Modern slavery represents a tragic market failure, where some companies maintain competitive advantage and large profits through unethical and unsustainable business practices that rely on the exploitation of approximately 16 million workers worldwide.
The finance sector has not been subject to the same level of scrutiny as sectors that are high-risk for labour exploitation. But financial actors, and asset managers in particular, have the leverage, and increasingly the responsibility, to push for better human and labour rights practices by companies within their portfolios.
In partnership with WikiRate and the Business & Human Rights Resource Centre we have assessed the statements produced by 79 asset managers required to report under the UK Modern Slavery Act. This is to understand the level of awareness of modern slavery risks, to identify good practice, and highlight gaps in reporting by asset managers.
failed to meet all minimum requirements of the MSA
failed to disclose policies to address modern slavery in direct operations or supply chains
did not disclose due diligence to address modern slavery risks in their supply chains
conducted some type of risk assessment on their supply chains, but only 30% of these then identified specific risks
disclosed conducting some form of due diligence on human rights or modern slavery in their portfolio
disclosed engaging directly with investee companies to address modern slavery through social audits, self-assessment reviews, filing shareholder resolutions, or training
“The report, ‘Beyond Compliance in the Finance Sector’, produced by Walk Free, WikiRate, and BHRRC is very timely- there remains confusion about the fiduciary duties of investors, and how they can include ESG factors, including modern slavery, in their investment decision-making. The report highlights that investors should recognise the leverage they have to strengthen their efforts to address modern slavery risks in their financial activities, including investment portfolios, and their supply chains.
At PRI, we have highlighted the importance of considering human rights issues in investment decision making. Many investors recognise that preventing and mitigating actual and potential negative outcomes for people leads to better financial risk management and aligns their activities with the demands of beneficiaries, clients and regulators. Our signatories have made it clear that PRI should focus on social issues, including modern slavery, and this reports further highlights the need for social issues to come to the fore in investment decisions in order to deliver on the achievement of the SDGs and the eradication of modern slavery.”
Fiona Reynolds, CEO at the UN Principles for Responsible Investment (PRI)