Modern Slavery: Compliance and Investor Leverage

With the UK Independent Anti-Slavery Commissioner recently endorsing a report ( see here) with a call to action for the financial services sector on preventing modern slavery and human trafficking and writing to the CEOs of a number of major financial institutions to ask them what they are doing to address the risks of modern slavery and human trafficking within their organisations (see our previous blog post), the Rathbones 2020 Votes Against Slavery report comes at an opportune moment. It also provides some key learnings. 

Firstly, although the UK modern slavery reporting regime is six years into its existence, compliance with the basic three requirements (board approval, director signature & publication) is still not as high as might be expected. As changes to toughen up the regime are incoming (see our podcast) (including the Foreign Secretary's recent promise of fines for non-compliance), this is something for those reporting (whether financial sector entities or not) to address and address quickly. 

Secondly, investors have the power to drive compliance. And they should exercise it. Human trafficking and modern slavery risk is not just a moral issue, nor is it a purely reputational one as it might have been in the past. As the Rathbones report notes, it now represents a risk to the long-term resilience of the assets investors manage for their clients. This more than makes the business case for investors and investees alike to ensure they are compliant and taking actions to ensure others with whom they do business or are linked are likewise. 

Thirdly, the compliance criteria for the UK regime are fairly low and the increased scrutiny on the topic of modern slavery and human trafficking is not just about getting your director to sign a piece of paper annually. It's about taking action on the ground to enable you to put forward the case in that piece of paper that you as a company have taken the necessary actions and steps to minimize the risk of modern slavery and human trafficking in your business and supply chain and dealt with it appropriately where the risk has materialized. For financial sector entities this not only involves looking at your own operations but increasingly, as set out in the report endorsed by the Independent Anti-Slavery Commissioner, is expected to involve looking at your investees and customers.