Investor challenge
CHALLENGE
Human trafficking is an emerging issue with limited investment solutions for concerned shareholders.
SOLUTION
We review research on evidence of human trafficking in company supply chains.
RESULTS
Our ready-to-go screen is used by 743 accounts with $3.6 billion in assets under management as of May 5, 2021.
Challenge
Modern-day slavery is an unfortunate reality that many in the investment community and wider public are only beginning to learn about. Even in socially responsible investment products, human trafficking is not as widely considered and incorporated as other social justice concerns. Therefore, investors seeking to address this issue typically find themselves with few, if any, investment options.
The United Nations Office on Drugs and Crime defines human trafficking as recruitment by threat, use of force, or other forms of coercion and deception for the purpose of exploitation. Human trafficking affects every country of the world either as the origin, transit, or destination point. Although it can take many forms, forced labor is one of the most common—and the one most relevant to investors’ portfolio holdings.
Although no publicly traded companies intentionally support human trafficking, they can become complicit by inadequately overseeing their supply chains. To combat this, companies must remain vigilant with regard to their suppliers’ hiring policies and practices to avoid and discourage these conditions in the workplace. However, continually assessing supply chains for thousands of global companies is no small task.
Parametric solution
Parametric turned to one of our data suppliers with existing labor and human rights controversies research. This supplier helped us create a unique data set that identifies recent instances of child and forced labor in direct operations as well as in corporate supply chains.
The research is performed by a 200-member multilingual team that monitors more than 14,000 companies daily, looking for corporate controversies and evaluating the severity and pervasiveness of each case, which is then flagged appropriately. Investors can apply these findings to any benchmark in the coverage universe, and the information is continually updated.
Modern-day slavery is an unfortunate reality that many in the investment community and wider public are only beginning to learn about. Even in socially responsible investment products, human trafficking is not as widely considered and incorporated as other social justice concerns. Therefore, investors seeking to address this issue typically find themselves with few, if any, investment options.
The United Nations Office on Drugs and Crime defines human trafficking as recruitment by threat, use of force, or other forms of coercion and deception for the purpose of exploitation. Human trafficking affects every country of the world either as the origin, transit, or destination point. Although it can take many forms, forced labor is one of the most common—and the one most relevant to investors’ portfolio holdings.
Although no publicly traded companies intentionally support human trafficking, they can become complicit by inadequately overseeing their supply chains. To combat this, companies must remain vigilant with regard to their suppliers’ hiring policies and practices to avoid and discourage these conditions in the workplace. However, continually assessing supply chains for thousands of global companies is no small task.
Parametric solution
Parametric turned to one of our data suppliers with existing labor and human rights controversies research. This supplier helped us create a unique data set that identifies recent instances of child and forced labor in direct operations as well as in corporate supply chains.
The research is performed by a 200-member multilingual team that monitors more than 14,000 companies daily, looking for corporate controversies and evaluating the severity and pervasiveness of each case, which is then flagged appropriately. Investors can apply these findings to any benchmark in the coverage universe, and the information is continually updated.
Source: MSCI 2021
Results
Parametric’s human-trafficking screen is a ready-to-go solution that ensures only securities with acceptable labor practices are owned. The screen is available to all clients, which allows investors to easily use it as a customization option for their portfolio. Since inception, the screen has identified 50 to 100 companies, many of them well-known entities in such industries as food and apparel, with unacceptable forced-labor practices.
This material is provided for illustrative purposes only and should not be construed as investment advice, a recommendation to buy or sell specific securities, or direction to adopt any particular investment strategy. This material is based on the experiences and observations of Parametric. No representation is made that a client will, or is likely to, achieve results similar to those presented. Actual results will differ and may differ substantially from the example provided. Client outcomes will differ depending on each client’s specific circumstances as well as changes in securities or financial markets or general economic conditions. All investments are subject to risks, including the risk of loss.
