Modern approaches to modern slavery: addressing risks and impacts in investor portfolios
Schroders and human rights organisation Shift explore modern slavery’s impacts and how investors can help reduce harm.
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Executive Summary
Modern slavery is a severe human rights harm and an increasingly material investment risk. Conventional approaches to modern slavery risk assessment often remain too reliant on visible but incomplete indicators, such as policies, audits and disclosure statements. These can show that processes exist, but not whether they are effective, whether risk sits deeper in the supply chain, or whether a company’s business model creates conditions in which exploitation is more likely. Bringing together Schroders’ investment and active ownership perspective with Shift’s human rights expertise, the paper sets out two complementary approaches.
Schroders’ Modern Slavery Risk Model helps identify and compare risk at scale across portfolios, focusing on direct and supply-chain exposure, scrutiny risk and quality of risk management. Complementary to Schroders’ top-down scalable approach is Shift’s bottom-up Business Model Red Flags framework. It helps explain why modern slavery risks arise by identifying the commercial features of a company’s value proposition, value chain or revenue model that can create structural vulnerability to exploitation.
Together, these approaches can move investors beyond policy box-ticking approaches and reactive controversy monitoring. Portfolio-scale models can help investors know where to look; business model analysis can help them understand what to ask and why the risk exists. This can support more targeted engagement with companies, asking whether they understand their most salient risks, identify and remedy root causes of harm, and adapt structural business practices that may contribute to exploitation.
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This paper was written in partnership with Shift. Shift is a non-profit, mission-driven organisation working globally to embed respect for human rights into business. We leverage the UN Guiding Principles on Business and Human Rights to shape the standards, incentives and practices that are needed for a fairer economic system in which everyone, not just the few, can thrive.
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