4. Actions to
Assess and
Address Modern Slavery Risks

4. Actions to Assess
and Address Modern Slavery Risks

A. ACTIONS WITH RESPECT TO OUR OPERATIONS

i. Policies and Procedures

We recognize that robust risk policies and business standards are crucial to help us uphold human rights and prevent Modern Slavery. We are guided by internationally recognized human rights standards. We regularly assess our policies and standards to ensure their effectiveness, working with internal subject matter experts as well as with external partners.

Our Code of Business Conduct and Ethics,⁶ available on our global website, is a statement of basic principles promoting honest, ethical conduct and compliance with applicable law from directors, officers and employees. Among other things, it specifically states that no Northern Trust director, officer or employee should take unfair advantage of anyone, including through forced labor.

Northern Trust's guiding principles are “Service," “Expertise” and “Integrity.” How Northern Trust does business is as important as what we do. We have a long-standing culture of doing what is right.

Our Standards of Conduct Policy expands upon the themes expressed in our Code of Business Conduct and Ethics and provides further detail concerning business ethics and standards. It affirms our commitment to compliance with all applicable labor laws, and the active championing of human rights. It also expresses our firm belief that all work should be done voluntarily without slavery, servitude, forced or compulsory labor or the involvement of human trafficking.

Our Human Rights Statement,⁷ available on our global website, sets out our firm belief that all work should be done voluntarily without any slavery, servitude, forced labor or human trafficking and reflects our commitment to respect the rights, dignity and equality of people. It focuses on three key stakeholder groups: employees, clients and suppliers, as well as the communities that may be impacted by our business activities.

Employees worldwide may exercise freedom of association regarding collective bargaining and trade agreements as permitted by applicable legislation. Our Employee Handbook was reviewed during 2023 to reflect our ongoing commitment to respecting human rights.

Senior management in multiple business units and corporate groups, globally including Human Resources; Corporate Sustainability, Inclusion and Social Impact; and Risk and Compliance, continued to have responsibility for the implementation of the human rights and workforce principles set out in our global policies.

Additionally, in 2023, we became signatories to the UN Global Compact to affirm our commitment to its Ten Principles, including respect for human rights, as well as the elimination of forced or compulsory labor and child labor.

ii. Ability to Raise Concerns and Seeking Feedback from Employees

Northern Trust’s culture continues to support open communication at all levels. Northern Trust’s whistleblowing policies and reporting procedures were maintained and operational during 2023. These policies encourage employees to report suspected wrongdoing as soon as possible in the knowledge that their concerns will be taken seriously and investigated appropriately and confidentially.

In addition to internal reporting avenues, employees, suppliers and other third parties may raise concerns regarding unethical conduct, including Modern Slavery, via our Business Abuse and Employee Relations Hotline (Hotline) maintained by Navex Global, an independent third party. The Hotline is a confidential and secure service allowing concerns to be raised 24/7.

All reports received via the Hotline are triaged and investigated thoroughly, fairly and with discretion in a timely manner. Concerns may be reported anonymously to the extent permitted by applicable laws. A review of our Hotline reports during 2023 did not reveal any concerns raised regarding Modern Slavery.

Northern Trust prohibits retaliatory action against anyone who raises concerns regarding ethics, discrimination or harassment; reports suspected violations of applicable laws, regulations, or policies; or participates in a subsequent investigationof such concerns. As part of any investigation, we respect the rights of all parties related to the matter afforded under applicable laws and regulations.

Each year we conduct an employee engagement survey to solicit employee sentiments on topics such as communication, accountability, and company culture.

iii. Compensation

Northern Trust remains committed to providing competitive and equitable compensation for our employees, as well as benefits that support our employees’ needs, including health insurance, retirement benefits, and other programs to bolster work-life balance.

We continue to evaluate information regarding competitive practices and emerging trends gathered from a range of publicly available and commissioned resources. This information is used to inform our decisions about compensation programs.

