Unethical labor recruitment is a key driver of forced labor — an extreme human rights abuse, and a serious material risk for investment firms. Those firms play a critical role in ensuring that their portfolio companies, and the companies within those companies’ supply and value chains, recruit workers ethically. Transparentem’s report examines how a select group of investment firms are addressing recruitment risks faced by migrant workers, through the lens of Malaysia’s electronics sector — one of the high-risk industries for such exploitation. The report shares the current range of investor policies and practices and promotes stronger, more consistent measures to ensure workers are recruited ethically and working with dignity.

The findings point to an urgent need for investor action. None of the twelve firms assessed had comprehensive policies aligned with international standards, and most fell short on key issues such as the payment of all costs associated with job recruitment, repayment of worker-paid recruitment fees, prevention of document retention, and worker access to effective grievance mechanisms. Transparentem urges investors to recognize unethical recruitment not as a peripheral social concern but as a core compliance issue and a material risk that demands proactive oversight and engagement across portfolio companies and their supply and value chains.

To conduct this analysis, Transparentem identified investment firms with exposure to Malaysian electronics suppliers employing migrant labor. We analyzed investor policies and engagement practices across a diverse group of asset managers, hedge funds, institutional investors, and socially responsible investors. The report provides an illustrative snapshot of how investors can and should strengthen their approach to ethical recruitment — and their role in preventing forced labor.