A number of large investor groups have called on the 23 FTSE 350 companies that do not adhere to the Modern Slavery Act to begin to comply.
The move comes ahead of this year's AGM season and is being spearheaded by Rathbone Investment Management. Other signatories to the call include Aberdeen Standard Investments, Aviva Investors and Legal & General Investment Management.
Rathbones said its stewardship director Matt Crossman has sent letters to the 23 companies, urging them to meet the reporting requirements of Section 54 of the UK Modern Slavery Act 2015.
Non-compliance poses a serious risk to long-term investors and leads us to question the suitability of investing in such companies"
Crossman said his firm had "played a leading role in the development of the landmark 2015 Modern Slavery Act". The act "requires all UK companies over a certain size to report in detail their approach to finding and eliminating modern slavery within their supply chains".
"As long-term investors, we believe it is fundamentally important that companies comply with all provisions of the Modern Slavery Act 2015 to demonstrate a strong commitment to fighting modern slavery," Crossman added.
"Non-compliance poses a serious risk to long-term investors and leads us to question the suitability of investing in such companies."
The firm said the targeted letters make clear the nature of non-compliance, the steps required to remedy the situation, and an explanation that members of the engagement coalition will consider withholding support for the approval of the annual report and accounts at the company's next AGM should changes not occur.
Rathbones noted it had engaged with three FTSE 100 firms in 2019 - Ashtead, Legal & General and Intertek - that it believed were non-compliant using a similar approach.
Archie Pearson, Rathbones' ESG and voting analyst, said: "We initiated the activity through the United Nations Principals for Responsible Investment Collaboration Platform and the level of support shows how seriously investors are taking this issue.
"We will carry out a further round of engagement with non-compliant companies, including the possibility of questioning management during AGMs."
Modern slavery is a widespread, criminal activity which has a significant economic impact globally. It is estimated to be a $150 billion trade which involves approximately 40.3 million people in some form of slavery.
Further, the eradication of forced labour, modern slavery and human trafficking is a component of the United Nation's Sustainable Development Goals.
This article was first published by Investment Week
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