Navigating Human Rights Due Diligence: Implications for Nordic Financial Institutions

Financial institutions face growing pressure to identify and manage hidden human-rights risks across their portfolios, yet limited corporate disclosure and the lack of forward-looking analytical tools make it difficult to act before financial and reputational impacts materialize.

Market practices are also evolving. Historically, financial institutions have responded only after human-rights violations surfaced. Today, leading financial institutions are proactively assessing where adverse human-rights impacts may arise in their downstream activities and whether their investees or clients are equipped to prevent or mitigate them. This evolution aligns with the UN Guiding Principles on Business and Human Rights (UNGPs) and the OECD Guidelines for Multinational Enterprises (OECD MNE Guidelines) — frameworks increasingly referenced by regulators and financial institutions globally.¹

In the Nordics, financial institutions have been early adopters of formal human-rights commitments, supported by strong stewardship traditions and evolving regulatory frameworks such as Norway’s Transparency Act and the EU’s Corporate Sustainability Due Diligence Directive (CSDDD). Our data shows that 91% of Nordic financial institutions had a commitment to respect human rights aligned with international standards, compared with only 47% for financial institutions globally.²

Evolving practices, hidden risks

Our research suggests that exposure to negative human-rights impacts is far greater than corporate reporting or isolated controversies indicate. Approximately 3% of constituents in the MSCI Nordic Investable Market Index (IMI) disclosed exposure to forced or child labor risks and 2% faced related allegations.³ Our analysis, however, suggests that supply chain exposure may be significantly higher. Based on MSCI’s Impact Materiality Assessment — which evaluates risk at the product and business-activity level across value chains — nearly 32% of constituents had potential exposure to these risks (see exhibit below).

Identifying the most salient human-rights risks in business activities

MSCI Human Rights Metrics include an impact materiality assessment that evaluates companies’ exposure to material negative impacts on four stakeholder groups across more than 15 human-rights issues, including forced and child labor. These tools can help financial institutions identify priority human-rights risks within a portfolio, loan book or company to better target due diligence efforts. We identify the share of index constituents with a potential material negative impact on people (based on sub-industry) within the MSCI Nordics IMI

^{Data as of Feb. 13, 2026. Blue bars show the percentage of MSCI Nordics IMI constituents identified as having a potential material negative impact on stakeholders. Source: MSCI Sustainability & Climate, MSCI Impact Materiality Assessment. MSCI Sustainability & Climate products and services are provided by MSCI Solutions LLC in the United States and MSCI Solutions (UK) Limited in the United Kingdom and certain other related entities. Sectors, industries and sub-industries referred to throughout are defined according to the Global Industry Classification System (GICS®). GICS is the industry-classification standard jointly developed by MSCI and S&P Dow Jones Indices.}

Most Nordic companies identified as being exposed to risks related to forced or child labor had established human rights policies aligned with international standards. However, only 7% had implemented a comprehensive due diligence process to monitor and assess the effectiveness of those policies. Supply chains — the primary source of exposure to forced and child labor — are also where safeguards are most often missing. Only 11% of these companies had adopted a living-wage commitment, and just 23% disclosed taking remediation actions when labor incidents were identified. These measures can play an important role in addressing underlying drivers such as wage vulnerability and the absence of effective corrective mechanisms.

Cracks in the chain: High-risk companies fall short on mitigation practices

MSCI Human Rights Metrics include more than 100 sector-agnostic and sector-specific indicators that assess how companies prevent, reduce and remediate negative impacts on people. Below, we evaluated the practices of companies identified as being at risk of modern slavery, focusing on both foundational human-rights practices as well as supply-chain-specific practices, where the risk is most prevalent (share of companies with such practices).

^{Data as of Feb. 13, 2026 Left chart universe: MSCI Nordics IMI constituents identified as having a potential material negative impact related to child and forced labor in the MSCI Impact Materiality Assessment (n=94). Right chart universe: MSCI Nordics IMI constituents assessed on the Supply Chain Labor Standards Key Issue in MSCI ESG Ratings (n=13; except for living wage and grievance mechanisms: n=11). Source: MSCI Sustainability & Climate Source: MSCI Sustainability & Climate}

Nordic companies are subject to human rights due diligence requirements under the EU CSDDD and similar rules in other markets where they operate. ⁴ We estimate that up to USD 33 billion in revenues generated by Nordic companies may be linked to forced or child labor.⁵ Such exposure may be associated with regulatory penalties, operational disruptions and reputational damage that, in certain cases, could affect financial performance.

