In 2025, modern slavery has come to be viewed not only as a moral concern but also as a critical financial risk entrenched within global investment portfolios. Asset manager IFM Investors has pointed out that slavery practices often signal governance failure—capable of triggering legal liabilities, disrupting supply chains, and causing reputational damage. Now that over 70 percent of the companies in the large market face modern slavery regulations, investors are increasingly urged to unearth aspects of the use of hidden exploitative means before they draw value and destroy emerging principles.
Supply chains are most vulnerable especially those in infrastructure, consumer goods, and the renewable sector. Informal labor and complex fragmented networks are difficult to scrutinize. It has been estimated that one in five of the victims are caught, which shows how much unchecked risk there is and how investors need to dig deeper into operations.
Supply chain complexity and evolving regulatory demands
Sectoral hotspots and exposure pathways
The presence of modern slavery is more high in the industries with long chains of global subcontracting. High-risk jurisdictions Renewable energy projects, which are well-represented in infrastructure portfolios, typically mean different levels of subcontractors, which is not accepted by the infrastructure owners. This makes it opaque, and it is difficult to introduce fair labor standards across the supply chain.
The regulatory changes are more pressing. The EU is planning to ban forced-labor imports as of 2027, and other states are imposing civil penalties on failure to comply. These actions compel asset managers to consider slavery risk assessment as part of the due diligence, stewardship, and decision-making when it comes to making investments.
Governance mandates and investor obligations
As regulation tightens, investors face actionable mandates. Australia’s Modern Slavery Act and emerging EU standards require asset managers to conduct supply chain mapping and stewardship interventions. Investors that ignore these norms risk financial exposure, regulatory scrutiny, and erosion of stakeholder trust.
Identifying and managing modern slavery risks in portfolios
Advanced risk assessment and third-party benchmarks
IFM Investors deploys proprietary supply chain risk models, leveraging data from sources such as KnowTheChain and the World Benchmarking Alliance. These tools help pinpoint and assess exposure at the sub-sector level. The use of multi-data scoring models allows governance teams to prioritize engagements and allocate resources where slavery risk is highest.
However, many challenges remain. Disclosure quality varies across jurisdictions, and reliance on generic scoring systems often masks real-world vulnerabilities—making it difficult to convert assessments into actionable stewardship.
The power of collective investor engagement
Collaborative platforms like Investors Against Slavery and Trafficking Asia-Pacific amplify investor influence over portfolio companies. Collective engagement increases leverage in demanding supply chain reforms, transparency, and independent verification. Investor-led dialogues have begun shifting corporate behavior, particularly in industries with prior high-risk ratings.
The business imperative for ethical vigilance
Financial stability and trust preservation
From a fiduciary standpoint, modern slavery is not just a moral issue—it represents a tangible risk to returns. Cases of forced labor trigger regulatory sanctions, media scandals, and consumer boycotts. A public confirmation from IFM’s Chair Cath Bowtell underscores that
“Modern slavery erodes value, damages trust, and exposes portfolios to mounting legal liabilities.”
Pension funds, responsible for assets tied to social welfare, increasingly mandate human rights compliance. This reflects a broader shift: ethics are increasingly embedded within governance—not bolted on as external obligations.
ESG benchmarking and disclosure expectations
Leading ESG rating providers such as ISS ESG now include modern slavery indicators in their metrics, evaluating thousands of global issuers. Scores carry real investment consequences; companies ranked poorly face divestment or increased stewardship demands. Asset managers respond by tightening selection criteria and prioritizing engagements with high-risk firms.
Collaborative frameworks and technological innovation
Multi-stakeholder coordination for systemic change
No investor can address modern slavery alone. One focus of IFM Investors and other leaders has been on the collaboration between asset owners, companies, regulators, and the civil society. The simultaneous audits, information sharing and shared approaches to engagement generate pressure in markets and supply chains which is coherent.
The normalization of disclosure practices, uniform auditing processes, and accountability to peers through coalition efforts decrease the risk that will happen through ease of migration of risks across jurisdictions where no regulation is in place.
Technological advances enhancing invisibility detection
Tracking down the hidden risk is being assisted by innovative tools like AI analysis, blockchain-based traceability and satellite imagery. To exemplify, immutable verification of employment contracts can be provided with the help of blockchain-based labor tracking. Such technologies, combined with analytics concerning subcontractor networks, enhance the transparency in no/sub-contracted labour processes.
Regulatory approvals are slow to reach the level of compliance and adoption is low despite the huge potential. There must be continuous intersectoral cooperation and policy foundations to scale effective instruments.
Persistent challenges and future trajectories
Data fragmentation and enforcement disparity
Investors still face inconsistent disclosure practices; many companies issue generic modern slavery statements without specific remediation plans. Regulatory regimes remain uneven across jurisdictions, with some nations lacking enforcement capability entirely.
Effective audit mechanisms and cross-border regulatory cooperation will be essential to closing loopholes, especially as supply chains reach into regions with weak oversight.
Integrating progress metrics into stewardship strategies
Tracking progress over time requires consistent KPIs—such as supply chain audit coverage, grievance resolution, and worker representation. Investors must build capacity to interpret this data effectively, and follow through with escalation or divestment as appropriate.
As IFM’s Head of Sustainable Investment has stressed, establishing collaboration and transparency is core to effective risk management. It demands both systemic structures and measurable accountability.
Navigating ethical opportunity while preserving financial resilience
The investment portfolio on modern slavery is a merge of altruism stewardship and risk abatement. The 2025 landscape is one of increased sophistication on the part of investors, as well as, increased demand to be vigilant at the systemic level. There is growing innovation in the field of data, enforcement, and engagement, but the lack of consistent transparency and regulatory gaps still prevails.
The next question is whether those with investments and capital can convert vigilance into action they can prove, beyond avoidance of risks, to engage in the active mitigation of root causes. The tension in balancing the fiduciary duty and ethical responsibility rests on the answer to the question as to whether capital markets should take the human rights norms sufficiently deep within the markets so that it will influence the corporate practices and accept the values upheld by the investors at an appropriate scale. Such a more profound integration will characterize the new era of sustainable and resilient stewardship of investments in years to come.