There are many lenses that can be applied when assessing the effectiveness of sustainable finance. Perhaps one of the most important is how quickly words translate into actions. The UK’s Modern Slavery Act was legislated in 2015 and in that time we have seen reporting requirements and discussion of modern slavery increase significantly. Yet recent reviews of company and investor responses show that even after 5 years, increased attention is not corresponding to increased action or better outcomes.
Web searches for Modern Slavery 2015 — Present
A recent report by Walk Free which will soon be added to Altiorem looked at the modern slavery statements of UK asset managers with worrying results. Only 27% of the managers reported conducting some form of due diligence on human rights in their portfolios, with only 15% reporting engagement with investee companies — probably the best lever most investors have to effect change. Even more troubling was that despite the largest asset managers being more likely to publish a modern slavery statement, they were half as likely to disclose due diligence on modern slavery in their portfolios. These largest 15 managers have twice the assets under management of the remaining 76 managers combined.
While disclosure provides one view of finance industry action, a separate report completed for the UK’s Independent Anti-Slavery Commissioner suggests the problems run far deeper. The report found that 43% of directors and senior managers did not have or did not know if they had a policy on Modern Slavery. Extending to practice, only 28% of respondents believe that modern slavery is factored into investment decisions. It’s no wonder when 71% said they had never received training and 78% felt they needed it.
Modern slavery and human rights are complex issues requiring humility, persistence, collaboration and vigilance if we are to succeed in eradicating it. A recent South China Morning Post investigation shows the danger of not being vigilant. The story looks at third party factory audits and how the use of agents had resulted in widespread fraud and corruption. While these audits and the use of collaborative platforms like SEDEX are important tools in the fight against modern slavery, we cannot afford complacency or to fall back on simple tick the box forms of engagement. Improving due diligence and engagement is important but it must recognise and constructively work through the wicked challenges involved.
Fortunately, there are many tools and frameworks that finance organisations can use to drive effective action. The Agenda Action for the Finance Sector built into the UK Anti-Slavery Commissioner’s report outlines a four part framework for action:
- Monitor and report
- Detect and disrupt
- Invest and engage
- Empower and support
Altiorem is also here to help. The eight reports we have summarised on Modern Slavery range from the blueprint for finance sector action by Liechtenstein Initiative Financial Sector Commission on Modern Slavery and Human Trafficking to practical guidance from the Responsible Investment Association of Australasia’s Tool Kit and their Reporting Guide. We also cover sector specific issues including through Baptist World Aid’s Ethical Fashion Report and the seafood sourcing risks from Asia Research and Engagement. By collating and summarising content like this we believe we can support finance professionals to more quickly move to tangible action.
These are of course just the tip of the iceberg with many more resources to add. If you are among the 78% of people who reported wanting more training on Modern Slavery you can volunteer as a mentor with Altiorem. Spending 2–10 hours a month working with us can help build a valuable resource for the industry while supporting your own learning and that of our university student volunteers. Find out about mentoring.
Let’s work together to move from talk to action. As a community we have the power to make a difference.
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Altiorem is looking for volunteers to summarise sustainable finance research. If you would like to help build Altiorem please contact us here.
