Finance actors including capital markets, stock exchanges, investors and others are considered one of the levers available to address modern slavery in global supply chains and their potential influence is a theme of growing importance and attention.
The risk of losing significant shareholder value, not receiving or losing investment, or receiving it on less favourable terms, could be a powerful influence on companies that operate or have supply chains in sectors with a heightened risk of modern slavery, for example through threatening their ability to utilize investment for growth, diversification, innovation or expanding into new markets.
Investment decisions could also have wider impact. For example, for countries where there are multiple sectors with a high risk of modern slavery, the risk of losing access to investment into the country due to the high reputational market or legal risk for investors may encourage increased state action to address it. While being a potentially positive force against modern slavery, this effect might however risk reducing the critical investment into poorer countries needed to create jobs, improve livelihoods and tackle poverty. More work is needed to understand these potential impacts.
A new research project, commissioned by the UK Foreign, Commonwealth and Development Office (FCDO), will focus on the role of investment from local, regional or global markets in addressing the risk of modern slavery in particular, high-risk sectors. The project is carried out by the Modern Slavery PEC consortium partner, the Bingham Centre for the Rule of Law, in collaboration with the Finance Against Slavery and Trafficking Initiative (FAST) at UN University Center for Policy Research (UNU CPR), a multi-stakeholder initiative that works to mobilise the financial sector against modern slavery and human trafficking.
The research will synthesise the existing evidence on the potential of capital markets to act as a lever to address modern slavery worldwide and identify gaps in need for further research. This rapid evidence review will allow the researchers to identify potential geographies, sectors, and capital markets actors which require further research. The team will then conduct a mapping exercise in these specific sectors and geographies, to map out and analyse capital markets and finance actors, their investment flows, and specific policies and practices.
The project aims to generate practical recommendations to inform the UKs international approach to tackling modern slavery., It will also aim its recommendations at investors and other financial actors with an interest in taking action to address modern slavery, civil society organisations and other relevant international actors such as donor governments and international organisations. It will aim to inform a larger, follow-on piece of research that would explore the actual and potential effectiveness of investment to address modern slavery risk in-depth across one or two specific supply chains.
Research team: Dr Irene Pietropaoli, Dr Sofia González de Aguinaga (Bingham Centre for the Rule of Law), Maha Khan, Liva Sreedharan (Finance Against Slavery and Trafficking Initiative), Malaika Oringo (FAST, Footprint to Freedom), Deborah Drake, David Wray (FAST Consultants).