Fund managers need better ways to assess corporate exposure to supply chain worker exploitation but the embryonic NZ modern slavery legislative proposal is deeply flawed, according to Nikko Asset Management NZ chief, George Carter.
“The government has shoe-horned the somewhat emotive term ‘and worker exploitation’ into the bill, and whilst at first glance this may seem to be aligned with slavery and trafficking, it’s actually simply a reference to upholding NZ employment conditions,” Carter said. “Clearly it’s important that NZ businesses abide by the relevant legislation, however, it’s pretty outrageous to conflate the issues of modern slavery and trafficking with someone not having a written contract or having their holiday pay miscalculated.”
He said requiring NZ businesses to vet local suppliers compliance with standard employment laws would distract from carrying out a thorough investigation of all supply-chain partners (including offshore firms) for potential worker rights breaches.
“As a fund manager that looks after around NZ$9billion in assets for investors, we would be horrified if we were to have inadvertently deployed capital into businesses that are involved in exploitation and slavery,” Carter said.
“We want to be able to thoughtfully and intelligently invest our clients’ money in businesses that have done their due diligence and know that their supply chains are ethical, clean, and do not incorporate forced labour, human trafficking, and debt bondage.”
Under the Ministry of Business, Innovation and Employment (MBIE) consultation published in April, the mooted modern slavery law would “create new responsibilities across the operations and supply chains of all types of organisations in New Zealand, with more responsibilities for larger organisations”.
While the proposal is unlikely to have much direct impact on local fund management operations, Carter said better disclosure of supply-chain employment practices from NZ businesses would help investors combat modern slavery.
“It’s a lot easier for us, for our clients, and for consumers more generally if there’s a standardised approach for companies to disclose risk so everyone understands how products are being manufactured, supplied and traded through global supply chains,” he said.
For example, businesses could establish an ‘anti-modern slavery’ officer – similar to the anti-money laundering role adopted in many financial services firms – to ensure compliance across suppliers.
“These moves will take some time, especially for those with complex and multiple supply chains, but it’s an important step for businesses, consumers and workers around the world,” Carter said. “Surely we believe that slavery is as much an issue to humanity as money-laundering?”
Nikko NZ launched the Freedom Fund last year as a zero interest rate cash-parking alternative with all returns donated to the Tear Fund, a global Christian charity devoted to fighting human trafficking and modern slavery.
As at the end of March the Freedom Fund reported about $415,000 under management. Due to bond market ructions, the unit price dipped slightly below the par $1 value recently Carter said rising rates would see the fund deliver a stronger income stream over time; delivering steady donations to the Tear Fund (after restoring the unit price to $1).
Submissions on the MBIE modern slavery consultation close on June 7.