During 2023, we completed a global review of salaries utilizing benchmark information from the Fair Wage Network. Starting in 2024, an analysis of Living Wages will be conducted globally at least annually to monitor and evaluate the changes in Living Wage pay rates to ensure Northern Trust pays its employees commensurate with the Living Wage in each location.

iv. Training

Training is an effective way to raise awareness of the various forms of Modern Slavery and to support the detection of Modern Slavery red flags by our employees. We remain committed to providing training and opportunities to raise awareness of Modern Slavery within our workforce.

Annually, employees are required to complete mandatory training on the Standards of Conduct Policy. Such training emphasizes the importance of complying with applicable laws and maintaining the highest ethical standards. The training includes content focused on ensuring that our employees are ably equipped to identify, respond and report on Modern Slavery risks. In 2023, more than 99 percent of the firm completed the annual training. Additionally, Northern Trust requires all employees to complete mandatory training on related matters such as diversity, anti-money laundering and anti-bribery and corruption.

In 2023, we launched our new Sustainability Learning Hub within the Northern Trust University that curates training materials supporting employees in their understanding of various sustainability related matters, including human rights and the risk of Modern Slavery. In 2024, we also plan to extend the training opportunities for employees by leveraging the training available within the UN Global Compact’s Academy to deliver more bespoke training to specific segments of the employee base.

B. ACTIONS WITH RESPECT TO OUR SUPPLY CHAIN

i. Policies and Procedures that Manage Supply Chain Risk

During 2023, Northern Trust continued to expect new and existing suppliers to comply with our Global Third Party (Supplier) Code of Conduct (Supplier Code). Among other things, the Supplier Code prescribes that our suppliers are expected to:

Respect human rights and refrain from engaging in any form of Modern Slavery;
Have in place adequate procedures to identify, prevent, mitigate and account for Modern Slavery and other human rights impacts in their operations and supply chains;
Adopt sound labor practices and treat workers fairly;
Comply with applicable labor laws and regulations;
Ensure that sub-contractors are made aware of the Supplier Code; and
Promptly notify us if the supplier becomes aware of any acts of Modern Slavery by either the supplier or any of its subcontractors. Our Supplier Code provides the details of our Hotline for suppliers and their employees to report concerns.

In addition, we expect our suppliers to have a process through which their workers can raise workplace concerns without fear of retaliation.

During 2023, the Modern Slavery Questionnaire sought confirmation from suppliers that they have read and agreed to adhere to our Supplier Code when providing goods and services to us and agree to notify us in the event of an actual or suspected breach. Of those that responded to the Modern Slavery Questionnaire 91 percent agreed to comply with our Supplier Code and the remaining 9 percent of respondents noted that they were unable to confirm compliance with our Supplier Code, although they were able to confirm compliance with their own supplier code of conduct that included comparable standards and expectations. During 2023, we did not receive any notifications from suppliers in relation to actual or suspected breaches of the Supplier Code.

Our Master Supplier Agreement contains provisions requiring suppliers to agree to comply with the Supplier Code including with respect to Modern Slavery and sets out the corrective and consequential measures available to the parties in the event of any breach. Modern Slavery terms were deployed in contracts during the reporting period and procurement team members were provided guidance on how to navigate negotiations with suppliers while adequately managing Modern Slavery risks.

Our Global Procurement Policy governs supplier engagement. Under our Global Procurement Policy, the business units identify a need which initiates the procurement and due diligence processes prior to the engagement of any new supplier for all but the lowest-risk and lowest-spend purchases. Such due diligence includes a review of the supplier’s compliance with applicable laws and regulations; adverse media screening using a well-known subscription database which covers risk areas including human trafficking, slavery or forced labor; and a country-based risk assessment incorporating the risk of human trafficking. A subsequent risk-based assessment of the supplier determines the appropriate level of ongoing monitoring of that supplier. The degree of monitoring and the overall inherent risk rating for each new supplier engagement is determined by a review by subject matter experts from across the organization, including Compliance, Operational Risk and Procurement. The Global Procurement Policy provides that suppliers are encouraged to adhere to the Supplier Code, including managing Modern Slavery risks. As noted above, under the terms of our Master Supplier Agreement, non-compliance by the supplier with the terms of the Supplier Code may trigger the need for corrective action and may result in termination of the supplier relationship by Northern Trust.

