“Greed drives the modern slave trade. This is an economic crime, People do not enslave people to be mean to them; they do it to make a profit.” 
(Bales, Modern Slavery: Its Root Causes and the Human Toll, 2020)

As increasing numbers of consumers and investors demand action around Environmental, Social and Governance (ESG), money laundering and modern slavery, these issues have become key concerns for policymakers. While public pressure was originally focused on individual companies, such as those in the fashion industry, that use child labor, the growing importance of sustainable investing is amplifying country-level attention. Consequently, the headwinds are rising for unsustainable companies and countries alike. And, as we pointed out in an article on the commonalities between anti-money laundering (AML) and ESG analysis, scrutiny can come from both directions. 

Since this article received a lot of interest from our readers, we’ve decided to publish some follow-up pieces on selected aspects of AML and ESG. For this first sequel, we teamed up with modern slavery researcher and advocate, Boglarka Radi. 

Slavery has been recognised as a crime for many years and, 70 years ago, was prohibited by Article 4 of the Universal Declaration of Human Rights. The concept of modern slavery is frequently used to capture various exploitative, coercive and abusive practices, including human trafficking, forced and bonded labour, servitude and forced marriage. According to data from the International Labour Organization (ILO), forced labour alone generates over US$ 150 billion in illegal profit annually. 

The ILO estimates that there are currently 40.3 million people living in slavery globally—disproportionately women and girls—including 24.9 million in forced labour and 15.4 million in forced marriage. While nation states hold some 4 million people in involuntary servitude, the private sector is the most significant user of forced labour with around 16 million people in its grip—an enterprise that, thanks to its profitability, is going nowhere fast. In addition, around 4.8 million people are subject to forced sexual exploitation. And this is not just a problem of developing nations, with the tragedy of modern slavery continuing to unfold even in developed countries like Canada, Germany, the UK and the US. Figure 1 shows the prevalence of modern slavery in each country versus its wealth, whileFigure 2 shows the distribution of forced labour by sector.

Source: CountryRisk.io with data from Global Slavery Index and World Bank

Similarly, certain products such as gold, cocoa and electronics are particularly likely to be produced using forced labour, as identified by the Global Slavery Index.

Cotton: Kazakhstan, Tajikistan, Turkmenistan, Uzbekistan

Bricks: Afghanistan, India, Myanmar, Nepal, Pakistan

Garments - Apparel & Clothing Accessories: Argentina, Brazil, China, India, Malaysia, Thailand, Vietnam

Gold: Democratic Republic of the Congo, North Korea, Peru

Fish: Ghana, Indonesia, Thailand, South Korea, China, Japan, Russia

The upshot is that forced labour continues to pervade much of the global economy, with victims of slavery working in diverse areas from construction and agriculture to the sex industry, nail bars, car washes and cannabis farms. A good place to learn more about the importance of such products for specific countries is the United Nations Comtrade database, which lists the main exports and destinations for each country.

Fortunately, the public is becoming increasingly aware of the challenge of forced labour. As a result, pressure is growing on businesses, corporate leaders and investors to do more to protect human rights and eliminate slavery. 

Human trafficking is closely related to modern slavery. For perpetrators, it is the ‘supply’—the exploitative process by which a person is delivered into forced labour or sexual abuse. And as global supply chains grow increasingly complex, many companies are not even aware of the risk, much less in a position to manage and mitigate it. This is also an issue for financial institutions, many of which become unwitting accomplices when they handle funds that are associated with, or even directly generated by, slavery or human trafficking as the perpetrators endeavour to launder their money.

The most important international treaties against modern slavery are the 1930 Forced Labour Convention the 1957 Abolition of Forced Labour Convention. In 2014, a new protocol came into effect to strengthen efforts to eliminate forced labour and human trafficking. You can find details here, including a list of countries which ratified the treaties.

In 2021, the European Commission adopted a package of sustainable finance measures, which includes the requirement for nearly 50,000 companies in Europe to disclose information on social and environmental challenges that would impact all large and listed businesses. 

While mandatory human rights due diligence in the UK has yet to be decided, the country has introduced the Modern Slavery Act 2015 (MSA 2015). This legislation raises awareness of the issue and makes the case that exposing organisations to public scrutiny would help them become more proactive and improve their supply chain management, but stops short of encouraging businesses to map their supply chains. If you want to read more on this, you might take a look at two articles by Boglarka: ‘ESG post Covid-19’ and ‘Human rights governance and modern slavery in the UK’.

Recently, the Swiss held a referendum on whether to hold companies accountable for human rights issues and environmental standards, in Switzerland as well as their entire global supply chain. While 50.7% of the public vote turned out in favour of the initiative, the Ständemehr (state vote) rejected it and, as a result, it will not come into effect. 

