Investment Industry Exposure to Modern Slavery

Jim Shannon Excerpts

Tuesday 26th October 2021 Westminster Hall

[Gareth Davies (Grantham and Stamford) (Con)]

I beg to move,

That this House has considered investment industry exposure to modern slavery.

Modern slavery is one of the most prevalent and egregious violations of human rights in the world today.

It is great to see you in the chair, Mr Robertson, for what is my first ever Westminster Hall debate. Hopefully my performance will not mean that it is my last. I welcome the Minister to her new, important role. I know she will carry out her brief superbly in one of the most important jobs in Government—safeguarding our most vulnerable people.

I think we can all agree that the shameful existence of modern slavery has no place in a civilised world. It is an issue that should concern every person who believes in the integrity of common humanity, and should be a concern for every business, because it distorts markets and undermines ethical business practices. As an international community, we have rightly taken collective responsibility for defending human rights around the world. Organisations, such as the United Nations working group on contemporary slavery, have drawn increased attention to the issue and made significant strides in defining and identifying this covert and highly complex crime.

That being said, there is a great deal more work to do. Human exploitation continues to pervade every major nation on earth. Almost half the countries in the world have yet to criminalise slavery. In the UK alone, it is estimated that 136,000 people are currently victims of this awful crime. However, we are here today to specifically discuss the role that the investment industry can play in tackling modern slavery because, as it currently stands, financial services are not considered part of the solution in public policy. I want to do my little bit to try to change that.

We must first acknowledge the great work that this Government, and previous Conservative Governments, have done in tackling this issue, thanks to the leadership of my right hon. Friend the Member for Staffordshire Moorlands (Karen Bradley), together with, of course, our late friend and colleague James Brokenshire, the Security Minister at the time, who passed the Modern Slavery Act 2015. The vision for that legislation was truly world-leading, and the UK became the first country in the world to require businesses to identify and address modern slavery risks in their operations and supply chains. It is an Act that we, in this country, should be incredibly proud of, for it has highlighted that modern slavery exists in the private economy. It has also paved the way for legislation in other countries—in Australia, France and the Netherlands.

However, while we reflect on what the 2015 Act has achieved, we must also acknowledge the need for evolution. All legislation requires continual review to keep pace with developing risks, and the Government have therefore, rightly, announced that they plan to strengthen the Act in response to consultation in 2019.

[Jim Shannon (Strangford) (DUP)]

I congratulate the hon. Gentleman on bringing this forward. I spoke to him outside, so he knows what my thoughts are. Does he not agree that it is important that for girls in particular, we need to understand that investment portfolios should show mindfulness on human slavery? It is not enough to say that if we do not use modern slavery in our businesses, our hands are clean. Would the hon. Member agree that we must be cognisant of how investment portfolios gain interest? This can only be done, as the hon. Gentleman says, through legislation and legislative change.

[Gareth Davies]

I am grateful to the hon. Gentleman for his intervention, which is a great honour. That is another first for me, so I feel like I am really making it now. I completely agree that young girls and young people—all people, actually—who have investments, savings or a retirement pot, need to know and have confidence that those who invest that money on their behalf are doing so prudently and are putting in place the checks to ensure that there is no inadvertent risk of modern slavery. The Government should do everything they can, as I will come on to in a minute.

The Government’s commitment to amend section 54(5) is intended to make it more prescriptive for investment funds. I completely agree with that, but even with those changes, that section would remain entirely focused on internal business structures and supply chains, not where their investments are made. The good news is that an increasing number of responsible companies are holding themselves to a higher standard. Many investors are already assessing modern slavery risks as part of their robust environmental, social and governance strategies or choosing to report their alignment with the United Nations’ guiding principles on business and human rights.

Yesterday, I met a group of investors, and this year alone, I have met 24 separate financial services companies in preparation for today’s debate. I found that they already have robust measures in place to tackle modern slavery. On the whole, however, the sector has not integrated modern slavery risks into investment processes to the same extent that it has adopted environmental risks. Some 795 financial organisations published modern slavery statements under the Act last year, but of 79 asset managers who submitted a statement, only 27% disclosed that they had conducted due diligence on modern slavery risks.

