• Organisation:  AllianceBernstein
  • Signatory type:  Investment manager
  • HQ country:  United States of America

Give a brief overview of your initiative, its objectives, and why you decided to undertake it.

Modern slavery, including forced labour, debt bondage, forced marriage, slavery and slavery-like practices, human trafficking, and child labour is a pervasive social issue. The International Labour Organization and the Walk Free Foundation, in partnership with the International Organization for Migration, estimated in 2017 that 40.3 million people were victims of modern slavery and that forced labour generates US$150 billion in profits annually.

Our objective is to reduce risks to people associated with companies’ operations and supply chains. As part of that, we evaluate modern slavery risks for holdings in AB’s portfolios. We also engage corporates to improve their behaviour, reduce risks to people, and position that reduction as a potential source of competitive advantage. In addition, we determine how risks to people translate into investment risks, informing our research process and portfolio construction. Next, we collaborate and share AB’s proprietary research with clients and other stakeholders to support them in achieving their modern slavery reduction goals.

Active investors are in a unique position to address the systemic problem of modern slavery. With deep industry knowledge, AB and other active managers can zero in on industries, regions, and companies at high risk of modern slavery. In many cases, investors also have the ear of company management, using the power of capital as shareholders or bondholders to encourage companies to adopt best practice.

Through active engagement and by communicating expectations, investors can push issuers to make advances on modern slavery - helping victims and generating long-term, sustainable performance. Modern slavery is a complex issue that requires systematic and in-depth research, broad industry collaboration, and collective action across the investment community. As investors, we believe that we have an important role to play in combating modern slavery, by engaging with issuers on these risks in their own operations and supply chains. We have developed proprietary frameworks to assess modern slavery risks facing issuers and to encourage best practice.


Describe how your initiative is aligned to Active Ownership 2.0.

Our Modern Slavery Frameworks align strongly with the PRI’s Active Ownership 2.0 standard. Rather than solely reporting modern slavery risks, we strive to reduce risks and encourage companies we invest in to do the same. Our work drives better outcomes for investments and the world. At AB, direct dialogue with global supply-chain managers enhances our fundamental research. By tapping into company managers’ knowledge and insights, we gain a deeper understanding of firms’ strategies and operations. Ultimately, the information from global supply-chain managers may help AB determine whether to invest in a company. The connection is clear: If a company cannot manage modern slavery risks in its global supply chain effectively, then it cannot manage its global supply chains.

Because we aim to be a catalyst for positive change, we have developed two tools to bolster our research and engagement process: Our 3x3 risk assessment matrix allows our investment teams to produce nine categories across two dimensions: 1) modern slavery risk exposure in the company itself (low/medium/high), and 2) modern slavery risk exposure in the company’s supply chain (low/medium/high). The highest-risk issuers would be assigned a score of six, receiving three points for operational risk and three points for supply-chain risk. Lowest-risk issuers would be assigned a score of two: one point each for operations and supply chain. After assessing issuers, we engage with them on best practice to reduce modern slavery risk. We have identified five criteria that, in our view, capture best practice:

  1. Governance framework: What steps are the Board and senior management taking - through policies and procedures, culture, and values - to align the business with the goal of reducing modern slavery risk?
  2. Risk identification: The criminal and covert nature of modern slavery practices makes this a difficult and delicate task - but a critical one. How well does the firm understand the challenge, and how robust are the techniques and processes it uses to identify the risk?
  3. Action plan to reduce risks: Is the plan a realistic solution to reduce risks to people within the company’s operations and supply chains? Does the company appropriately and effectively train and empower employees and suppliers to identify and reduce risks?
  4. Action plan effectiveness: To what extent have the company’s actions reduced risk, and how are the Board and senior executives measuring progress? What procedures are in place to ensure that follow-up actions are implemented and monitored?
  5. Future improvement: For many companies, the road to reducing modern slavery risk will be long and will pass through unfamiliar territory. The best firms will be able to evaluate their progress at each step of the way and make changes with an eye towards continuously improving their performance against each of the four previous criteria.

We convert our best practice assessment into numerical ratings. In any of the five criteria, an issuer could receive between one and three points. A score of one represents “beginners” that are early in their development of a governance framework and identifying modern slavery risk areas. Two represents “on-the-way” issuers that have governance frameworks and are identifying high-risk areas and implementing programmes to manage modern slavery risks, but are not yet finding modern slavery or remediating victims. A score of three represents “advanced leaders” in terms of their governance frameworks, identification of risks, and effectiveness of plans to minimise modern slavery risks. Often, these issuers have already identified modern slavery indicators and have remediation programmes in place. Issuers earlier in their efforts would receive a score of five, while the most advanced issuers would receive a score of 15.

Collaborative engagement is a natural extension of our active investment process. We regularly engage issuers and stakeholders directly and collaborate with leading corporations, expert organisations, academics and social auditors when evaluating companies. Modern slavery is often a challenging topic to engage on. The issue is not always well known, and it can be difficult to navigate sensitivities. Some issuers may be concerned with the potential of reputational risks and controversy associated with modern slavery. We find that issuers are most receptive to the conversation when we combine multiple perspectives: addressing modern slavery is the right thing to do, leads to stronger supply-chain management, and can materially reduce financial risks. We strive to take a collaborative approach with issuers, setting expectations but also sharing best practice and constructive feedback.

We applied these frameworks in our firmwide 2021 ESG Engagement Campaign, which focused in part on modern slavery. Experts on our centralised Responsibility Team, including our Director of Social Research and Engagement, partnered with equity and fixed income analysts on our investment teams to engage with issuers and push for positive change using our power as shareholders and bondholders. Of the 44 issuers we engaged with on modern slavery as part of the campaign, 82% were receptive or very receptive to the conversation, demonstrating that our well-researched and collaborative approach can be effective in driving positive change.

AB has been recognised for its ongoing work to combat modern slavery and human trafficking in our investment process, receiving the Combatting Modern Slavery Award at the 2021 Themis AFC Awards. Themis is a think tank that aims to help clients and members identify and manage their specific financial crime risk through a combination of insight, intelligence, and innovation. In March 2022, AB co-developed and launched a training programme, “Anti-Slavery Digital Learning for the Financial Services Industry” in partnership with Themis. Our aim was to help educate the financial services industry on these risks and what they can do to help address them.


The results achieved in the initiative to date, including: evaluation of its success against the objectives; any adjustments to plans going forward; and any insights learned from this project that can be applied more broadly?

Since we first started tracking our modern slavery engagements, we have conducted 123 engagements with 88 issuer companies. We have found that issuers facing the highest risks are typically advancing further while issuers with lower risk are earlier in their journey but are often willing to learn more about the issue. In general, we found that consumer-facing companies have better modern slavery disclosures. Also, issuers that report under regional modern slavery acts tended to be further along in their understanding of the risks.

A recent engagement with an Australian telecoms company resulted in senior management making the issue a priority on their materiality map. Engagements with other issuers have resulted in them conducting staff training and developing supply-chain risk assessment tools. Through our engagements, and by employing our risk assessment and best practice frameworks, we are seeing companies and investors moving beyond the “unaware and unaccountable” stage, toward awareness and understanding that modern slavery is a real threat to business sustainability.

This approach - using deep fundamental research and frameworks to support robust engagements to help address real-world issues - will help inform our approach to active ownership practices in other areas. In fact, our firmwide ESG Engagement Campaign in 2022 is focused on engaging with issuers on the most material ESG issues facing them, and this is encouraging them to take concrete steps towards making meaningful progress.