Climate-related modern slavery risks

Our key takeaway: Climate change poses physical and transition risks to companies and investors. These two categories of climate risk also presents risks to people. This recent report by Walk Free and AllianceBernstein shines the light on how modern slavery will increase - amongst other human rights impacts. In short, where workers are in situations of vulnerability without decent work, they may be forced to accept low-paid and low-skilled jobs, which exposes them to labour exploitation and poor working conditions. Sudden and slow-onset events will push people into migration, looking for jobs in vulnerable positions. The phasing out of fossil fuel industries can leave some workers and communities stranded. And as we move toward renewable energy generation and supply, we also face forced labour in these supply chains. In addition to these situations, climate change acts as a stress multiplier: it compounds existing vulnerabilities, such as poverty and inequality, and forces workers to migrate elsewhere - along dangerous migration routes - to find work. The report finds that - for all the talk of ESG - investors are failing to consider the interconnections between the ‘E’ and the ’S’ and how environmental impacts compound risks to people. It issues a call to action: “Investors play a pivotal role in managing the intersection of these environmental and social risks. Knowing that one risk reinforces the other, investors are uniquely positioned to provide oversight and support businesses to be accountable.”‍

Walk Free and AllianceBernstein published Bridging ESG silos: The intersection of climate change and modern slavery (October 2023):

• Climate-related risks can manifest as modern slavery risks: The report explains the myriad of ways in which climate-related risks translate into human rights risks. These include the following physical and transition risks: (1) “Sudden and slow-onset events may damage or destroy homes and livelihoods.” People are forced to migrate elsewhere to look for work, which increases their vulnerability to human trafficking and labour exploitation; (2) “Phasing out fossil fuel industries can leave workers and communities stranded”, exposing people to labour migration and exploitation, and human trafficking risks; and (3) “Phasing in renewable energy generation and supply creates new extraction and manufacturing activities that currently face a high prevalence of forced labour and child labour.” More broadly, climate change directly impacts a whole host of human rights, such as the rights to life, housing, food and water. It is also a “stress multiplier” because it “aggravates existing vulnerabilities, particularly for women, children, the rural poor and fossil fuel industry workers”, which increases their need to “adopt riskier coping strategies, such as unsafe, disorderly or irregular migration.” This in turn “makes exploitation through human trafficking and modern slavery more likely.”
  

• Investors’ role in the just transition: The report states that investors, while they are increasingly looking at ‘ESG’ factors when looking at their investment decisions, fail to consider the interconnections between the ‘E’ and the ’S’ and how environmental impacts compound risks to people: “[T]he adverse effects of climate change on human rights, and the role investors can play in supporting a just transition from an economy driven by fossil fuels to one built on renewable energy, have not been fully explored.” The report issues a call to action. Investors should consider the human rights impacts of climate change on workers and their communities, which can help them to gain visibility over “materials risks for investments over multiple time horizons.” There are clear business incentives to do this: “Gaining a better understanding of these climate-related human rights risks can empower investors to chart a more sustainable path to long-term value creation and align themselves with the UN Guiding Principles on Business and Human Rights.”
  

• What can investors do?: More broadly, the report recommends that investors “take a systematic approach to identifying where physical and transition risks might lead to material social risks such as modern slavery, and then assess the relationship of such social risks to their investment activities.” The report provides several tools for investors to gain this visibility over their value chain. One tool is the Climate Reporting Supplement, which outlines a set of recommendations for companies seeking to disclose the policies and processes they have in place to identify, assess and manage climate-related modern slavery risks. Another tool is the Investor Stewardship Guidance, which outlines a set of recommendations to help investors incorporate climate-related modern slavery risks into their corporate engagements with current and potential investee companies.