Institutional investors have become more aware of the risks of modern slavery in their portfolio companies’ supply chains, but detecting labor issues is an uphill battle as companies chase profits and the industry lacks skills to detect labor issues.
In emerging Asia, where the bulk of supply chain companies are located, regulations are not yet at a level where they’re an effective deterrent, sources said.
According to the United Nations, modern slavery refers to “situations of exploitation that a person cannot refuse or leave because of threats, violence, coercion, deception, and/or abuse of power.”
An estimated 50 million people were living in modern slavery in 2021, of which 28 million were in forced labor (the rest were trapped in forced marriages), according to a report by the International Labour Organization.
In recent years, listed companies have been exposed for having signs of forced labor in their supply chains. Apple Inc. has been accused by research organizations and news outlets of having suppliers with forced labor practices, including using labor from the Xinjiang province in China. In 2021, Dyson Ltd. cut ties with Malaysian supplier ATA IMS Bhd after ATA was found to have subjected its migrant workers to abusive conditions.
As a result, human rights concerns have become increasingly important to investors. The Swedish AP funds’ Council on Ethics, which represents the sustainable efforts of several Swedish asset owners, brought together investors to engage with technology firms on managing human rights risks and impacts.
“Funds like Norway’s sovereign wealth fund have hired advisers like Verite (a U.S. non-profit civil society organization) to conduct on-the-ground investigations, and we are starting to see some similar collaborations between civil society organizations with fund managers in Australia and the region,” said Darian McBain, Singapore-based founder of Outsourced Chief Sustainability Officer Asia. Ms. McBain was most recently the chief sustainability officer for the Monetary Authority of Singapore before launching her own firm this year.