In partnership with WikiRate and the Business & Human Rights Resource Centre (BHRRC), Walk Free have assessed the statements produced by 79 asset managers required to report under the UK Modern Slavery Act (MSA). The purpose of the assessment was to understand the level of awareness of modern slavery risks, to identify good practice and highlight gaps in reporting by asset managers.

Recommendations to asset managers:

Compliance with the MSA and reporting improvements through meeting the minimum requirements, as set under Section 54.

• Detailed disclosure on modern slavery risks, including investment portfolios.
• Improved transparency of ownership structures and business relations.
• Going beyond policies and commitments to provide evidence of due diligence measures and year-on-year improvements.

Increased efforts to address modern slavery risks.

• In financial activities asset managers should use their leverage to guide companies to adopt and adhere to human rights standards such as the United Nations Guiding Principles (UNGPs) in line with the nine minimum practices for asset managers to address modern slavery in their portfolios (p. 19).
• In complex supply chains, investigation is required to identify where labour abuse, including modern slavery, occurs in production or through vulnerable outsourced or agency workers.

Engage and share good practice with industry initiatives and collaborations, such as
Finance Against Slavery and Trafficking and Investors against Slavery and Trafficking.

Challenges identifying investors in scope of mandatory reporting:

• Lack of transparency within the sector to determine whether the asset manager’s revenue meets the threshold. Investment income is publicly disclosed but cannot be used to determine revenue.
• Opaqueness in ownership structures and business relationships, making it difficult to determine which entities within a group structure are required to report, which hinders the ability to monitor compliance by in-scope companies. It leads to perceived underreporting, where parent companies do not disclose all eligible subsidiaries.
• No publicly available government list of entities required to report under the Act.

The report offers nine metrics to assess the minimum actions asset managers should take to conduct modern slavery due diligence in their portfolios (p. 19), including:

• Does the investor disclose it has a human rights investment policy covering any portfolios under management?
• Does the investor disclose it requires investee companies to meet their reporting obligations under the UK Modern Slavery Act?
• Does the investor disclose it assesses investee companies prior to investment to identify potential modern slavery risk areas?

Federated Hermes’ 2019 statement is used as a case study to highlight due diligence, disclosure, engagement, and best practice toward modern slavery in the supply chain (p. 20).

Expectations for asset managers and institutional investors to integrate ESG considerations, including modern slavery, into their investment decisions and reporting are increasingly clear (UK MSA, AU MSA, EU Regulation 2019/2088, penalties for non-compliance).

This report promotes respect for human rights and labour standards and highlights the imperative role, and untapped potential that asset managers play in building a more sustainable, ethical, and resilient global economy.

1. Of the 91 asset managers identified as within scope of the MSA, 87% had a modern slavery statement covering a total of 303 entities. Walk Free could not find the statements for the remaining 12 asset managers (13%) on their websites. This is concerning as it had been five years since the MSA was passed in 2015.
2. Improved transparency of ownership structure and business relationships from asset managers will streamline reporting processes for business groups by allowing them to publish a single statement that covers all in-scope entities while reflecting on the specific risks linked to each entity within that group. This then allows the government to identify whether in-scope companies have complied with their reporting requirements.
3. The UK government has recently announced plans to introduce penalties for businesses that do not comply with the MSA. Based on the report, 12 asset managers will soon be exposed to financial penalties unless remedial action is taken.
4. Home Office statutory guidance is explicit about disclosure on supply chain risks. Home office guidance metrics include organisational structure and supply chains, organisational policies, due diligence, whistleblowing, assessing and managing risks, performance indicators and training.
5. Detailed disclosure that demonstrates asset managers have a clear understanding of their risks and have plans in place to address them generates trust from stakeholders.
6. Integrating ESG issues is becoming commonplace in regulatory and legal requirements for institutional investors, and increasingly aligns with the preferences of clients and beneficiaries.
7. Walk Free's 'Business and investor toolkit' (p. 23) is designed to help businesses and investors take action to improve human rights standards in their supply chains and combat forced labour, human trafficking and other forms of modern slavery. It contains links to case studies, research, legal frameworks and tools produced by Walk Free and other civil society organisations from around the world.
8. The report refers to the FAST Initiative (p. 9). Finance Against Slavery and Trafficking (FAST) is a multi-stakeholder initiative based at United Nations University Centre for Policy Research that works to mobilise the financial sector against modern slavery and human trafficking. It is a great resource for businesses and individuals looking to understand more about, and the accelerate action to end modern slavery and human trafficking.
9. The reports also refers to KnowTheChain (p.9). KnowTheChain is a great resource for companies and investors to address forced labour in global supply chains. KnowTheChain's benchmarks and practical resources help companies operate more transparently and responsibly, whilst informing investor decisions.
10. The top 15 companies in terms of assets under management (AUM), identified as within scope of the MSA, account for almost double the AUM of the asset managers combined. Asset managers that published a statement were half as likely to consider modern slavery in their portfolios compared to all reporting asset managers. Given the leverage that these asset managers have, there exists a large capacity for greater due diligence and risk assessment around modern slavery.