With environmental, social and governance issues top of mind for many pension plan investors, modern slavery is one concern to keep on the radar.
Historically, slaves were kept through force, but modern slavery is about forcing people to work through coercion and lies, says Sudhir Roc-Sennett, head of ESG and thought leadership at Vontobel Asset Management Inc.
Some examples of modern slavery are debt-bondage, withheld wages, threats of violence or legal action or withholding passports and documentation.
Going further down the supply chain, modern slavery can be difficult to see and can eventually end up in products bought in developed markets.
A large multinational company may have a good understanding of its first-tier suppliers, but it becomes much more difficult to track the suppliers of those suppliers. “And then by the time you get to their suppliers — tier three — . . . unless you’re intentionally following things closely, you generally lose a lot of visibility at that point of how they operate and how they look after their people and what are their business practices.”
While, investors can’t have good visibility into the supply chains of the companies in which they’ve invested, they can indeed ask themselves what they are able to see and what they can do, he says.
For example, investors can track reported violations of forced labour through databases. “And you could look for controversies or media items related to a company’s supply chains.”
Once an investor learns about a violation, it can confront the company’s management about the issue and see what they’re doing about it, how they will prevent it from happening again and how they’re going to avoid similar situations, says Roc-Sennett.
In a perfect world, a company would be able to track all of their supplies to the raw commodity, he adds. “It’s something, I think, is increasingly likely to be possible, but it’s a technology thing to be able to track from the field or from the mine or from the sea to the shelf.”
However, investors have a lot of influence and they can raise these issues with a company’s leadership now, including, for example, speaking about implementing a policy. “If you have no policy, you probably haven’t got a process. So it sounds like box-ticking, but sometimes these things are useful.”