That is clearly a problem, but I believe that there are three solutions. First, the Government could broaden section 54 of the Act and consult on including a requirement that investment portfolios are included, as they are in Australia. Secondly, the Government could issue specific statutory guidance on how investors can assess modern slavery risks—again, as they do in Australia—so they are equipped with knowledge on that assessment. Thirdly, as it is a global problem that needs a global solution, we should work with our global allies to establish a taskforce, modelled on the taskforce on climate-related disclosures. Although the issue is different, the approach can be the same.

As it stands, financial services firms are a £9 trillion lever that we are not yet pulling in our fight against modern slavery. The UK is the largest net exporter of financial services in the world and the law change that I have proposed could make a difference in eradicating that horrendous crime. It would also protect and promote our democratic values at home and abroad. British savers and investors should never be used to support profit from human slavery. It matters for global Britain, as our leadership in this space will create prosperity at home and help to promote our values abroad. The situation that we walk past is the situation that we accept. It is an issue hidden in plain sight. We need to pull every lever we can to end it once and for all.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for the Home Department (Rachel Maclean)]

It is a huge pleasure to be here serving under your chairmanship, Mr Robertson. I very much thank my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for securing this vital debate and for bringing with him a wealth of experience from his distinguished career in the investment industry, which informs us all and helps us all to move further.

I also thank my predecessor, my right hon. Friend the Member for Staffordshire Moorlands (Karen Bradley). I really do feel that I have very big footsteps to follow in. I thank her for all her work in bringing the world-leading and groundbreaking Modern Slavery Act 2015 on to the statue book. Without her work, I certainly would not be here today talking about this subject, and it is absolutely right that we are. Thanks to her work, and that of others, last week we were able to mark Anti-Slavery Day and reflect on the trauma that victims suffer, the cruelty of those who exploit them and the bravery of survivors attempting to rebuild their lives. That was also a moment to reaffirm our commitment to confronting the evils of modern slavery, wherever and whenever they occur. They are utterly appalling crimes that have no place in our society. I very much welcome the interest shown by my friends today, including the hon. Member for Strangford (Jim Shannon), so that we can stamp out these crimes.

It is nice to pause and reflect on what we have already done as a Government. We have taken some very important strides forward in recent years, but of course there is more to do. These crimes continue to evolve and we must continue to evolve. As my friends have said, modern slavery is a global problem. We continue to provide global leadership to tackle it. During our G7 presidency, G7 members agreed to joint action on forced labour in global supply chains, and reaffirmed their commitment to upholding human rights and international labour standards. That is why we continue to invest heavily in tackling modern slavery. We have funded a new five-year modern slavery victim care contract to support victims to rebuild their lives. That new contract is worth £379 million over five years and will deliver a much-needed service that is based on need and better aligned to the requirements of individual victims. As we know, victims present with incredibly complex needs, and it is right that we have the support tailored for them.

The Home Office has invested a further £1.4 million this year to support the police’s response to modern slavery, bringing the total investment in policing to £15 million since 2016. That funding in the round has helped us to pursue perpetrators and drive an increase in modern slavery investigations and operations. Following our recognition that the nature of modern slavery has evolved over the years, the Home Secretary announced a review of the 2014 modern slavery strategy, which builds on the considerable progress, by adapting our approach and maintaining our position as an international leader in this area.

We will publish a new strategy next spring, which will set the strategic direction for years to come. Through the Modern Slavery Act 2015, the UK became the first country in the world to require businesses to report on the action they were taking to address modern slavery risk in their operations and supply chains. That legislation acts as a call to action for businesses, investors and the international human rights community—no doubt the businesses that my hon. Friends were involved in before they brought their expertise to this place.

Following the recommendations of the independent review of the Modern Slavery Act and a consultation, the Government committed to introduce an ambitious package of measures to strengthen our world-leading legislation on transparency in supply chains. We will extend the reporting requirements to public bodies, to leverage public procurement and address risks in public supply chains.

We will mandate specific reporting topics that statements must cover, set a single deadline for reporting, require organisations to publish their statements to a new Government registry for modern slavery statements, and introduce financial penalties for organisations that fail to meet their reporting obligations. Those changes require legislation, but I want to reassure colleagues that this Government remain committed to legislating on modern slavery and will implement the measures as soon as parliamentary time allows.

