New research published today offers a practical roadmap that Capital Market Actors can adopt to address modern slavery within their value chains – using their leverage and influence to tackle this human rights violation and end the suffering of an estimated 50 million people currently affected worldwide.
Accelerating Change: The Potential of Capital Market Actors in Addressing Modern Slavery, a collaborative effort between the Finance Against Slavery and Trafficking Initiative (FAST) at the United Nations University Centre for Policy Research (UNU-CPR), the Bingham Centre for the Rule of Law and the Modern Slavery and Human Rights Policy and Evidence Centre (Modern Slavery PEC), offers insights, best practice examples, case studies, and five actionable recommendations. The research was commissioned by the Modern Slavery PEC and funded by the UK Foreign, Commonwealth and Development Office (FCDO).
The publication is being released at a time when the convergence of various factors – including the climate crisis, escalating conflicts, displacement of populations, and the disproportionate impact of COVID-19 on vulnerable communities – has left many desperate for employment or income-generating opportunities, thus placing them in risky situations vulnerable to exploitation.
There is a growing expectation that the financial sector should play a critical role in mitigation efforts. The illicit proceeds from modern slavery – for example the estimated $150 Billion generated by forced labour – flow through the global financial system. Capital Market Actors, which includes asset owners, asset managers, private equity funds, stock exchanges, investment banks, and development finance institutions, are uniquely positioned to identify, prevent, mitigate, and remediate modern slavery.
However, there has been a notable absence of comprehensive guidance on the role of Capital Market Actors in addressing modern slavery within their value chains. As the world aims to eliminate modern slavery by 2030 – ending it is the focus of Sustainable Development Goal 8.7 – the research will help to identify and mobilise the actions required to provide effective and sustainable solutions.
“Although the financial sector alone cannot address modern slavery, efforts to tackle this crime will not be successful unless the financial sector plays a more pivotal role,” argues Maha Khan, co-author of Accelerating Change and Financial Sector Lead for the FAST initiative.
“Capital Market Actors in particular are hugely influential – but until now have not had clarity on both the scale of the modern slavery challenge and the steps they need to take to address this heinous crime which has worsened in recent years due to the climate crisis, ongoing conflicts, and the fallout from the COVID-19 pandemic.”
Accelerating Change reveals that modern slavery awareness is not uniformly integrated into Capital Market Actors‘ strategies due to a lack of understanding. It emphasizes the importance of senior-level commitment and board oversight for addressing social risks and argues that investors' active engagement is a powerful lever to influence investee behaviour. However, challenges persist, including the need for a better grasp of the 'S' in Environmental, Social, and Governance (ESG) reporting, concerns about data availability and reliability, and inconsistent approaches to governance.
The five actionable recommendations put forward to accelerate change are:
- Improve awareness and understanding of modern slavery risks and their relationship to ESG priorities.
- Develop dedicated social policies in alignment with international human rights and labour standards and principles.
- Incorporate Human Rights and Environmental Due Diligence processes throughout the investment life cycle.
- Increase collaborations with other Capital Market Actors to increase leverage, capitalizing on shared resources and building each other’s capabilities.
- Partner with modern slavery knowledge experts, civil society organizations, workers’ rights organizations, and survivors to obtain actionable data.
Taken together, these recommendations provide a strategic framework to not only mitigate modern slavery risks but also champion positive change in high-risk sectors.
“This research provides much needed evidence for investors and other financial actors to build their responses to modern slavery on, particularly addressing wider factors that underpin it, from poverty to the lack of decent work opportunities for communities vulnerable to exploitation,” said Jakub Sobik, Communications Director at the Modern Slavery PEC.