Beyond legal risk, alleged weak labor standards have already led to higher sourcing costs, production delays and value-chain restructuring as firms divest or rotate away from high-risk suppliers.⁶ Reputational impacts can also erode consumer trust, with allegations of unethical sourcing contributing to local boycotts, revenue declines and longer-term brand impairment.⁷

Looking back over the past decade, we found that companies with stronger supply-chain labor practices tended to outperform peers with weaker practices, generating higher cumulative returns, as illustrated in the chart below. This suggests that stronger human-rights practices not only align with global norms and expectations but may also signal greater financial resilience over the long term.

Chain reaction: Better labor practices, better returns

^{Data for the period Sept. 30, 2013, to April 30, 2025. Analysis covers MSCI ACWI Index constituents assessed on the Supply Chain Labor Standards Key Issue. Over this 10-year period, these companies represented an average of 7.25% of MSCI ACWI Index constituents. Quintiles are rebalanced monthly based on adjusted scores. Scores are first z-scored by GICS sector and region (North America, Europe, Pacific and EM subindexes of the MSCI ACWI Index) and then size-adjusted. The next month’s performance (in USD return) is calculated for each quintile. The chart shows the cumulative performance difference between the top and bottom quintiles. The associations reported are correlations and do not imply causation. Source: MSCI Sustainability & Climate}

Advancing data-driven due diligence

Financial institutions face growing pressure to embed human-rights due diligence across their investment and financing decisions. Leveraging systematic, data-driven tools — such as MSCI’s Human Rights Metrics and Impact Materiality Assessment — may help investors and lenders respond to emerging regulatory demands, identify potential risks and direct capital toward companies better equipped to manage them. This can accelerate the shift from reactive oversight of human-rights risks to proactive stewardship, supporting portfolios that are both more responsible and more resilient.

Sources:

1. 950 investment managers and 235 asset owners reported using these frameworks, representing USD 24 trillion and USD 40 trillion in AUM, respectively. “Annual Report 2024,” PRI, 2024.
2. Universe: Financials GICS sector constituents of MSCI Nordics IMI constituents (n=34) and Financials GICS sector constituents of MSCI ACWI IMI (n=1,152), as of Feb. 13, 2026.
3. Based on active child- and forced-labor-related controversies within MSCI Controversies. Universe: MSCI Nordics IMI constituents, as of Feb. 13, 2026.
4. This information is provided “as is” and does not constitute legal advice or any binding interpretation. Any approach to comply with regulatory or policy initiatives should be discussed with your own legal counsel and/or the relevant competent authority, as needed.
5. We estimated the share of company revenues potentially linked to forced or child labor by mapping each business segment’s reliance on goods commonly produced under such conditions, as identified by the U.S. Department of Labor, and applying economic input–output data from the U.S. Bureau of Economic Analysis. The analysis focused on MSCI Nordics IMI constituents for which forced and child labor in the supply chain was identified as a salient risk according to the MSCI Impact Materiality Assessment (n=94, as of Feb. 13, 2026).
6. As an example: “Volkswagen sells scandal-hit Chinese factory in Uighur province,” The Times, Nov. 27, 2024.
7. As an example: “Shein Chose Paris for Its First Boutique. Paris Isn’t Pleased,” The New York Times, Oct. 10, 2025.

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About the writers:

Aura Dron, Consumer Goods Lead, Supply Chain Specialist, MSCI
Aura Dron is a member of the MSCI’s Sustainability Research team, focusing on the Healthcare and Consumer sectors. Aura has been with MSCI for six years, working on projects related to corporate governance, human rights and supply chain risk. Prior to working at MSCI, Aura has worked for Sustainalytics and Aktis Intelligence, focusing on corporate governance. Aura studied Economics and International Relations in Romania, France and China and is a CFA® Charterholder.

Leslie Swynghedauw, Head of Sustainability Research, MSCI
Leslie Swynghedauw leads MSCI’s Sustainability Research team. She previously led the EMEA team and the consumer-goods sector. Leslie has 15 years of experience in sustainability performance measurement and developing sustainability methodologies across various sectors and asset classes. Her areas of expertise are biodiversity, the circular economy and human rights. Leslie represents MSCI as a Knowledge Partner to the Taskforce on Inequality and Social-related Financial Disclosures (TISFD). Before joining MSCI in 2014, Leslie worked for EIRIS, a U.K.-based sustainability research provider, the PRI and Amundi.