Beyond compliance in the financial sector: Assessing UK Modern Slavery Act statements produced by asset managers
The UK Modern Slavery Act 2015 (the Act) was hailed as a landmark piece of legislation that would encourage businesses to remove modern slavery from their operations and supply chains by both introducing transparency requirements for companies and inspiring a ‘race to the top’ by increasing competition to drive up collective standards. Over the past five years, Business & Human Rights Resource Centre (BHRRC) hosted the only public repository of statement – the Modern Slavery Registry – and assessed compliance from over 16,000 modern slavery statements from some of the largest global companies. Our analysis of reporting under the Act show that the Act has failed to deliver the transformational change many hoped for.
This briefing, undertaken in partnership with Walk Free and WikiRate, analyses modern slavery reporting by asset managers. Of 91 asset managers identified as required to report under the Act, 79 had published statements. We also looked at due diligence efforts taken within investment portfolios in line with standards within the sector. While the finance sector has not been subject to the same level of scrutiny as other sectors, it faces clear exposure to modern slavery risk through its direct operation, supply chains and business relations.
We recommend asset managers undertake the following due diligence, at a minumum to address modern slavery risks within investment portfolios:
- Does the investor disclose it has a human rights investment policy covering any portfolios under management?
- Does the investor disclose it requires investee companies to meet their reporting obligations under the UK Modern Slavery Act?
- Does the investor disclose it assesses investee companies prior to investment to identify potential modern slavery risk areas?
- Does the investor disclose active engagement, either directly or through intermediaries, with investee companies on their (investee companies’) modern slavery/ labour exploitation/ human trafficking risks in value chains and business relationships?
- Does the investor disclose it collaborates with industry and non-industry stakeholders to learn from experts and peers on and/or lift the industry standard for preventing, identifying, and mitigating modern slavery, labour exploitation and human trafficking risks, and enabling effective remedy for harms caused or contributed to?
- Does the investor disclose it has a human rights due diligence process in place to prevent and mitigate modern slavery/ labour rights/ human rights risks identified within its portfolio pre, during and post investment or identified in its investments?
- Does the investor disclose whether any of the following social issues (the S from ESG) inform the company’s investment decisions?
- Does the investor disclose it identified salient human rights and labour rights risks in their investments (e.g. vulnerable workers, geography, sourcing country, etc)?
- Does the investor disclose it has an exclusionary policy in place to screen out companies based on social criteria related to modern slavery and human trafficking?
This review of modern slavery statements produced by asset managers is incredibly revealing, showing more than half fail to meet the minimum standards required by law. The report, ‘Beyond Compliance in the Finance Sector’, produced by Walk Free, WikiRate, and BHRRC, reveals that many asset managers are also not disclosing if they consider modern slavery risks in their investment decisions. The report found more than half did not disclose due diligence on their supply chains, and less than one third disclosed conducting some form of due diligence on human rights or modern slavery issues in their portfolio. These findings are also 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, UN Principles for Responsible Investment
WikiRate Interactive Dataset
Explore individual company performance in the interactive dataset on WikiRate
Modern Slavery Registry Archive
Access our historical record of 16,000 statements from 2015-2020