In addition to the changes we have already committed to make, we will consider our future approach to transparency in supply chains, as part of our modern slavery strategy review, including how we can best utilise the unique power—and pockets—of the financial sector, to tackle modern slavery.

Let me now turn to some of the specific points referenced in the debate. Individual organisations must focus on preventing harm in their practices. We do not believe that physical remoteness or being several steps away from the supply chain is an excuse. Investors do need to hold their organisations to account, as my hon. Friends so eloquently set out. People who are saving for their pensions or retirement should not be exposed to criminal activity.

I am grateful for all the work done by my hon. Friends the Member for Grantham and Stamford and for Totnes (Anthony Mangnall). Through their convening power, they have brought together financial institutions and organisations. I am also grateful for the work of the Independent Anti-slavery Commissioner, highlighting the role that the financial services sector has to play. It is clear that there is more to do, but investors can help to drive this change by fully harnessing their leverage. I highlighted that message this week at a meeting jointly hosted by the Home Office and CCLA, a fund manager, to discuss how Government, businesses and investors can work in partnership to tackle modern slavery. There are some really good examples of investor-led initiatives, with investors taking collective action, such as the CCLA-led Find It, Fix It, Prevent It and Rathbone’s Votes Against Slavery project.

However, we know that there is more to do here. While I am encouraged by the positive initiatives already under way, we need to make sure that we continue on the right track and that investors scrutinise their investment portfolios to engage and challenge companies on their response to modern slavery.

As hon. Members have said, when it comes to those environmental, social and governance issues, we know that businesses and investors have responded well to the environmental challenges they face. As we look to accelerate progress on tackling modern slavery, the Home Office is working with investors to understand what more we can do to encourage and incentivise businesses and investors to place the same emphasis on social issues. This issue is now, rightly, rising up the agenda.

[Jim Shannon]

I thank the Minister for her excellent response. Minister, last week in the press over a hundred MPs had signed a petition and a letter of concern about investment in Chinese companies, some of which are using Uyghur Muslims as slave labour. Is the hon. Lady able to give us any guidance on how we can take that further to try to make that stop?

[Rachel Maclean]

I thank the hon. Gentleman for that. It is an egregious example of abuse of human rights; just because it is happening overseas does not mean that we should turn a blind eye to it. We in the Home Office are looking closely at all of these issues as part of our review of the modern slavery strategy. I would be very happy to continue in discussion with the hon. Gentleman to provide further reassurances on what can be done. However, I want to make very clear from this Dispatch Box that companies have a responsibility to their consumers and shareholders to do the right thing and not enable slavery in the pursuit of profit.

As we look to accelerate progress on tackling modern slavery, it does seem very challenging. However, we do know that the business and investor community has taken huge strides, and it has succeeded in making better, more informed green choices. We should hold and demand those same expectations for modern slavery. We should not walk by. We should not ignore the crimes that are hiding in plain sight.

My hon. Friend the Member for Grantham and Stamford called for the legislation to be extended to financial services so that they address modern slavery in their investment portfolios. I have taken close note of that. Legislation is important, but it is not the only factor driving responsible behaviour. Many organisations already report voluntarily under the Modern Slavery Act and publish modern slavery statements. I would strongly encourage any responsible organisation to do the same, and I would encourage shareholders and consumers to ask those questions about where they are putting their money and their investment.

I have noted very carefully the points that my right hon. Friend the Member for Staffordshire Moorlands and my hon. Friend the Member for Totnes made. I reassure them that we will consider extending the scope of section 54 as part of our strategy review.

In closing, let me once again express my thanks to my hon. Friend the Member for Grantham and Stamford for securing this debate on such an important subject. It is a real tribute to him to have brought forward a debate on a topic that is sometimes hidden, but should not be. I thank him for shining a light on all the work that the Government, many NGOs, my right hon. Friend the Member for Staffordshire Moorlands, the Anti-Slavery Commissioner and many others are doing. Modern slavery is utterly abhorrent, and I can assure hon. Members that this Government remain steadfast in our determination to root out such crimes, protect the vulnerable and support victims.

Question put and agreed to.