The role of business in addressing modern slavery can’t be overestimated. The International Labour Organisation’s estimates that forced labour in the private economy generates US$ 150 billion in illegal profits per year provide an idea, even though they are out of date by now.
But what about the role of the finance sector? Financial institutions have connections with businesses at all stages of a value chain – from raw material producers through to high street retailers – since most businesses use banks, buy insurance and receive investment, for example. Since the finance sector is connected in these many different ways to businesses around the world, there is an increasing awareness that it has an especially important - and unique - role to play. However, although recently there has been more discussion of that role, it is still relatively unexplored.
Which is why the Modern Slavery PEC organised a roundtable to engage further with organisations from across the finance sector, to understand what new evidence could support them to take effective action on modern slavery. Here are our three key take-aways from that discussion.
1. The finance sector is diverse and levels of awareness of modern slavery issues, as well as particular organisations’ roles in addressing them, differ. It’s easy to fall into the trap of thinking there is a single ‘finance sector’ that can or should act in certain ways. But it is important to remember that the finance sector has many diverse parts including investors, asset managers, insurers, retail banks and accountancy firms, to name just a few. There are a small number of organisations within the sector who are leading the way and are establishing new and innovative approaches to addressing modern slavery, such as the Find It, Fix It, Prevent It initiative or the Votes Against Slavery report. However, there are many others who are not highly engaged and may lack awareness of the complexities of modern slavery. There is a lack of clarity in the sector of what it entails (lack of clear definitions was mentioned as a problem), what presents the biggest risk and, crucially, what are clearly defined actions that organisations are supposed to take to tackle those risks.
2. Accessible, high quality data on modern slavery is essential. Financial institutions need more and better data on modern slavery to underpin effective action. We still don’t have sufficiently robust data on the nature and prevalence of modern slavery in different sectors and geographies. This is essential to give finance sector companies the information they need on risks and commercial impacts that in turn helps them to plan and prioritise their approaches to tackling modern slavery. There is also still much work to do to ensure that data can be shared between institutions and between sectors. For example, financial institutions can be a valuable source of information for law enforcement agencies. But there needs to be robust infrastructure in place to allow for the safe sharing of potentially sensitive data in appropriate ways.
The Modern Slavery PEC recently funded a project led by the Alan Turing Institute and the Bingham Centre for the Rule of Law on ‘Data for investor action on modern slavery’ that lays the groundwork for developing solutions to some of these data challenges, but much more needs to be done.
3. We need to reward transparency. Financial institutions need to know what is happening in the operations and supply chains of their investee or client companies in order to make the best decisions. So it is important to reward businesses for being transparent – including when they have found modern slavery risks – rather than to penalise them for identifying and being open about problems that we know are endemic across many sectors and geographies. Transparency is also important within the finance sector itself – to enable greater data sharing, collaboration and combined leverage.
The Modern Slavery PEC is keen to work with financial institutions and support them in their efforts to tackle modern slavery. Through conversations like this recent roundtable we can begin to identify the key evidence gaps that exist – so that we understand where research could make a difference. That understanding in turn feeds into the research that we undertake or commission, leading to new evidence on what works for the finance sector and supporting the development of effective approaches to addressing modern slavery. By ensuring that relevant research is being carried out, with the collaboration of businesses, policymakers, NGOs and others who put the evidence to use, we can advance efforts to address modern slavery together.