Editor’s Note: Fiona Reynolds is chair of the Financial Sector Commission on Modern Slavery & Human Trafficking and CEO of the Principles for Responsible Investment (PRI). The opinions expressed in this article are solely hers.
Modern slavery represents a tragic market failure that leaves us all worse off. By treating people as disposable objects to be exploited, we all miss out on their lost economic and social potential.
As the CEO of UN-backed Principles for Responsible Investment, I have seen the enormous influence that the financial sector can have, as a lever by which the entire global economy can be moved. Now, the investor community must come together and mobilize against modern slavery and human trafficking.
The figures remain staggering. With an estimated 40 million people – or roughly 1 in every 185 people – in situations of modern slavery and human trafficking, we would need to reduce the number of people affected by around 10,000 individuals per day to meet the UN Sustainable Development Goals. It ranks as one of the top three international crimes (and may, in fact, be higher) and creates significant costs for society at large. Recent research suggests that every modern slavery case in the UK costs £328,720 ($407,000) in these direct costs, such as law enforcement and healthcare costs.
For the past year, I have chaired the Financial Sector Commission on Modern Slavery and Human Trafficking, a public-private partnership known as the Liechtenstein Initiative that I wrote about here for its launch. Since then, we have been focused on finding practical solutions to help the financial sector accelerate action in this area. Over our one-year mandate, we have held four consultations on three continents to consider different ways the financial sector can accelerate its engagement in addressing and preventing these practices: from compliance and regulatory regimes, to responsible lending and investment, remedy, financial inclusion, financial technology and international cooperation.
And now, during the UN General Assembly High-Level Week, we are releasing our final report, Unlocking Potential: A Blueprint for Mobilizing Finance Against Slavery & Trafficking, which includes important actions for all financial institutions to take, including investors.
Addressing human trafficking through sustainable finance
While the “E” of ESG (Environmental, Social and Governance – criteria used to measure the sustainability and ethical impact of a business) has been the major focus of sustainable finance in recent years, addressing modern slavery and human trafficking should be at the heart of sustainable finance. As we note in our report, credit and bond ratings agencies should factor modern slavery and human trafficking risks into emerging ESG ratings, or issue stand-alone modern slavery and human trafficking scores. Addressing modern slavery and human trafficking requires improving market information and transparency, so that businesses connected to these risks face higher costs of capital.
The global ESG investment market is now worth an estimated $31 trillion. This is likely to increase given that millennial investors are twice as likely as others to invest in companies that incorporate ESG practices. And modern slavery and human trafficking will increasingly factor into the minds of this group. As consumer and investor appetite for sustainable business choices increases, first-mover actions provide a commercial advantage.
Of course, greater transparency and detection of these risks needs to happen first at the institutional level. Human rights due diligence in value-chains will be critical in identifying these abuses and accelerating action to tackle them. Financial sector actors need to work together to learn how to make risk mapping and due diligence real, routine and effective. Due diligence must move beyond banking in anti-money laundering contexts into other financial sector businesses, including the investor community.
Many investors and financial sector institutions are already acting against modern slavery, but we must also foster greater transparency about the leverage we use. Without greater transparency on how that is used, and with what impact, it will not be possible for financial markets to connect individual enterprise behavior with resulting risk.
Just as the survivor leaders on the Commission kept us accountable, so too must we keep each other accountable to take action. Business as usual will not end modern slavery and human trafficking, so urgent and collective action is needed.
Together we can work to make sustained progress in eradicating modern slavery and human trafficking. I encourage the investor community to join the global movement of Finance Against Slavery & Trafficking, as we all have a key role to play in making slavery a thing of the past.