Modern slavery

The International Labour Organization has estimated that there are over 40 million victims of modern slavery.¹ Women and girls account for 71 per cent of modern slavery victims, while one in four victims are children.

Modern slavery includes crimes such as forced labour, debt bondage, human trafficking, child labour and forced marriage and disproportionately affects vulnerable communities.

Against this backdrop, investors, regulators and markets have an obligation to address modern slavery risks as a key aspect of their ESG obligations. The opportunity to influence positive change for the millions of victims of modern slavery is central to our stewardship responsibilities.

Additionally, we recognise that there are business risks associated with human rights, and this impacts our investment portfolios. 

First Sentier Investors is taking a leadership position to address modern slavery. This entails a two-pronged approach: looking at our own operations and supply chain, and engaging with the companies we invest in.

In terms of our own operations, in September 2020 we published the firm’s first Modern Slavery Statement under the Australian Modern Slavery Act as well as initiating a review of our risk and compliance framework on modern slavery.

The review includes:

• re-assessing the risk of modern slavery in our business and our supply chains and our approach to such risks;
• developing and implementing a specific modern slavery policy;
• enhancing current staff awareness of modern slavery including the specific risks of modern slavery through business-wide training and targeted training for staff involved in the engagement of suppliers and our investment teams; and
• identifying those standards against which to assess our progress on slavery and human trafficking issues. 

Over subsequent reporting periods, we intend to take the findings of this review and determine the appropriate measures to further enhance our risk and compliance framework.

In terms of our investment portfolios, at the beginning of 2020 we established a modern slavery working group consisting of investment team members and led by the RI team. The purpose of the group was to build on the work we have done previously on human rights more broadly and further integrate risk identification and governance into our processes. This group created a Modern Slavery Toolkit which was published in June 2020.

The toolkit provides detailed background on modern slavery risks, as well as case studies of best practice. The investment teams have been working to implement this toolkit into their own investment processes and collect data so that we are able to report on progress and refine our approach in 2021.

Download our latest Modern Slavery Statement

One of the challenges we identify below is risk mapping, and we have been working hard over the past year on ways to use the data that is available to better identify risks. 

The country map below taken from our Modern Slavery Portfolio Analytics tool shows the levels of modern slavery risk across various countries where we invest in listed equities and corporate fixed income. The size of the bubble relates to our exposure to this company across these asset classes, and the colour of the bubble relates to modern slavery risk (darker = higher risk). This data is taken from the Global Slavery Index 2018. As you can see from the map, our greatest risks are concentrated in Asia, hence why we decided to focus on this region as part of the IAST APAC initiative profiled above.

Source: First Sentier Investors, Walk Free Portfolio holdings data as at 31 December 2020

Given the number of victims of modern slavery globally, in a world of complex supply chains there are many challenges involved in scrutinising companies for signs of modern slavery. 

Key challenges that we have encountered this year include: 

• How to effectively identify risks given that most of the data is at country and industry level. We have been exploring different proxy indicators to identify vulnerability to modern slavery, including examining the workforce and purchasing practices of the companies we invest in. 
• How we can have the biggest impact with our engagement. We feel that given the systemic nature of the issue, modern slavery is well suited to collaborative action. This is something we expect of the companies we invest in, and similarly we are trying to collaborate with other investors and stakeholders more broadly. In 2020 this led us to launch an internal collaborative engagement, to convene the IAST APAC initiative, to participate in the Bali Process Government and Business Forum Financial Sector Consultation and to invite experts to present to our modern slavery working group. 
• The COVID-19 pandemic not only increased modern slavery risks across a number of industries and countries, it also changed the risk profile as supply chains globally were disrupted overnight. In response to this we launched an internal collaborative engagement to engage with companies we invest in across the healthcare supplies and apparel industries to ask how they are addressing increased modern slavery risks amidst the pandemic. We also joined an engagement run by CCLA on debt bondage among migrant workers in the Middle East. 

In response to the challenges outlined above we have been working to improve our risk mapping tools. We will be rolling out interactive portfolio level modern slavery reporting to all investment teams in early 2021 and clients later in the year.  

We will continue to Chair and actively participate in IAST APAC, and hope that our investment teams will take learnings from this engagement that they can apply to their own individual company engagements. 

In Q1 2021 our investment teams will complete their first reporting in accordance with the qualitative and quantitative indicators outlined in our Modern Slavery Toolkit. This will allow us to monitor the effectiveness of our approach and continue to develop our process going forward.