Yes, Slavery Still Exists – Here’s How Socially Responsible Investors – and Their Financial Advisors – Confront It
It’s time for new year’s investing solutions!
After past holiday shopping seasons, companies posted profits from the gift-buying rush, financial advisors reviewed corporate earnings purely from a financial standpoint and investors followed suit, oblivious to contradictions between their investments and personal values.
This scenario changed rapidly in recent years as investors learned ugly truths, including that over 40 million people are in slavery today, with another 150 million victims of child labor, half of whom toil under hazardous conditions.
In response, investors increasingly demand their financial advisors and wealth management firms strategize beyond mere financial returns.
They want the advisors and firms they work with to select investments attuned to moral and social issues – And this includes offensive labor practices.
The following three keys provide a solid understanding for financial advisors joining in this fight.
Countries and goods linked to child labor and slavery
Let’s start with this: An investment into a particular country or a commodity as innocuous as coffee may open a back door to deploy your client’s money into slavery.
The U.S. Department of Labor reports exported goods from seventy-seven countries are made with child or forced labor – the worst offenders being China, Burma, India and Brazil.
China alone has imprisoned over a million Uyghur and other Turkish minorities, forcing them to provide goods for the supply chains of international corporations, including American companies. U.S. authorities have labeled these actions as genocide.
In addition, almost two hundred products are harvested, manufactured or mined using child labor and slavery – half are agricultural products, including coffee, cotton, cocoa, fish, shrimp and tobacco. Child and forced labor are also employed to manufacture goods such as finished garments, electronics and bricks and mine minerals such as cobalt (used in lithium-ion batteries), diamonds and gold.
Do your due diligence before investing in that Chinese cobalt miner!
Companies accused of immoral labor practices
Many of the household names we trust stand accused of employing offensive labor practices such as slavery, human trafficking or child labor. Often the unethical practices take place outside of the company but within the supply chain providing the company’s products.
Nestle, Nike, Starbucks, H&M and Walmart all have been accused by various non-governmental organizations (NGOs), global advocacy groups and certain media commentators of benefiting from problematic labor practices within their supply chains.
In addition, NGOs, advocacy groups and pundits have also asserted that companies reportedly complicit in China’s genocide against Uighurs and other Turkish minorities encompass Abercrombie & Fitch, Amazon, Apple, BMW, Calvin Klein, Cisco, Dell, Founder Group, Gap, General Motors, Google, H&M, Microsoft, Nokia, The North Face, Polo Ralph Lauren, Tommy Hilfiger, Victoria’s Secret and Volkswagen.
While the facts around these assertions remain hotly debated, investors frequently ask the advisor’s views on such allegations – views the advisor can only give after researching and asking tough questions.
Countries with strict laws against unethical labor practices
On the positive side, search for countries with strict laws designed to prevent slavery, child labor and human trafficking and you will find many companies operating under these laws.
For instance, the U.S. and the European Union have laws requiring disclosure of goods produced by forced labor and human trafficking, as well as the countries that produce them, such as the Trafficking Victims Protection Reauthorizations Act of 2018.
California also has strong laws against manufacturing with unfair or illegal labor practices, including human trafficking.
Similarly, goods produced in the European Union, including Italy and France, can be said to be essentially free of unethical labor practices.
How much is a clear conscience worth?
As the old saw says, “If something is cheap, there’s a reason why.” Cheap labor often comes at the price of trafficking, slavery or child exploitation.
Once aware, socially conscious investors can’t forget about human rights violations, and will examine the earnings from the recent holiday shopping season in the light of responsible investing.
Financial advisors should consider educating themselves on socially responsible investing to prepare for clients who not only ask “How much did I make?” but “Did my returns hurt anyone?”
Dennis R. Hammond is Head of Responsible Investment at Veriti Management, a provider of direct indexing technology that offers the ability to personalize investment strategies to align with investor values and potentially capture tax benefits.
The opinions expressed by Mr. Hammond are his own, and are not necessarily indicative of the editorial perspectives of Wealth Solutions Report’s staff.