Investors have a duty to uphold the United Nations Guiding Principles and in doing so can recognise the benefits of strong risk management around modern slavery and human rights.
Modern slavery is defined as the act of an individual being exploited by others, for personal or commercial gain. Whether tricked, coerced or forced, they lose their freedom. Modern slavery includes but is not limited to human trafficking, forced labour or debt bondage.
It is often believed that modern slavery only exists in dictatorships or the global south, but in reality the issue is significantly larger: it is estimated that over 50 million people are trapped in slavery worldwide.
In the UK, modern slavery still occurs. At the end of 2021, over 12,000 potential victims were reported to the Home Office; of these, 43% were children and 31% were British nationals. Unfortunately, these reported numbers are likely to understate the true levels of modern slavery still present.
In 2012, LGT became a member of the UN Global Compact, committing to uphold human and labour rights in line with the initiative’s ten principles. LGT is also a founding member of Finance Against Slavery & Trafficking (FAST), built on work by the United Nations University, and the Permanent Mission of Liechtenstein to create the Liechtenstein Initiative for a Financial Sector Commission on Modern Slavery in 2018.
As part of FAST, in March 2022, LGT along with three other large Lichtenstein banks declared our willingness to provide any Ukrainian in need with a specific protected status and issue them free bank accounts and debit cards to safeguard their access to financial payments.
This ability to provide access to remedy to those displaced by human rights abuses is an area we are proud to offer, but one we will continue to explore and grow, through our own practices and through our investee companies.
Understanding human rights implications for businesses and in their supply chains is not only the right thing to do, but ignorance of it also bears significant consequences.
Human rights are protected under international law through the Universal Declaration of Human Rights and, whilst we can look to provide remedy to those affected by human rights abuses, we cannot take away their distress. Therefore, eliminating the risk of it from the beginning is far more powerful. In fact, the ignorance of human rights exposures can create legal or reputational risks, which in turn can often create project delays and cancellations, significant fines and even impacts on returns.
Human rights litigation against companies is an area under the spotlight, with examples spanning Shell’s activities in Nigeria, through to cases closer to home such as Boohoo Plc’s investigations for modern slavery and low wages in the UK.
Whilst the Universal Declaration of Human Rights applies to all individuals, corporates and society, it became clear that a more specific framework for businesses and investors was required. In 2011, the Human Rights Council endorsed a new framework called the UN Guiding Principles for Business and Human Rights, looking to “Protect, Respect and Remedy” potential abuses. The three-part responsibility to respect human rights therefore extends to investors, with the first step being to adopt a policy commitment, the next is to undertake due diligence processes and finally to enable access to remedy for potential victims.
In fact, the principles have now been embedded by many countries, including the UK, into National Action Plans. In France, these expectations are part of the Duty of Vigilance Law and the EU is now introducing a similar legislation to make due diligence on human rights mandatory.
In the UK, in 2015, the specific human right of modern slavery was adopted, through a countrywide law requiring businesses that supply goods or services or with an annual turnover of more than £36 million to produce a statement on the risks and processes in place to identify modern slavery in their business practices.
It is equally important to recognise the benefits and opportunities that strong labour and employee practices bring. Companies and value chains with less human rights risks are likely to be more resilient to external shocks and showcase more stable business operating environments.
We are continuously building and evolving our own robust policies and practices around human rights risks. To us, this began with the writing and implementation of our Human Rights Policy, including efforts to broaden these expectations throughout our supplier contracts and onboarding processes.
Within our investment process, we bolstered our social data points to look beyond traditional data on health and safety, to include areas like community relations and controversial sourcing. We routinely consider controversy data from hundreds of sources including news articles, blogs across different languages to ensure we look beyond what the company reports. We have also brought this into our stewardship framework as a key issue, joining collaborative initiatives like PRI’s Advance and the Find it, Fix it, Prevent it collaboration on Modern Slavery in the UK hospitality and construction sectors.
Our engagement on these issues also includes public policy advocacy on modern slavery, cautioning that the Employer Pays Principle, whereby workers should never have to pay to work, should still be applied in the UK through the new workers’ visa schemes and beyond.
We are broadening this awareness throughout our investment partners as well: last year, we sent all our third party fund managers a due diligence questionnaire with 35 dedicated questions on human rights and diversity, equity and inclusion efforts. Despite these efforts, we know our work in this area is not finished and we have participated in human rights identification workshops this year, with more specific sectoral learnings planned, for example one dedicated to the risks in the solar supply chain.
As with climate, we recognise that the robust consideration of human rights is a journey and achieving change will require an industry-wide transformation, with the necessity for this issue to be viewed as interlinked and dependent.
We will need to ensure that people remain at the heart of the green transition.
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