Modern slavery represents a tragic market failure, where some companies maintain competitive advantage and large profits through unethical and unsustainable business practices that rely on the exploitation of workers.
In 2020, Walk Free, WikiRate, and the Business & Human Rights Resource Centre assessed the statements produced by 79 asset managers identified as having to report under the MSA. These statements were assessed against:
The purpose of the assessment was to understand the level of awareness of modern slavery risks among asset managers, to identify good practice, and to highlight gaps in reporting. By conducting this assessment, we aim to support the financial sector to improve transparency and drive better practice.
For more information about this project, please visit: walkfree.org/reports/beyond-compliance-in-the-finance-sector/
The below highlights the key findings of our assessment of asset managers’ MSA statements. These findings are organised by sections outlining the level of disclosure in line with the minimum requirements, the Home Office guidance, and the consideration of modern slavery risk in investment portfolios.
Click any section to investigate the data behind our assessment. Clicking on the subtitle of a graph will take you to the overall results for that metric, while clicking on a particular section of a graph will take you to the relevant underlying data.
The ‘Filter the data’ option on the top right allows you to examine the data by AUM category, geographical region, or membership of FTSE 100, S&P 500, or PRI.
In this section, we analyse the minimum requirements under Section 54 of the MSA, where each statement must be signed by a director (or equivalent), approved by the Board of Directors (or equivalent management body), and linked from the company’s homepage.
Beyond minimum requirements in the MSA, the accompanying Home Office statutory guidance outlines the actions companies should take to ensure their supply chains are free from exploitation. From this guidance, we developed further metrics which we present in this section organised under the following groups:
Disclosing ownership structures and supply chains is an important step towards greater transparency and improves understanding of where risk may occur.
Policies are important for companies to establish their priorities for their direct operations and supply chains.
Assessing and identifying modern slavery risks is an important part of targeting effective responses and resources.
As part of companies’ responsibility to respect workers’ rights, those affected by modern slavery or witnessing violations in any part of a company’s operations should be able to freely report incidents through grievance mechanisms. Companies should also have remediation procedures in place.
Training is important for raising awareness of the issue of modern slavery, while helping employees and suppliers identify risks, and how to address them.
Companies can use key performance indicators to measure effectiveness and can review business KPIs to understand how their business needs may increase the risk of modern slavery.
This graph shows how many metrics derived from the Home Office guidance are met by companies.
Investors which do not integrate ESG considerations into their investment practices and decision making are failing in their fiduciary duties. Modern slavery is clearly a human rights and labour standards issue and should be considered as part of the S in ESG. Reporting on addressing modern slavery risks in MSA statements is good practice, offering an opportunity for asset managers to show transparency and leadership.
Despite this, many asset managers do not disclose modern slavery risks as a consideration in their investment decisions.
The investor-specific metrics used to assess the statements were:
