A report commissioned by the First Sentier MUFG Sustainable Investment Institute and international human rights group Walk Free has warned businesses that do not manage modern slavery risk effectively can expose themselves to legal, reputational and financial risks.
Modern slavery, encompassing forced labour and other egregious human rights violations, remains a pressing global issue. The most recent Global Estimates of Modern Slavery indicate that 27.6 million people were living in forced labour in 2021, marking an alarming increase of 2.7 million since 2016.
These violations are prevalent across various sectors, particularly in manufacturing, construction, agriculture, and domestic work.
“Forced labour and other forms of modern slavery are violations of fundamental human rights, as well as serious criminal offences,” the sustainable investment institute underscored.
Regulatory frameworks are tightening globally to help combat this major issue, with the European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) mandating that member states implement laws requiring companies to conduct human rights and environmental due diligence.
Similar legislative measures are in effect in France, Germany, and Norway, while businesses in the UK and Australia are compelled to disclose their strategies for identifying and mitigating modern slavery risks.
However, The First Sentier MUFG Sustainable Investment Institute has urged investors to adopt proactive remedial actions regarding modern slavery to help guide investee companies towards ethical practices.
Key recommendations for investors include:
- Before incidents occur: investors should encourage companies to establish robust grievance mechanisms. This proactive approach helps identify potential human rights impacts early and fosters a culture of accountability.
- During the remediation process: When cases of modern slavery are reported, investors are urged to communicate clear expectations for satisfactory remedies. They should also advocate for the development of corrective action plans and recommend that serious cases be investigated by an internal team.
- After remediation: post-incident, companies should be guided to review their complaint-handling processes and implement measures aimed at preventing future occurrences of harm.
“Our report shows very clearly the range of remediation work that companies can undertake and the opportunity for investors to enable remediation and encourage best practice actions to provide redress and resolution for human rights impacts,” said Kate Turner, head of responsible investment at First Sentier Investors.
“Together, businesses and investors should increasingly seek to mitigate and prevent these impacts and provide or facilitate remedy where harm has occurred,” Turner said.
Looking at Australia, local disclosure laws require businesses and investors to report on steps they are taking to identify and address modern slavery risks.
Individual initiatives include, for example, ANZ, which launched its own human rights grievance mechanism in 2021, to take direct complaints from individuals and communities that feel their rights might have been impacted by ANZ’s institutional or corporate lending customers.
Sudip Hazra, director of the First Sentier MUFG Sustainable Investment Institute, added that while remediation is a central part of human rights outcomes, it is often not well understood.
“Investors are asking how they can use and extend their influence. This report will enhance understanding of the stages of remediation, with underlying drivers and explanatory case studies, as well as an exploration of the investor’s potential role alongside other actors in the process,” Hazra said.
