Human rights and modern slavery

Armed conflict has enormous humanitarian consequences, as well as long lasting economic, social and environmental repercussions. The Russia-Ukraine conflict is not the only conflict happening now (the Geneva Academy is currently monitoring over 110 armed conflicts³), however the sanctions relating to this conflict are unprecedented in scope and severity, at state level as well as for corporates.

In response to the invasion of Ukraine, many companies announced their withdrawal from Russia, at times without applying a human rights lens to their decision. After referencing and updating our Human Rights Toolkit and receiving specialised training, First Sentier Investors identified and engaged with a number of companies to determine:

• The nature of their involvement and how exposed they are
• How the company is enhancing its due diligence to identify, prevent, and mitigate heightened human rights risks and comply with international humanitarian law
• What measures the company is taking to ensure it actively monitors the situation, including through consultation with workers, affected communities, human rights groups, and/or humanitarian organisations
• What measures the company has taken to ensure business relationships, products, services, operations, or other actions do not contribute to Russian military activities or occupation in Ukraine (this may or may not include a responsible exit)
• What actions the company has taken to mitigate the effects of any decisions taken on affected communities and workers and how regularly they are re-evaluating their response
• What other actions the company is taking to promote respect for humanitarian law and human rights.

To date, the quality of company feedback and the response rate has been low, with only 10% of global companies that we invited to respond on the Russia-Ukraine conflict, providing a full or partial response to our questions. The majority of responses were generic. We are continuing to engage.

Next steps will be to follow up with the companies that have not responded in addition to engaging with the companies that provided partial responses to expand our findings. Where we identify examples of best practice, we will seek to share that information with companies that have scope to improve their approaches.

³ https://geneva-academy.ch/galleries/today-s-armed-conflicts

IAST APAC is an investor-led, multi-stakeholder project. It was established in 2020 to engage listed companies in the Asia-Pacific region to find, fix and prevent modern slavery in their operations and supply chains. IAST APAC comprises 42 investors with A$9.4 trillion in assets under management⁴, with Walk Free and the Finance Against Slavery and Trafficking (FAST) initiative acting as Knowledge Partners and Walk Free as Secretariat.

A company’s exposure to modern slavery risks can be complex due to both the contextual nature of the risks (different issues can be present based on sector, industry, geography) as well as the rise of distributed, dynamic and fragmented supply chains.

While a single data point is never the ‘answer’ to modern slavery risks, the members of IAST APAC believe that disclosure and collection of a core set of metrics can help provide the first step towards comparability and facilitate discussion and engagement of a company’s approach and outcomes.

As part of this, the group assembled a number of ESG data providers to discuss gaps in modern slavery analysis, understand gaps in current metrics and develop a core list of metrics in relation to modern slavery. The subgroup heard from data providers, standard setters, and academics as they looked for ways to improve the use of data.

The group subsequently drafted a set of recommended metrics for companies to disclose to help better identify modern slavery risk. They are designed to distinguish between “input” and “output” metrics: input metrics represent the inputs into effective management of modern slavery risk while output metrics aim to provide a quantitative measurement of tangible outcomes as a result of policies, frameworks and processes adopted and implemented.

⁴ According to IAST APAC Annual report FY2022-23

Stewart Investors is the convener of the multi-year collaborative engagement initiative: ‘Tackling conflict mineral content in the semiconductor supply chain’.

Tantalum, tin, tungsten, and gold (referred to collectively as conflict minerals) along with cobalt, are essential building blocks of the semiconductor industry. The poor traceability of these minerals along complex supply chains can make it hard to trace their source, which may often be in conflict-affected regions, and inadvertently finance armed conflict and the abuse of human rights.

Stewart Investors believes there is an opportunity for investors and companies to take a lead in the development of conflict mineral free supply chains. This year, our engagement initiative was able to forge a stronger relationship with the Responsible Minerals Initiative (RMI), a trade body of over 40 members, including the manufacturers of technology.

As part of this relationship-building, the initiative chaired and hosted a closed-door workshop, endorsed by the RMI, with sixteen leading electronic companies to discuss challenges and opportunities for improvement. One of our representatives also became the first investor to speak at the RMI’s Annual Conference in Santa Clara, California on the positive role of capital.

In a significant step forward, the RMI agreed to allow investors to join the organisation. This was an objective we had set the year before, based on the belief that it would provide investors and supporters of the initiative with a deeper understanding of mineral supply chains and greater engagement credibility. Membership should also enrich engagement conversations with companies at senior levels, and highlight the importance of mineral traceability.

Stewart Investors recognise that engagement on this topic will be a long journey, over a number of years, but we hope that by building a closer relationship with the RMI and influential companies in the electronics supply chain, it is a step closer to effecting change.