Stock Exchange Guidance on Modern Slavery Growing, But More Needed

Although more stock exchanges reference modern slavery in their ESG disclosure guidance, variation in terms of coverage and details remains.

New research suggests that an increasing number of stock exchanges reference modern slavery in their environmental, social, and governance (ESG) disclosure guidance to listed companies. However, there remains considerable variation in terms of the coverage and detail of the guidance they provide – an area for improvement that could help strengthen global efforts to achieve SDG Target 8.7 which seeks to eradicate forced labour, modern slavery and human trafficking.

The publication Modern Slavery: Analysis of Coverage in Exchange ESG Disclosure Guidance, was released today in Geneva at the UN Business and Human Rights Forum. A joint publication by the UN Sustainable Stock Exchanges (UN SSE) initiative, the Finance Against Slavery and Trafficking (FAST) initiative at the United Nations University Centre for Policy Research (UNU-CPR), and Walk Free, an international human rights group, the Market Monitor examines the number of exchanges that reference key modern slavery-related terms in their ESG disclosure guidance, helping to identify the extent to which this subject has been integrated into mainstream recommended disclosure practices.

Modern slavery, which describes situations where coercion, threats or deception are used to exploit workers and undermine or deprive them of their freedom, is a serious human rights issue. Current estimates suggest nearly 28 million people worldwide are working in forced labour.   

The financial sector, including stock exchanges and investors, are playing a greater role in recent years in preventing, mitigating, and remediating modern slavery. “The financial sector can help to accelerate the end of modern slavery,” Matthew Coghlan, Walk Free’s Financial Sector Engagement Manager, said. “Capital market actors such as securities commissions and stock exchanges can provide sustainability rules and guidance to issuers to improve reporting on modern slavery prevention and remediation. Investors can use increased disclosure to invest in listed companies that manage modern slavery risks well.”

To help determine how stock exchanges and their listed companies approach modern slavery disclosure, the research analysed 70 stock exchange ESG guidance documents. Encouragingly, FAST, SSE, and Walk Free found that stock exchange guidance to issuers on disclosure about modern slavery and related issues is becoming a market practice: more than two-thirds, some 55 exchanges, include at least one modern slavery related reference; 59 include the topic of decent work; while supply chain and remedy topics are covered by 36 and 30 exchanges, respectively.

“Stock exchanges play an important role in establishing market norms and providing the necessary capacity building to help companies in their sustainability journey,” said Anthony Miller, Chief Coordinator of the UN SSE. “We are encouraged to see exchanges promoting improved disclosure and management practices related to human rights among their issuers.”

The analysis also revealed several areas for improvement and significant variations across exchanges and jurisdictions. References to modern slavery-related terms are primarily focused on the different forms of modern slavery, rather than indicators or warning signs that modern slavery may be occurring, and the practices companies should take to effectively address modern slavery.     

“We were encouraged to find that stock exchange guidance on disclosure about modern slavery is becoming more common,” says Andy Shen, Government and Multilateral Organization Lead for the FAST initiative and part of the publication's research team. He added: “It’s extremely positive that over two-thirds of exchanges include at least one reference related to modern slavery. However, clearly, more progress is needed. The lack of specificity in most exchanges’ guidance and the limited breadth of relevant indicators is concerning. It means that issuers will find it more difficult to identify instances of modern slavery – and more importantly, to prevent and mitigate it, and provide or enable remedy for those who are harmed.”  

Stock exchanges can strengthen their approach to modern slavery by, for example, conducting a risk assessment of the potential exposure in their marketplace to human rights violations and risk for modern slavery to  help identify whether existing disclosure guidance needs to be expanded or whether dedicated guidance needs to be developed. Guidance could cover modern slavery elements and indicators, positive indicators and red flags for other fundamental rights at work, good risk management practice for employees and suppliers, and remediation frameworks, grievances, and remedy. More specific guidance on specific practices or other warning signs that can constitute modern slavery and are crucial for companies to assess and address could be particularly useful for listed companies that are new to the topic.

Exchanges can also follow promising models already in operation. The Stock Exchange of Thailand (SET), for instance, working with Walk Free and FAST, published the first (and as yet only) disclosure guidance specifically on modern slavery, the Guidance on Modern Slavery Risks for Thai Businesses which sets out the definition of modern slavery; identifies the risks that modern slavery cases pose to business; examines specific modern slavery risks in the eight industries represented on the SET; and provides a detailed checklist for modern slavery risk management.    

Modern Slavery: Analysis of Coverage in Exchange ESG Disclosure Guidance can be accessed here

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