
Capital markets and modern slavery
This report synthesises evidence on the role of investors in addressing modern slavery in global supply chains. Key findings reveal that data limitations pose a significant challenge for investor action. Additionally, drivers for investor action include moral standing, financial incentives, regulatory compliance, and investor-led engagement.
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OVERVIEW
This report examines the role of capital market actors in addressing modern slavery in business supply chains. Key findings reveal that financial, moral, regulatory and reputational drivers motivate investors to take action.
The report found that capital market actors are implementing policies and practices to address modern slavery, including human rights policies, due diligence, clauses/requirements, and company engagement. To improve effectiveness, the report recommends increasing investor engagement with supply chain management primarily through human rights due diligence.
Investors use various levers to influence modern slavery action, including asset size and class, involvement in management, and voting rights. The report suggests that the size of the investment matters, with larger investors having more significant leverage. Investors are also limited by capability challenges, particularly related to human rights, and reliance on external ESG experts for guidance.
The report notes that data limitations pose a significant challenge for investor action. Although existing frameworks and data providers are useful, they lack reliability and consistency. The report recommends that investors adopt a collaborative approach and build partnerships to increase access to reliable and actionable data.
Financial drivers are crucial for investor action, followed closely by moral and regulatory drivers. The report suggests investors can leverage regulatory frameworks, apply existing legal and policy frameworks, and collaborate with stakeholders to drive change in addressing modern slavery.
Investors rely heavily on ESG rating and data providers for relevant data. However, discrepancies in ESG data measurement and limited access to corporate-level data hamper investor action. The report recommends transparency on ESG data measurement, improvement of data quality, and more extensive and better triangulation of available data sources.
The report concludes by urging increased collaboration between investors, stakeholders, and civil society organisations to improve the effectiveness of modern slavery risk management practices in business supply chains. To effect meaningful change, investors must leverage all drivers, including financial, moral, regulatory, and reputational, working collaboratively with stakeholders to overcome challenges.