuits over Sex Trafficking

On June 25, 2021, Justice James Blacklock of the Texas Supreme Court ruled that the impacted women can file a lawsuit against Facebook under a Texas state law that permits legal action against those who benefit from sex trafficking. The Texas Supreme Court ruled that Facebook could be liable for the conduct of pimps to recruit and prey on children. The social media giant that is run by Mark Zuckerberg can face lawsuits filed by three women claiming they were forced into prostitution as teenagers by abusers who used Facebook to entrap young girls. The judge also said the women cannot pursue claims under federal law that Facebook failed to warn minors and enact measures to block sex trafficking activity on its website.

According to the lawsuits, Facebook hasn’t put effective safeguards in place to block sex traffickers because it benefits from advertising to more than 2 billion users. The women who were sex trafficked from Facebook claim the listed social media giant won’t use advertising space for public service announcements regarding the dangers of sex trafficking. Sheryl Sandberg, the Chief Operating Officer of Facebook, wrote the book titled, “Lean In: Women, Work, and the Will to Lead.” Why does Facebook continue to be the lead social media facilitator for sex trafficking in the U.S., according to various institutes?

Facebook claimed it was protected under Section 230 of the U.S. Communications Decency Act, which shields websites from lawsuits over what users post online. The judge from Texas rejected that argument. “The statutory claim for knowingly or intentionally benefiting from participation in a human-trafficking venture is not barred by Section 230,” the judge ruled.

“Perhaps advances in technology now allow online platforms to more easily police their users’ posts,” Blacklock said. “On the other hand, perhaps subjecting online platforms to greater liability for their users’ injurious activity would reduce freedom of speech on the internet by encouraging platforms to censor ‘dangerous’ content to avoid lawsuits.”

Facebook has no problem censoring political speech. The platform kicked off then U.S. President Donald Trump during the 2020 election and curbed accounts that provided alternative information regarding COVID-19.

This is not the first case in Texas that had a somewhat similar situation. Marc Benioff, the CEO of Salesforce.com, saw his SaaS CRM giant company lose in Federal court in Houston in March 2021. The federal court ruled that Salesforce.com must face state and federal over sex-trafficking facilitation complaints. These complaints were by several young women who said their “pimps” many times sold them via the classified ads of Backpage.com. Salesforce filed to have the entire case against it dismissed. In this instance, Judge Hanen said Salesforce was not necessarily shielded by Section 230.

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