Super funds making progress to tackle modern slavery but must dig deeper

Australian superannuation firms are making good progress in working to combat modern slavery one year on from the introduction of the Commonwealth’s Modern Slavery Act but need to “dive deeper”, according to one of Australia’s largest investment consultancies JANA.

The UN and the Walk Free Foundation estimate that there are approximately 40 million victims of modern slavery around the world, many of whom are intertwined in our global supply chains. This is a serious issue for communities and investors alike.

In a review of the Modern Slavery Statements produced by 20 large superannuation funds, JANA found that 100 per cent of the funds surveyed acknowledge modern slavery as an investment risk, and 95 per cent are carrying out modern slavery risk assessments on assets.

Other key findings

• Only 5 per cent of superannuation funds reviewed conduct risk assessments of supply chains beyond tier one of assets – modern slavery is more likely to be identified at tiers three or four.
• Less than half (45 per cent) have conducted internal modern slavery training, with even fewer carrying out training at board or c-suite level. While there has been a significant uptake in the inclusion of modern slavery considerations in investment risk, JANA’s review found that dedicated frameworks or processes to improve how super firms identify and resolve modern slavery issues remains a work in progress.
• Only 15 per cent of surveyed superannuation firms to date have produced a standalone Modern Slavery Policy. In many cases, policies linked to modern slavery were embedded within wider ESG and Responsible Investment Policies, although several funds noted standalone policies were in progress.

While there is still more work to be done with reporting under the Act, JANA notes it is very encouraging to see many superannuation funds opted to report, despite being below the $100m revenue threshold whereby reporting becomes mandatory – showing that the sector is serious about combating investment related modern slavery.

JANA Consultant, Christopher Beattie, said, “modern slavery can occur in every industry and sector and is deeply intertwined in our global supply chains. While it is difficult to identify risks at the investee company level, the Australian superannuation industry has a material influence on the fight against modern slavery. They have an opportunity to use their collective size and influence to advocate against modern slavery and thereby strengthen the social systems on which capital markets and their investments rely.

“When reviewing the first round of Modern Slavery Statements, it was pleasing to see that the majority of large superannuation funds elected to produce Modern Slavery Statements despite not meeting the revenue threshold in the first year of the Reporting Requirement. It shows that the industry is engaged and serious about this issue, but the fact still remains that super funds need to dive deeper and conduct wider analysis within and across asset classes over time to try an identify any instances of modern slavery. It is essential that risk assessments look further down the supply chain at tiers three and four and beyond, where instances of modern slavery are typically identified.

“It is important for super funds and the investment industry as a whole to see the big picture and understand the expectations of their investors”, said Mr Beattie.

The Commonwealth Modern Slavery Act 2018 (the “Act”) was passed by the Australian Parliament on 29 November 2018 and came into effect on 1 January 2019 with the aim of combating modern slavery in global supply chains. To help achieve this aim, the national Modern Slavery Reporting Requirement (“Reporting Requirement”) was established under the Act.