Investors should have a duty to investigate links to modern slavery
While slavery might sound like an egregious crime of the past it is still commonplace in modern society. It is a crime that exploits and dehumanises individuals and sees them as property to be bought, sold or traded. While it is prevalent, it is not public, and across the world acts of modern slavery take place without recognition, understanding or assistance.
Estimates suggest there are 40.3 million people across the globe in slavery. Of the twenty-five million that are victims of forced labour, sixteen million are exploited in the private sector and five million are victims of forced sexual exploitation. Seventy per cent of those in slavery are women and girls.
This is not a problem of some far off distant land but one that occurs across the western world, including in the United Kingdom. Recent figures suggest that in the UK alone 136,000 people are victims of modern slavery. These figures, yet to be revised to take into account the pandemic, are likely to be underestimating the true number.
The impact of a global pandemic and lockdowns will have only made the issue of modern slavery more acute. While organisations such as the UN Working Group on Contemporary Slavery exist, there is a great deal more to be done. Almost half the countries in the world have failed to criminalise slavery.
In 2015 the UK passed the Modern Slavery Act (MSA). This landmark piece of legislation specifically addresses slavery and trafficking in the 21st Century by ensuring both the private and public sector are engaged and active in eradicating modern slavery from their supply chains or businesses. Requiring annual reporting from private enterprises ensures a new level of due diligence in how businesses operate and with whom they transact deals.
It is an Act that we should be proud of and world-leading. But like all pieces of legislation, they must be viewed as a start point, not an endpoint. For it to be truly effective and relevant in the 21st Century it must be continually reviewed and updated to counter the illicit networks that trade in such misery.
We believe we must now go further than the Modern Slavery Act’s initial focus on just supply chains and include financial investments. While businesses across the UK are now obligated to disclose supply chain links to slavery, for financial services there are still no explicit requirements to report on their investments.
To put this into context, the independent review of Boohoo, found that the firm’s major investors had significantly underestimated its modern slavery links and even ranked and recommended the company in their dedicated sustainable investment funds. Of the 795 financial organisations that publish modern slavery statements, only 30-40 per cent of them meet the minimum reporting requirements and many do not look beyond their own firm’s in-house operations.
The example given shows the need for financial services to look beyond their own operations and consider where they are investing. It matters because the UK is the third-largest pension market in the world with £3 trillion in investable assets and the second-largest asset management industry with £9 trillion. The sheer scale of UK pension and investment markets shows the weight of our pound and the need for us to ensure that it does not willingly or inadvertently fund modern slavery.
So, just as when we passed the Modern Slavery Act, which helped to encourage France, the Netherlands and Australia to do the same, we must once again be bold in our ambition and determined to update this legislation as we seek to eradicate modern slavery once and for all.
This is an opportunity for the Government to show leadership both globally and domestically.
First, as multilateralism and rules-based order are reasserted we should seek to create an international Task Force on Modern Slavery in Finance. As was achieved by the Chancellor in setting a global corporation tax minimum, we can bring together our allies to make recommendations on how major financial companies can develop a specific framework that addresses modern slavery, thereby encouraging more of a focus on the ‘S’ in Environmental, Social and Governance (ESG) strategies.
Second, the Government should consult on expanding the Modern Slavery Act, section 54 to include investments. Such a move would see supply chain and investments under the same umbrella of compliance making the act itself more effective.
Those financial services companies who are already investing significant time, energy and resources to build robust ESG processes will surely welcome this enhanced focus on one of the most egregious crimes against humanity. In a global investment market that is increasingly driven by investors who want to know where their hard-earned savings are going, they will relish the opportunity to demonstrate their work and transparency.
Put simply, the situation you walk past is the situation you accept. We must do all we can, wherever we can to stop modern slavery. The UK is the financial capital of the world. In casting our net wider, not only can we provide global leadership to end modern slavery, we must.