Modern slavery is also a reality in the 21st century

David Fyfe, Portfolio Manager at Mint Asset Management, explains why slavery isn’t old history and why investors need a modern mindset in understanding the risks…

The term modern slavery is popping up more and more everywhere: in journalist headlines, corporate releases and, of course, the investment world. What does it mean and how is it manifesting in our society? What does it mean for investors and what are we doing to counter it?

As an introduction to modern slavery, it is interesting to note that there really is no internationally agreed definition. Here in New Zealand, MBIE defines modern slavery as ‘a serious exploitation from which a person cannot leave through threat, violence or deception’. This includes forced labour, debt bondage, forced marriage, slavery and human trafficking. By way of background, the International Labor Organization (ILO) recently released global estimates on modern slavery.¹ We noted that by 2021, 50 million people will be living in modern-day slavery. They divided this between his 28 million in forced labor and his 22 million in forced marriage. While many consider these problems to be a relic of the past, nearly 1 in 150 people on the planet has this problem, and in the last five years he has killed 10 million. It is also increasing in the near future.

So what forms could modern slavery take? Historically what we think of when the word slavery is mentioned is descent-based slavery, which is It still exists, mainly in Africa. However, the most common form of modern slavery is debt bondage (or bonded labour), where employers force you to work in debt, often with little or no control over debt. You will be working for no wages or no wages.This is more common in South Asian countries² Sectors such as agriculture, factories, mines and factories. Added to this are child labor, forced labor and human trafficking.

What is New Zealand’s position on this issue?³ We oppose forced labor, human trafficking and slavery. 28 actions as part of this plan will be implemented over the next five years (until 2025) to ensure New Zealand meets international commitments on modern slavery (and exploitation of workers) is. The government is currently working on legislation to achieve this (received public submission). This creates new responsibilities across the operations and supply chains of organizations of all kinds, but places more responsibilities on larger organizations (with revenues exceeding her $50 million). This is where the majority of NZX-listed entities are captured, although some have already disclosed modern-day slavery risks per ASX requirements.

Across the Australian chasm they have moved much faster than us to fight modern slavery. They have already introduced the Modern Slavery Act 2018^Four Businesses with revenues over A$100 million must report annually on modern slavery risks in their operations and supply chain.
A recent study by Monash University^Five examined the disclosure quality of modern slavery statements of the top 300 entities listed on the ASX. The study gave a scorecard rating to each company (rating A-F) based on five key areas. In summary, these areas address your operations, your supply chain, the risks of modern slavery within your supply chain, your actions to address and remediate such risks, and finally your The level of detail that describes how to rate the sexiness. Actions taken to assess the risks of modern slavery. This evaluation and scoring of the results yielded several important observations.

First, size matters. In general, the higher the market capitalization, the higher the score. This means that large organizations have more resources to evaluate, build and review such policies and practices. For many entities this was a new requirement. Second, the highest-scoring sectors were utilities, consumer staples, and real estate, while healthcare was the worst, with the riskiest sectors often taken more seriously. Finally, the most common risk seen overall was forced labor (especially, not surprisingly, in consumer stocks), which took precedence over child labor and debt bondage. The disparities in outcomes by size and sector certainly provide future work, not only for the companies themselves, but also for investors’ own involvement in the risks that lie within these companies.

As investors, what does this mean for us? How all of this relates to the investment community happens on many levels. First and most obvious is the legal risk to the entity. This could be a “black swan” event that could stun a company with huge fines, shut down a supplier or, in severe cases, shut down the company itself. The possibility of such outcomes may be due to the supply his lack of understanding of the chain, or the lack of a framework to assess, or even the unawareness of the existence of such risks. . Second, reputational risk. When a brand or business is associated with undesirable practices or suppliers, the damage can be irreparable.

Within all Mint Australasian equity funds, we integrate environmental, social and governance (ESG) factors, including modern slavery disclosures, when evaluating investments. Many New Zealand-listed companies have already disclosed key risks related to modern slavery, which we are considering incorporating into their valuation. As New Zealand moves towards legislated reporting requirements on modern slavery, we will adopt this and build our own frame on top of the work and engagement we believe is necessary to understand each investment. Ready to integrate into your work. Part of our philosophy is that we believe ESG considerations are key to making well-informed decisions in any investment process. When investing with a long-term view, companies that are better able to manage such risks should be able to achieve better sustainable results.

Some of the high-risk areas we have been working on recently are the potential employment of offshore workers (nurses in the agricultural sector and the retirement sector of RSE workers), and the assessment of each company against such risks. and trying to understand how they mitigate. them within their current business model. Even as I write this, cases involving offshore workers have made so many headlines.

As an eye-opening and interesting read on the issue of forced labor, staff circuit survey⁶ Researched current and historical issues in the Pacific over fisheries. This shows not only how dire it is for exploited workers, but how complex and intertwined supply chain issues are. It is clear how difficult it is to obtain It makes you think twice before eating your next tuna sushi roll.

Disclaimer: David Fyfe is a portfolio manager on the investment team at Mint Asset Management Limited. The above article is for informational purposes only and is not intended as investment advice.

Mint Asset Management is the issuer of the Mint Asset Management Fund. Download a copy of the Product Disclosure Statement here.