In the EU, the ‘Directive (EU) 2018/1673 of the European Parliament and of the Council of 23 October 2018 on combating money laundering by criminal law’ is an important regulation that explicitly mentions human trafficking, migrant smuggling and sexual exploitation as predicate offences and requires organisations to screen financial transactions and clients for such activities.

What needs to be done: Transparency, transparency, transparency

At CountryRisk.io, we focus our work at the country and government level and support our users in analysing and understanding country risks for various applications, such as sovereign default, ESG country or AML country risk. One of the most important aspects of what we do is to remove the pain point of sourcing, cleaning and aggregating data from various sources. 

When it comes to modern slavery, we recommend as a resource the Global Slavery Index and publications by the Australia-based Minderoo Foundation. The Global Fund to End Modern Slavery is also excellent.  

As we outlined above, human trafficking is closely related to modern slavery. To learn more about the prevalence of human trafficking in a given country and what its government is doing to address it—including scores for each country’s efforts to eliminate human trafficking—we recommend the Trafficking in Persons Report by the US Department of State. 

The Sustainable Development Goals (SDGs) also cover these topics. Target 8.7 of the SDGs focuses on the elimination of all forms of child labor by 2025 and the eradication of all modern slavery and human trafficking by 2030. 

Another great resource is the United Nations Office on Drugs and Crime, which offers a wealth of statistics on sexual crime and human trafficking.

Finally, the International Labour Organization has a dedicated webpage on the topic. 

We’ve pulled together data from all of these sources into a single spreadsheet, which we hope you will find useful in your work as ESG investment analyst or AML specialist. As always, we appreciate your feedback or suggestions for other aspects of modern slavery and human trafficking that you’d like to see us cover—you can reach us at contact@countryrisk.io.

Boglarka is an award-winning chartered governance professional and recognised advocate for ESG. She has a Masters degree in Corporate Governance and Environmental Engineering, and is an associated member of the The Chartered Governance Institute UK & Ireland. Boglarka is also a fellow of the Institute of Corporate Responsibility & Sustainability (ICRS) and works as a governance professional for a listed company in London and Cambridge. Her articles have been published by The Chartered Governance Institute UK & Ireland, Indigo Governance and Bizeducate Magazine in CIS countries. Boglarka is currently applying for a PhD programme, where she will research an ESG-related topic. You find here LinkedIn profile here.

As increasing numbers of consumers and investors demand action around Environmental, Social and Governance (ESG), money laundering and modern slavery, these issues have become key concerns for policymakers.

On 20 August, 2021, the Standing Committee of China’s National People’s Congress delayed a measure to incorporate elements of the PRC anti-foreign sanctions law into Hong Kong law. The measure, which is still expected to advance in the near future, comes roughly one year after the adoption of the National Security Law in 2020 and amidsts growing tensions between China, the United States, and other nations on a host of issues.  

David and Nick shared their on-the-ground views for how decision makers outside the region can assess risks impacting international businesses in Hong Kong and China.

Webinar: Hong Kong: Perspectives on International Business Risk

Exceptional times will come to an end, they always do. This is why they are exceptional. Confidence is rising in Europe stemming from our ability to overcome the pandemic. Inflation is showing renewed signs of life, reminding us that ultra-accommodative monetary policy may have reached its limits in the euro area. 

As more normal times ensue, the policy focus will pivot back to unresolved structural issues, with public debt and deficits dominating much of the discussion. Which type of fiscal rules does the euro area need? What is the role of fiscal policy in meeting the EU goal of carbon neutrality by 2050? Is the EU transiting to a fiscal union? And if so, would this be desirable? How sustainable will government debt be once ECB-support is withdrawn?

Questions such as these will be discussed at the CountryRisk.io webinar on Sept. 14, 2021. Join the debate with our panellists Cinzia Alcidi, Director of Research/Head of the Economic Policy Unit at the Centre for European Policy Studies (CEPS), and Rolf Strauch, Chief Economist of the European Stability Mechanism (ESM). Our Chief Economist, Moritz Kraemer, will moderate the panel.

Quick link to webinar materials and video

Webinar: The fiscal future of the euro area

Webinar: Hong Kong: Perspectives on International Business Risk

Jenny Asuncion
Sep 21, 2021

ESG & AML: MODERN SLAVERY

Webinar: The fiscal future of the euro area

Written by:
Jenny Asuncion

Webinar: Hong Kong: Perspectives on International Business Risk

Jenny AsuncionSep 21, 2021

ESG & AML: MODERN SLAVERY

Webinar: The fiscal future of the euro area

Written by: Jenny Asuncion

Jenny Asuncion
Sep 21, 2021

Written by:
Jenny Asuncion