By Tashemia Glen, RI Associate Consultant, Hymans Robertson
We also touch on how asset owners can take these risks into account, particularly when engaging with asset managers.
How are asset owners exposed to human rights issues?
Exposure to human rights issues can arise from investing in companies with operations or supply chains linked to conflict-affected or high-risk regions, or from investment companies without robust labour practices.
Human rights issues can arise across sectors, geographies and asset classes. The risks can be direct, such as workplace safety failures, or indirectly, through exposure to suppliers linked to forced labour, child labour, unsafe working conditions or community harm. Where companies fail to identify and manage human rights risks, the consequences can become financial. They may include litigation, regulatory penalties, operational disruption, remediation costs, loss of contracts, higher financing costs, weaker consumer trust and, in some cases, a lower company valuation.
Supply chains are often long, fragmented and data-poor, meaning investors may have exposure to labour rights risks that are not immediately apparent. MSCI research published in December 2025 found that only 3% of companies in the MSCI ACWI Index reported on modern slavery risks, while nearly 40% may have exposure to forced or child labour somewhere in their value chains.
Regulatory change driving accountability
This is becoming more relevant as regulation and market practice move towards greater supply chain transparency and holding companies accountable. The EU Corporate Sustainability Due Diligence Directive, for example, is designed to require in-scope companies to identify, prevent, mitigate and remediate adverse human rights and environmental impacts in their operations and chains of activities. The directive introduced financial penalties for non-compliance, highlighting the potential financial and reputational risks for investors.
For asset owners, this underlines the importance of asking managers how they identify, prioritise and act on social risks. A lack of perfect data should not mean inaction. It should prompt better questions about due diligence, escalation, engagement outcomes and how managers use the information that is available. The DWP's 2024 Taskforce on Social Factors guidance reinforces this by highlighting labour rights, health and safety, supply chain issues and modern slavery as social factors that may be financially material for pension schemes.
Case study: Boohoo
In July 2020, allegations were published about poor working conditions and low pay in parts of Boohoo's Leicester supply chain. Boohoo commissioned an independent review, which found that allegations of poor working practices were substantially true and that the monitoring of the supply chain had been inadequate. The allegations were followed by a 42% fall in Boohoo's share price.
The longer-term significance for investors extends beyond the initial market reaction, with damaged trust in the company's governance and oversight processes, contributing to ongoing reputational challenges and heightened stakeholder scrutiny. In 2024, a group of institutional investors brought legal proceedings alleging that Boohoo had failed to adequately disclose information relating to working conditions within its Leicester supply chain. By July 2026, the reported value of claims had risen to £245m. Boohoo strongly contests the allegations and intends to defend the claim.
Case study: Child labour in the cocoa supply chain
Child labour in West African cocoa supply chains is not a new issue, but recent litigation demonstrates that it remains financially relevant. In 2025 and 2026, a series of legal actions were brought against major confectionery and cocoa companies, alleging they had failed to adequately address or disclose child labour risks within their supply chains.
While the allegations are disputed, the cases highlight how human rights risks can translate into litigation costs, reputational damage, regulatory scrutiny and increased due diligence obligations.
What does this mean for asset owners?
These examples demonstrate how human rights issues are translated into financial risks in different ways. In some cases, impacts may be linked to a specific event, while in others, they arise through longstanding issues that take years to come to light. The financial consequences may not always be immediate or easy to quantify, but can emerge over time.
For asset owners, the challenge is how to deal with these complex and underreported issues and consider what to do, given limited time and resources. Most asset owners rely on their managers to identify, monitor and engage on human rights risks across portfolios – so it’s incumbent on asset owners to hold their managers to account.
Practically, this means asking challenging questions of managers. How do they identify and prioritise human rights risks, engage with companies on issues such as labour rights, modern slavery and supply chain oversight? How do they demonstrate that these risks are being considered as part of investment decision-making and stewardship?
We are currently assessing how asset managers identify, manage and engage on modern slavery risks across listed equities and listed credit, with the findings designed to help asset owners ask better questions and strengthen oversight. Look out for the upcoming paper, where we’ll share our key findings and practical considerations for engaging with managers.
Further information
Measuring exposure to human rights risks remains challenging, but a growing range of frameworks and benchmarks are helping to improve transparency. Resources such as the UN Guiding Principles on Business and Human Rights, the Corporate Human Rights Benchmark and the Taskforce on Inequality and Social-related Financial Disclosures (TISFD) provide valuable insights into how companies identify, manage and disclose human rights risks. For asset owners looking to deepen their understanding, these frameworks can support more informed conversations with managers about their approach to managing social risks and their stewardship activities.
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