The Autorité des marchés financiers (AMF) provides guidance to help public companies disclose their exposure to forced labour and other forms of modern slavery, in a notice published Tuesday.
The Notice relating to modern slavery disclosure requirements sets out how the Quebec regulator views companies’ disclosure obligations when it comes to various forms of abusive labour practices, such as child labour, forced labour, debt bondage and human trafficking.
According to the notice, the International Labour Organization estimated there were about 25 million victims of forced labour in the world in 2016, and this generated an estimated US$150 billion in profits.
“Modern slavery affects tens of millions of people around the world, and Canadian issuers may be directly or indirectly exposed to this serious problem,” says Louis Morisset, president and CEO of the AMF, in a statement.
“The AMF recognizes that modern slavery, in all its forms, is a growing concern for some market participants. That is why we are insisting on the importance for issuers of disclosing the required information as part of their continuous disclosure obligations in order to, in particular, help investors make investment decisions and exercise their voting rights,” he adds.
According to the notice, existing securities regulations may require disclosure of certain information regarding modern slavery as a material risk factor.
“Issuers should judge whether the nature of their business requires them to discuss the risks related to modern slavery in their continuous disclosure documents. For example, an issuer could face the following risks: litigation risks, regulatory risks, reputational risks and operational risks. Issuers should also assess the materiality of the risks affecting their supply chain, where applicable,” the notice states.
Additionally, the existing rules impose disclosure obligations involving companies’ social policies; and, whether or not the board of directors has adopted a code of conduct and ethics.
“When carrying out their oversight duties, boards of directors, audit committees and certifying officers should examine, among other things, management’s assessment of the materiality of issues related to modern slavery and satisfy themselves that the disclosure provided in the documents filed under securities regulation is consistent with that assessment,” the notice states.
The AMF carried out a review of the current disclosure practices of 20 large issuers in a cross section of industries, according the notice. The review found that 15% on companies identified social responsibility issues as a material reputational risk and 15% referenced social policies dealing with respect for human rights, or the issue of modern slavery. Although 40% of the companies reviewed have adopted a code of conduct and ethics, only 10% discussed the issue of modern slavery specifically.
The guidance is intended for all issuers, the notice states, but may be most relevant to industries that may be more likely to have exposure, such as the construction, manufacturing, entertainment and agriculture sectors.
It is being issued in response to both international regulatory developments, such as recent U.S. and European legislation in this area; and, growing investor interest in social issues, including labour practices.