Modern slavery remains a hidden but systemic risk for pension portfolios, according to a new report from IFM Investors.
The global asset manager’s latest paper, ‘Addressing Modern Slavery in Investment Portfolios’, warns that despite growing scrutiny, many institutional investors still struggle to identify and address the issue.
The report draws on IFM’s experience managing over A$230bn (£112bn) for institutional clients, including UK master trust Nest, and sets out why modern slavery risks are so often missed.
Unlike environmental risks, which can be assessed with technical metrics, modern slavery frequently lies buried in opaque supply chains, informal labour networks and layers of subcontracting. Disclosure rules are expanding, but enforcement is limited and reporting is often generic or incomplete.
IFM argues that modern slavery is not just a social concern but a material investment risk – capable of eroding value, fracturing trust, and triggering legal and reputational damage. It calls for coordinated action across the investment ecosystem, including asset owners, fund managers, companies, regulators, civil society and affected communities.
The report recommends that investors embed human rights into every stage of the investment process, move beyond standard company disclosures, and make better use of stewardship tools such as voting and engagement. It also highlights IFM’s internal supply chain risk model, designed to map vulnerabilities across sub-industries and supply chain tiers.
Pension funds are already responding. In Australia, superannuation schemes are required by law to assess modern slavery risks and are demanding stronger action from fund managers.
In the UK, meanwhile, Nest has made human rights – including freedom from modern slavery – a strategic investment priority.
“Any meaningful progress will require collaboration between asset owners, asset managers, companies, regulators, civil society, governments, and potentially affected workers and communities.”
Maria Nazarova-Doyle, IFM Investors
Tom Sanders, senior ESG analyst at Nest, said: “Respect for human rights and eradicating modern slavery in business are strongly associated with value chain resilience and a stable business operating environment. As investors, we recognise the operational, financial, legal and reputational risks companies face when they fail to manage modern slavery and human rights risks.”
Antonia Parkes, senior director in ESG and stewardship at AustralianSuper, added: “Modern slavery practices are a systemic risk. One company cannot fix that risk on its own… It’s important we work with other investors to look at opportunities to address modern slavery risks.”
Maria Nazarova-Doyle, global head of sustainable investment at IFM Investors, concluded: “Any meaningful progress will require collaboration between asset owners, asset managers, companies, regulators, civil society, governments, and potentially affected workers and communities.”
