By Kieran Guilbert
LONDON, May 1 (Thomson Reuters Foundation) - Big investors must look beyond the clamour over climate change and compel companies to tackle modern slavery as well, the head of a United Nations-backed group pushing for responsible investment said on Wednesday.
Fund managers can put trillions of dollars worth of pressure on businesses that fail to stop slave labour by uniting to demand improvements and monitor progress, said Fiona Reynolds, head of London-based Principles of Responsible Investment (PRI).
Otherwise a host of ethical issues risk falling from view, with consumer pressure over global warming providing handy cover for companies that drag their feet on modern slavery.
"Look for the laggards, target them and point to best practice from the top performers in their sector," she said. "Give them time to improve, and measure the change ... it must be a collaborative and collective, long-term engagement."
While top asset managers such as BlackRock have increasingly focused on climate-related risks, Reynolds said modern slavery had not made the same sort of mark on investors who weigh environmental, social and governance (ESG) factors.
"There are a lot of ESG conversations around climate change ... but it is interlinked with modern slavery," Reynolds told the Thomson Reuters Foundation in an interview.
"We see many climate migrants and refugees who end up vulnerable and at risk of being trafficked," she added.
The PRI represents more than 2,200 investors that manage a combined $82 trillion worth of assets. Once seen as irrelevant by many financial executives, ESG issues have become a vital tool for asset managers hoping to stand out.
The U.N. estimates that some 40 million people are trapped in modern slavery, from factory jobs to forced marriages.
Amid a U.N. goal of ending by 2030 a trade thought to generate annual profits of $150 billion, Reynolds said investors must team up to identify firms that are behind the curve on tackling slavery and use their financial clout to demand change.
The PRI in 2017 adopted tougher rules aimed at making fund managers deliver on pledges to pay heed to ESG issues, and said it would start delisting stragglers next year.
Reynolds said companies must be pushed to implement and enforce robust anti-slavery policies, carry out investigations within their supply chains and closely monitor sub-contractors.
"We can't think about modern slavery alone, there needs to be a holistic human rights approach that considers fair wages, labour laws, freedom of association," Reynolds said. "You won't fix any one of these issues without addressing the others."
Several supermarket chains have made strides in tackling slavery - pushed by both investor and public pressure as consumers demand to know more about their goods - she said.
Britain's six biggest tea companies have all revealed their suppliers, while fashion giant H&M has done the same for each garment on its website amid rising pressure on firms to be open.
"Transparency is at the heart of good governance but it is just a starting point," said Reynolds, also chairwoman of the Financial Sector Commission on Modern Slavery and Human Trafficking, which launched last year.
The initiative is backed by several governments and aims to fight money laundering by traffickers, boost ethical investment and offer opportunities to people who are vulnerable to slavery.
But Reynolds said there was a long way to go.
"The turning point will be when we don't have to talk about responsible investment but just investment ... and can move beyond the mindset of making profit at any cost," she added.
(Reporting by Kieran Guilbert, Editing by Lyndsy Griffiths. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's and LGBT+ rights, human trafficking, property rights, and climate change. Visit http://news.trust.org)
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