Tackling the scourge of modern slavery: An investor perspective

This article was originally published on the Responsible Investment Association Australasia website.

Modern slavery is a distressing and pervasive part of global supply chains and one of the most pressing human rights issues that investors can take action on. There are multiple factors that drive modern slavery and allow it to flourish, including economic dislocation, endemic poverty, and ongoing conflict and displacement.

Current events are also taking their toll. The COVID-19 pandemic and the Russia-Ukraine conflict have both exacerbated such conditions, increasing the vulnerability of people to modern slavery across the globe. Moreover, as we accelerate the transition to a low-carbon economy, we must be mindful of how this might impact already vulnerable workers and supply chains.

To combat modern slavery by 2030, in line with Sustainable Development Goal 8.7, we need to free over 10,000 people per day, which feels like a daunting task. And we need to remember that behind every alarming statistic, there is a human story to tell.

As I lie awake at night thinking about ways to solve an issue of such magnitude, I come back to two thoughts:

– As Einstein said, we cannot solve a problem using the same thinking that we used when we created it. Governments, companies and investors all need to do the work to understand how they are contributing to the problem in order to change their behaviour and think differently about solutions.

– No single player is going to solve this problem on their own. We need to collaborate within our industry and with broader stakeholders to share knowledge, push best practice and ensure consistency.

We believe that investors have a meaningful role to play in creating a better world through collaboration and cooperation. In 2020, this belief led First Sentier Investors to convene the Investors Against Slavery and Trafficking APAC (IAST APAC) initiative together with the other Steering Committee members. The initiative currently comprises 36 investors with AU$7.8 trillion in assets under management.

By using our leverage as allocators of capital, and sharing the resources of our knowledge partners, Walk Free and FAST, we hope to build a sense of momentum among the companies we invest in, so that they can work with us on ending modern slavery.

Last week, we were proud to release our inaugural annual report, which reflects on the scope of our first year of operation and our path for the future (pictured below).

There are certainly challenges. Modern slavery legislation is just a few years old in Australia, and in other parts of the Asia-Pacific region, there is no equivalent regulation yet. Thus, we are, in many cases, relying on companies to engage with the issue of their own volition. Across many markets, there is relatively low awareness of the scope of the problem, and few dedicated resources within companies to address it. In these markets, we are taking the critical, first steps in advocating for change.

Our first year of engagement has revealed that companies in the region are at various stages of tackling modern slavery. There are many companies still coming to grips with the scale of the problem and the ways to address it.

However, there are also several leaders, who have made significant strides in finding, fixing and preventing modern slavery in their operations and supply chains. Our aim is to help the leaders go further, modelling best practice for other industry participants as they make progress on the issue, and to support the companies that are early in their journey.

The chart below shows company progress as assessed by IAST APAC members at the beginning of the engagement.

IAST APAC has developed plans for multi-year company engagements and we will continue to share knowledge and best practice as the engagement process continues.

In late 2020 we sent an investor statement to the top 100 companies on the Australian Stock Exchange (ASX100), calling for companies reporting under the Australian Modern Slavery Act (the Modern Slavery Act or Act) to go above and beyond the bare minimum of legal compliance set out in the Act. The investor statement outlined the investor interest in impacts of modern slavery and suggested a number of measures for companies to adopt as good practice to mitigate their modern slavery-related risks. This statement was sent to the remainder of the ASX200 in June 2021.

During the course of this financial year, we also started to explore policy advocacy opportunities for participants. The most immediate opportunity is the Modern Slavery Act review process, through which IAST APAC will have an opportunity to help shape the future version of the Act. We feel that investors have an important role to play in this process as both writers and consumers of modern slavery statements.

In its first year of operation, IAST APAC has built the foundations for ongoing activity, set out a clear path for the future, and started building relationships with companies that have the potential to make a real difference.

We also welcome new members from the investment sector. An investor coalition only succeeds through collaboration and a shared commitment. This has certainly been the case to date, and I hope that the work we do can make a positive difference to the people behind the modern slavery statistics.