UK-based asset manager criticises government stagnancy and finance sector inaction, but reports progress on modern slavery in other sectors.
The finance sector is not doing as much as other sectors on tackling modern slavery, according to Martin Buttle, Work Lead at UK-based CCLA Investment Management, which is calling for mandated reporting on slavery risks in investing and lending portfolios.
CCLA has released a report on the progress of its Fix it, Prevent it initiative, supported by 65 investors managing £15 trillion (US$19 trillion) collectively. The initiative seeks to combat modern slavery through engagement with investee companies, participation in shaping public policy and in developing better modern slavery data.
The report detailed the initiative’s engagement with the hospitality and construction sectors on preventing modern slavery in their supply chains, including information of which companies investors were engaging with, and ranking the progress they had made.
Speaking to ESG Investor, Buttle said CCLA was now undertaking a benchmarking process of the top listed companies in the UK on their approach to modern slavery and the degree to which they were finding, fixing and prevent slavery.
“We will be publishing a report later this year,” he said. “But broadly, it shows that the consumer durables and discretionary sectors (food and fashion retail) are a long way ahead of other sectors. And to some extent that’s to be expected. They face much more public pressures.”
Finance sector reporting on modern slavery
In contrast, sectors such as professional and financial services were “not doing as much,” said Buttle. He continued: “They’re not exposed to the same level of risk through their own supply chain. But with the finance sector, they are exposed to risks through their portfolio of investments.”
He said NGO Walk Free’s Global Slavery Index had found that only a quarter of asset managers were conducting due diligence on their modern slavery risks across their portfolios. “Given that is where there is the greatest risk of exposure, we (CCLA) feel that finance sector companies and their portfolios should be in the scope of modern slavery legislation.”
The UK enacted the Moden Slavery Act in 2015 – the first country in the world to introduce legislation of this nature. Section 54 of the Act requires large companies with turnover of £36 million (US$46 million) or more to publish a statement outlining steps to ensure that modern slavery is not taking place in their business or supply chains.
CCLA has called for the government to strengthen supply chain provisions in Section 54, and mandate financial institutions to report on the risks of modern slavery in their investing and lending portfolios.
UK losing leadership
Peter Hugh Smith, Chief Executive of CCLA, has criticised faltering UK leadership on modern slavery.
“The UK, which used to be a leader in these matters, is regarded as not keeping pace,” he said, adding: “It was concerning to read recently that, according to the Chartered Institute of Procurement and Supply (CIPS), the UK business efforts to tackle modern slavery are stalling, with the number of modern slavery statements submitted to the UK government registry falling sharply in 2022.”
Buttle said that “in some respects the UK falling behind is just a natural process” as other countries which have developed their own modern slavery legislation since, such as Australia, New Zealand and Canada, would naturally go “one step further” as knowledge-learning and best practice in the area developed.
“We really do just need a review of the Modern Slavery Act,” he said. “And we have been pushing, but it hasn’t occurred yet. The UK is falling behind just because there’s new legislation being developed by different countries.”
He added that the UK and its businesses were facing many challenges from the recent past such as the pandemic, Brexit and the rising cost of living. “Businesses respond to the political environment and it’s deeply regretful that the government has been sending some signals, which suggests that they’re not prioritising modern slavery to the extent that they were in the past.”
The former UK Independent Anti-Slavery Commissioner, Dame Sara Thornton, who now is a Consultant for CCLA on modern slavery, had recently expressed disappointment on national television that her role had not been replaced since she left in April 2022.
Buttle added that the UK’s Illegal Migration Bill, passed in July, had measures which harmed victims of slavery. “So, in contexts where the government is sending signals, which suggests efforts to address modern slavery are lower priorities, it’s not surprising that businesses are responding to that.”
New seasonal worker scheme
Going forward, CCLA’s Fix It, Prevent It initiative will identify further sectors to lead engagement programmes on and seek to influence UK policy such as upcoming guidelines for ESG ratings and work on social risks in occupational pension schemes.
It will also strengthen action on its seasonal worker scheme spearheaded by CCLA in late 2022 to help protect migrant seasonal workers in the UK.
Buttle said the asset manager had identified the issue with Brexit and the war in Ukraine causing agricultural labour worker shortages from Europe. “There was a massive increase in people coming from far away as Nepal, Indonesia and Central Asia. When you have people coming from that far away, they’re going to have to take flights, and there is higher risk of them paying recruitment fees and of being in some form of debt bondage when they arrive in the UK.”
CCLA put out a public statement calling for supermarkets and companies in the agricultural supply chain to investigate the degree to which recruitment fees were being paid by workers in December 2022.
Buttle added that this week another group of investors had written a private letter to Secretary of State for Environment Thérèse Coffey on the same point.
“We continue to engage on it and we have seen the supermarket sector move to form a taskforce and they’re working with scheme operators and the farms to address those issues. But I think we want to see more progress.”