Modern Slavery Risk

The Investor's View

14 October 2021
3 Minute Read

What You Need to Know

Modern slavery is a clear risk to people—and a growing concern globally. Through comprehensive research and engagement with companies, investors can not only report on modern slavery risks but also strive to reduce them. This is the right thing to do, and it can drive better outcomes for investments and the world.

US$150 Billion
In estimated profits from forced labor annually,
according to the International Labor Organization (ILO) and Walk Free Foundation
2030
The year targeted to end modern slavery
by the United Nations (UN) Sustainable Development Goals
Five
Steps can help identify exposure to forced labor in investments,
reducing risks to people associated with companies' operations and supply chains
Authors

Modern Slavery: A Hidden Social Evil

Slavery was formally abolished in the US and Europe in the 19th century, but the abuse and exploitation of vulnerable people continues in many workplaces and other settings around the world today. Modern slavery—forced labor, debt bondage, forced marriage, slavery and slavery-like practices, human trafficking, and the worst forms of child labor—remains a critical issue of our time.

Because modern slavery is illegal, it’s a covert activity supported by crime and corruption. This makes it hard to precisely measure the scale of the problem, but the International Labor Organization (ILO) and Walk Free Foundation estimated in 2017 that 40.3 million men, women and children had been victims of modern slavery on any given day during the previous year. That translates into one out of every 185 people on the planet, mostly women and girls (71%). The research also estimated that forced labor generated US$150 billion in profits annually. 1

Ending modern slavery by 2030—the year targeted by the United Nations (UN) Sustainable Development Goals—would require the freeing of more than 10,000 people a day. Although modern slavery is seen as most widespread among emerging countries, it’s an issue in many developed countries, too.

How pervasive is this social evil, and how challenging is the battle for investors to surface and address it? A simple trip to the store tells the tale of how easy it is for ordinary consumers to come into contact with products made by slave labor, 2 and how their purchasing decisions can make them unwitting beneficiaries of a crime.

Most people drive to the store, and, depending on their car’s make and model, could face connections to modern slavery as soon as they slide behind the steering wheel. At least four auto manufacturers—two from the US, one from Europe and another from Japan—have used Brazilian pig iron to make car doors. The pig iron supply chain starts with burning hardwood to make charcoal. In many cases, trees are cut down illegally to source the wood, and the charcoal is made by slave labor from camps in the Brazilian rainforest. 3

1 Global Estimates of Modern Slavery, ILO and Walk Free Foundation, 2017.

2 Martijn Boersma and Justine Nolan, Addressing Modern Slavery (Randwick, Australia: UNSW Press, 2019).

3 Marcy Murninghan, “Pig Iron and Modern Slavery,” The Murninghan Post (August 12, 2010), http://murninghanpost.com/2010/08/12/pig-iron-and-modern-slavery.

Past performance, historical and current analyses, and expectations do not guarantee future results.

The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time.


About the Authors