"Analysing Modern Slavery Risks in Portfolio Companies: guidance for investors", 10 May 2021

As a result of the progressive legalization of international business and human rights “soft law” standards, the “S” of “ESG” is no longer an optional criterion for investors to include in their decision-making process...

In the framework of its work with La Banque Postale Assent Management on the ethical mutual fund “SRI Human Rights fund”, FIDH has developed a human rights methodology in order to assess which companies are suitable to join the investment portfolio. This is a unique example of a partnership between a human rights organization and an investor... Indeed, discussions concerning measurement of the human rights performance of companies for investment purposes rarely involve human rights NGOs with expertise at the local and national level, limiting the quality of the human rights data used...

FIDH has revised its existing human rights evaluation methodology to include performance tools that can facilitate assessment of modern slavery and has used this updated methodology to analyse a list of companies in four sectors: Tourism, Construction, Food and Beverage, and Textile and Footwear. The conclusions of this analysis are presented in this report, including a specific description of the results per sector, with a focus on modern slavery, along with the identification of transversal risk areas which relate to some of the root causes of modern slavery.

The sectoral analysis shows that there is still a big gap between companies’ human rights policies and practices, and the impacts on rights holders the ground. While companies in Tourism and Construction, show certain awareness of concepts such as “modern slavery,” “modern slavery risk assessments,” or “human rights due diligence,” proper integration of these concepts into the companies’ governance structure, processes, and supply chain is still missing. On the other hand, even if companies in the Food and Beverage, and Textile and Footwear sectors had overall higher scores in our analysis, compared to the other two sectors, we have generally observed discrepancies between the modern slavery commitments and risk mitigation measures adopted by parent companies, and the concrete impacts and situations reported by workers and other rights holders. In order to rectify these discrepancies, social and human rights indicators used by investors when analysing companies in their portfolios should not exclusively assess if companies have in place human rights policies, suppliers’ codes of conducts, and other human rights commitments. Investors should assess the congruence of the policies and the practices.

The report also shows that the work that Civil Society Organizations (CSOs) and human rights defenders carry out by documenting, advocating, and litigating against companies for human rights abuses happening in their operations and supply chains, plays a critical watchdog role and leads to companies putting in place specific policies, programs, and processes to prevent and mitigate the impacts on the ground. Investors have a duty to assess to what extent the companies in their investment portfolios value civic space, how they address the impacts on human rights defenders, and how they react to the existence of voices critical of their operations. In order for investors to analyse the discrepancies between the companies’ policies and the practices and impacts on the ground, FIDH has identified a list of transversal areas that investors should pay attention to, when analysing how companies in their portfolios address modern slavery risks...

This report therefore is not meant to be a public rating of those companies, and for this reason it will not contain specific information about the companies assessed...