Modern slavery in global supply chains poses a reputational risk for workplace pension schemes, that could lead to both legal and financial penalties, according to IFM Investors.
The global private market investor, which is part-owned by Nest, has called for asset managers to collaborate more effectively to tackle this issue, to provide greater transparency and more consistent data on this problem across the investment chain.
It says modern slavery remains “deeply embedded” in the global economy and by extension, in the portfolios of institutional investors across the world.
In a paper on the topic — Addressing Modern Slavery in Investment Portfolios — IFM Investors says that modern slavery can be buried deep in global supply chains, but it is not invisible to regulators, consumers, or investors. It adds that with regulations tightening on this issue around the globe, this is likely to expose those who fail to take action.
The paper suggests that while asset owners across major markets are increasingly prioritising modern slavery considerations in their investment processes, modern slavery risks remain among the most difficult to detect in investment due diligence.
Unlike environmental concerns which are often assessed through technical metrics and proxy indicators, modern slavery is often hidden in opaque supply chains, informal labour structures and complex webs of subcontracting.
The paper provides a consolidated list of recommendations aimed at investors, policymakers, data providers and other industry actors calling for a more systematic approach to identifying and ultimately eradicating modern slavery from investment portfolios — with an aspiration to drive positive change in the real economy too. As part of this it also showcases IF’s internal supply chain risk assessment model, which maps potential risk exposures across supply chains at sub-industry level, spanning upstream, operational, and downstream activities.
IFM Investors global head of sustainable investment Maria Nazarova-Doyle says: ”Modern slavery is not just a social issue—it’s a material investment risk that can erode value, damage trust, and expose portfolios to mounting legal liabilities.
“While institutional investors are paying closer attention to the problem, they still face major hurdles in addressing it. Detection is difficult, tools are fragmented, disclosure is inconsistent, and the issue often hides deep in supply chains where oversight is weakest.”
She adds: “Any meaningful progress will require collaboration between asset owners, asset managers, companies, regulators, civil society, governments, and potentially affected workers and communities to drive greater transparency, consistent data, and collaborative solutions.”
Tom Sanders, senior ESG analyst at Nest, which owns 10 percent of IFM, underlined the growing awareness of the financial and operational consequences of inaction.
“Respect for human rights and eradicating modern slavery in business are strongly associated with value chain resilience and a stable business operating environment. As investors, we recognise the operational, financial, legal and reputational risks companies face when they fail to manage modern slavery and human rights risks,” he said.
Antonia Parkes, senior director in ESG and stewardship at AustralianSuper, (which manages A$340 billion of retirement savings and is headquartered in Melbourne), called modern slavery practices “a systemic risk”.
She said: “One company cannot fix that risk on its own. As well as engaging with some of the assets we invest in directly through our ESG and stewardship program, we also engage in collaborative forums because it’s important we work with other investors to look at opportunities to address modern slavery risks.”
Liza McDonald, head of responsible investment at Aware Super, another Australian superannuation fund headquartered in Sydney, said: “Investors can significantly contribute by educating companies on the importance of reporting instances of modern slavery and removing the stigma associated with such disclosures. This effort would help the market strive for a transparency level comparable to the reporting of near misses in safety protocols.”