Analysing Modern Slavery Risks in Portfolio Companies: Guidance for Investors

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Today, the International Federation for Human Rights published its new report where it gives investors tools to identify and address human rights risks, including modern slavery risks, in their investment portfolios, from the perspective of an international human rights organization working with members and communities around the world to protect human rights from corporate abuses.

As a result of the progressive legalization of international business and human rights “soft law” standards, the “S” of “ESG” is no longer an optional criterion for investors to include in their decision-making process – it is becoming part of their normative duty to respect human rights.

In the framework of its work with La Banque Postale Assent Management on the ethical mutual fund “SRI Human Rights fund”, FIDH has developed a human rights methodology in order to assess which companies are suitable to join the investment portfolio. This is a unique example of a partnership between a human rights organization and an investor that is focused on improving respect for human rights by companies and States. Indeed, discussions concerning measurement of the human rights performance of companies for investment purposes rarely involve human rights NGOs with expertise at the local and national level, limiting the quality of the human rights data used.

As part of the Moving the Market Initiative, FIDH has revised its existing human rights evaluation methodology to include performance tools that can facilitate assessment of modern slavery and has used this updated methodology to analyse a list of companies in four sectors: Tourism, Construction, Food and Beverage, as well as Textile and Footwear. The conclusions of this analysis are presented in the report, which includes a specific description of the results per sector, with a focus on modern slavery, along with the identification of transversal risk areas which relate to some of the root causes of modern slavery.

The results of our report show that investors need to improve the indicators they take into account when assessing companies; be more critical regarding how companies are effectively putting in place their human rights commitments; and engage and consult with rights-holders and organizations on the ground in the design and implementation of preventive and mitigating measures.

Moreover, the report demonstrates that the work that Civil Society Organizations (CSOs) and human rights defenders carry out by documenting, advocating, and litigating against companies for human rights abuses taking place in their operations and supply chains plays a critical watchdog role. As a result, investors have a duty to take this factor in account and assess to what extent the companies in their investment portfolios value civic space, how they address the impacts on human rights defenders, and more specifically how they react to the existence of voices who are critical of their operations, since those are precisely the voices that the company needs to heed and amplify.

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