Some 16 million people worldwide remain victims of modern slavery – the same number as during the 18th century transatlantic slave trade. They help produce the food we eat, the clothes we wear and the products we use. This alone paints a dire picture of human rights abuses – before we even consider other abuses, such a child labour, exploitative and unsafe work conditions and poverty pay, to name just a few.

Through the work of the Sustainable Development Goals, governments aim to tackle human rights issues, and with just a decade to realise them it is more pressing than ever for companies to take urgent action. The asset management industry has a vital role to play. In part II of our Point of No Returns report series we examine how asset managers are tackling human and labour rights abuses.

US asset managers lag far behind those in Europe and Asia Pacific. Just 15 per cent of US asset managers assessed have policy commitments across all portfolios under management, compared to 78 per cent of European managers. This represents a broader trend as outlined in part I of this series, with 80 per cent of managers ranked D and E.

The majority of asset managers also lack commitments to human rights in their voting policies. While 53 per cent say they have a voting policy that covers human and labour rights, few make specific commitments.

Less than half of all the asset managers surveyed have identified human rights risks. Where they do identify them, they tend of focus on material risks, particularly reputational, for example exposed labour rights abuses in a companies’ supply chain, and operational, for example staff unrest.

Even fewer asset managers, however, are able to identify their impact on human rights issues. It is clear that most managers lack sufficient due diligence to identify salient human rights impacts – that is to say the human impact of a company’s operations. In fact just 9% of managers identify the negative impacts that may result from their investments, for example child labour in agricultural supply chains, or labour issues in the garment sector.

Much like the negative impacts, few asset managers (16 per cent) were able to identify the positive social impacts of their investments. These, however, were largely focused on specific ESG funds or mandates, such as positive impact fund options.

Some 61 per cent of asset managers have a weak or non-existent approach to engagement on human rights, while an additional 20 per cent only take a reactive approach. Reactive engagement takes place after a human rights abuse has occurred, focusing mostly on the material – i.e the financial risk – to business.

While this is important, it is often too little too late when it comes to mitigate the abuse – and often fails to account for the severe salient issues. We define a good or strong approach to human rights as both reactive and proactive engagement with companies, which focuses both on material and salient human rights issues. Where asset managers are engaging with the companies they mostly focus on supply chain due diligence, followed by gender, workforce conditions and wages.

While there are pockets of leadership across the asset management sector, the majority of managers appear to be addressing human rights in an ad-hoc and reactive fashion, and only where they consider it financially material. This falls short of the Sustainable Development Goals and huge opportunities are available to asset managers to build a sustainable and resilient economy for the future.