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By Fiona Reynolds.
In my last column, I discussed how the widening income inequality gap is becoming a pressing challenge for investors today. As I noted then, institutional investors are increasingly realising that inequality can negatively impact their portfolios. This can be seen clearly on a global scale with modern slavery and human trafficking.
A $150 billion illicit industry with one in 185 people affected in 2016, modern slavery is prevalent across the world. Structural inequality is, of course, at the heart of modern slavery and a lack of access to credit is a major driver of vulnerability to such exploitation.
Investors and the broader financial sector are taking note, not least because of the increased regulatory attention on modern slavery issues. In the UK, a Modern Slavery Act has been in place for several years. Similar legislation just came into force in Australia at the federal level and, in parallel, in the most populous state of New South Wales. Several other countries are considering similar legislation and several European countries have adopted mandatory due diligence requirements that also cover the financial industry. Investors have increasingly strong reasons to understand how the presence of modern slavery and human trafficking in the operations and supply chains of companies within their investment portfolio creates risk for them.
At the same time, there is a growing recognition that firms that have strong anti-slavery practices in place may provide important investment opportunities – not only for social impact investors, but also more broadly.
