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Modern slavery is a global issue

Walk Free and the International Labour Organization (ILO) have estimated that there are 40 million victims of modern slavery in the world today. Of these, 25 million are thought to be in the Asia-Pacific region, and about the same number are working in conditions amounting to forced labour. Women and girls account for 71 per cent of modern slavery victims, while one in four victims of modern slavery are children.

Modern slavery is an umbrella term that includes crimes such as human trafficking, forced labour, the worst forms of child labour, and debt bondage. The victims of these offences are disproportionately from vulnerable communities and people – migrant workers, rural and urban poor, Indigenous peoples and minorities, and women and children.

Companies operating or investing in the Asia-Pacific region – including Australia – are particularly exposed to the risk of modern slavery because of the region’s prominent role in the global economy and its high levels of vulnerability for and prevalence of modern slavery.

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Increasing regional and global attention

In Australia, the entry into force of the Modern Slavery Act 2018 (Cth) (Act) in 2019 was an important step in encouraging large business – including investors – to assess and address modern slavery risks in operations, supply chains, and wider business relationships. Over 3,000 companies are required to report annually. The guidance for and implementation of the Act aligns with operational expectations of the Corporate Responsibility to Respect pillar in the United Nations Guiding Principles on Business and Human Rights (UNGPs), which recommends that businesses put in place human rights policies and procedures, due diligence frameworks and processes, and grievance mechanisms and remediation plans.

Investors are businesses and have the same responsibility to respect human rights in their own operations and supply chains including in their own investments and via their asset managers. Investor stewardship recognises the investor responsibility to conduct due diligence and play a role in remediation.

Regionally and globally, governments and regulators are paying growing attention to modern slavery risks, as part of a broader shift to take corporate responsibility for human rights and investor exposure to environmental, social and governance (ESG) risks more seriously:

  • The US now prevents goods made with forced labour from entering its territory, creating market access risks for any goods made that way, including in the Asia-Pacific region.
  • The UK also has a Modern Slavery Act in place, and similar legislation is under consideration in Canada and New Zealand.
  • Several European countries have mandatory human rights due diligence (mHRDD) laws in place, and the EU is currently considering European rules.
  • Hong Kong and Singapore stock exchanges both require listed entities to disclose ESG risks on a ‘comply or explain’ basis, including forced labour and child labour risks expressly in the case of Hong Kong.

The business case for taking action

The commercial implications of respecting human rights and preventing modern slavery are real:

  • Better conditions for workers lead to improved productivity and better business performance.
  • Investors are demanding greater transparency from companies on their ESG practices. Modern slavery is increasingly seen as a core sustainable business risk and investors are using ESG data on this to inform investment decisions.
  • Businesses that introduce risk management and due diligence systems to manage social risks are bringing their corporate governance into line with global standards and ensuring their businesses are most resilient.
  • Customers and employees are increasingly informed about company sustainability performance, including human rights, and make purchasing, job and pension decisions based on their values and standards.
  • Social risk can also lead to heightened traditional business risks such as legal and compliance risk, project and operations risk, brand and reputational risk, and financial and credit risk.

“Modern slavery or human rights abuses in the companies we invest in, or their supply chains, pose significant financial risks to our portfolio, and to our members’ long-term retirement outcomes.”

Liza McDonald
Head of Responsible Investments at Aware Super

Approach and framework

Investors can use their influence over companies, policymakers and other stakeholders together to reduce investment risk, improve company disclosure, maximise company value and strengthen company sustainability. IAST APAC focuses on encouraging companies to address a simple question: what slavery risks have you addressed? To answer that question, companies are encouraged to:

Find It

by proactively searching their supply chain for modern slavery risks

Fix It

by addressing those risks and remedying harms to those affected

Prevent It

by working to ensure the situation does not continue

The initiative also aims to strengthen reporting under relevant disclosure regimes such as the Australian Modern Slavery Act. The aim is to ensure that companies report in a meaningful way, and take effective action to identify and address modern slavery, human trafficking and labour exploitation issues.

“Beyond its devastating human impact, modern slavery threatens business sustainability, supply chains and shareholder value. IAST APAC is a great opportunity for investors to work together to address systemic issues and manage modern slavery risk.”

Louise Davidson
CEO, Australian Council of Superannuation Investors (ACSI)

Membership

Currently, IAST APAC comprises 37 investors with AU$7.8 trillion in AUM:

A

abrdn
Acadian
ACSI
AllianceBernstein
American Century Investments
Ausbil Investment Management
Australian Ethical Investment
Australian Retirement Trust
AustralianSuper
Aware Super

B

BT Financial Group

C

CBUS Super
Challenger Limited
Christian Super
Colonial First State
Commonwealth Superannuation Corporation

D

Duxton Capital (Australia) Pty Ltd

E

Ethical Partners Funds Management

F

Fidelity International
First Sentier Investors

G

GMO

H

HESTA

I

IFM Investors

M

Maple-Brown Abbot
Mercer Investments
MFS Investment Management
Mitsubishi UFJ Trust and Banking Corporation

P

Paradice Investment Management Pty Ltd
Perennial Value Management
Platypus Asset Management

R

Resona Asset Management
Retail Employees Superannuation Trust

S

Schroders
Spheria Asset Management
Stewart Investors

T

Triple Eight Capital Pty Ltd

U

U Ethical

V

VFMC

Joining IAST APAC

IAST APAC is open to asset owners and asset managers with an office in the Asia-Pacific region to join. All initiative members must join at least one workstream – policy advocacy and company engagement. Asset owners and asset managers interested in joining IAST APAC should contact the Secretariat to discuss the application process, together with membership benefits and duties, via the contact form.

IAST APAC Leadership

IAST APAC is overseen by a Steering Committee made up of First Sentier Investors (the Convener) and the following founding members: Aware Super, AustralianSuper, Fidelity International, Ausbil Investment Management, the Australian Council of Superannuation Investors (ACSI), Walk Free (as Knowledge Partner and Secretariat) and the FAST initiative (as Knowledge Partner).

Steering Committee

first-sentier
aware-super
australian-super
ausbil
fidelity
acsi
walk-free
liechtenstein-initiative

Knowledge Partners

walk-free
liechtenstein-initiative

Secretariat

walk-free

Annual reports

More information

Asset owners and asset managers in the Asia-Pacific region interested in joining IAST APAC should contact the Secretariat.