Once a supplier is engaged, a vendor/manager (appointed by the relevant Business Unit within the Bank) is responsible for managing the ongoing business relationship with the supplier. The vendor manager is responsible for performing supplier risk management duties and responsibilities pursuant to Northern Trust’s Third-Party Management Policy (TPM Policy) and procedures.

The responsibilities of the vendor manager include, but are not limited to:

Monitoring the supplier against the terms of the contract and service level agreements; and
Documenting, maintaining and reporting legal and other issues or incidents.

The TPM Policy also highlights that the vendor manager also needs to assess whether the vendor is compliant with our Supplier Code (which includes the Modern Slavery commitments as outlined above).

Further, where possible, Northern Trust’s supplier contracts provide for audit rights to facilitate supplier monitoring, and such audit rights may be deployed to assess compliance with the Supplier Code, where required.

ii. Supplier Due Diligence via the Modern Slavery Questionnaire

In 2023, we continued to assess Modern Slavery in a subset of our suppliers through a Modern Slavery questionnaire process. At the end of December 2023, over 1,700 suppliers were sent our Modern Slavery Questionnaire and the completion rate remained consistent with 2022. Also, a cohort of goods and service suppliers in Canada were issued with the Modern Slavery Questionnaire.

We also aligned the existing Due Diligence Questionnaire used for sub-custody service providers with the Modern Slavery Questionnaire to achieve consistency in our supplier due diligence assessment processes. In 2023, we issued the Modern Slavery Questionnaire to our sub-custody service providers and achieved a completion rate of over 90 percent within this population.

For the sub-custody service providers who did not complete the Modern Slavery Questionnaire in 2023 and those requiring further engagement, Sub-Custodian Network Management will review relevant publicly available information and liaise with the Modern Slavery Working Group and escalate any concerns, as appropriate.

For suppliers who did not complete the Modern Slavery Questionnaire but provided alternative information, our Third-Party Management Office (TPMO) reviewed the evidence and determined whether the information was adequate or required additional due diligence to remediate outstanding Modern Slavery risks.

A sizeable proportion of suppliers who did not complete the questionnaire were companies domiciled in countries without Modern Slavery reporting obligations or related legislation. Of the suppliers that completed the Modern Slavery Questionnaire, just under half had implemented controls, adopted written codes or established policies addressing human rights.

Assessment and evaluation of a supplier’s Modern Slavery risk is undertaken as part of on-boarding or as part of supplier contract renewal. We are continuing to develop an assurance framework to monitor and verify a supplier’s compliance with the Supplier Code as part of the supplier evaluation, selection and contract management process.

iii. 2022 Recommended Actions Completed in 2023

Following the completion of our 2022 Modern Slavery Questionnaire process, we took a number of actions to assist us in managing Modern Slavery risks including:

Contacted suppliers that had reported that they did not have any controls, codes or policies in place to query their response and address where relevant.
Contacted suppliers that had reported that they were unable to comply with our Supplier Code to discuss their response and resolved any misunderstandings.
Notified those suppliers that had provided alternative forms of information instead of completing the Modern Slavery Questionnaire that they may be contacted at a later date to complete the survey if the supplied information provided proved to be inadequate.
Reviewed the contracts for those suppliers that had reported that they did not have a written contract with Northern Trust to ensure that the service arrangements had been appropriately formalized.
Included the sub-custodian vendor population in the 2023 Modern Slavery Questionnaire process.
Validated via our Third Party Management Office (TPMO) that corresponding Modern Slavery Risk ratings did not contain additional risks.
Presented our conclusions to the Modern Slavery Executive Steering Group.

We will continue to engage with our suppliers where appropriate to make them aware of our approach to Modern Slavery and encourage them to adopt their own measures to minimize Modern Slavery risks in their own organizations and supply chain.

iv. In-house Catering

As set out in our last Statement as an objective for 2023, we transitioned to Fair Trade, Rainforest Alliance (or similar) tea and coffee products in all of our office locations reflecting our commitment to combatting Modern Slavery by supporting ethical and responsible business practices.

C. ACTIONS WITH RESPECT TO OUR CLIENTS AND INVESTMENTS

The Bank’s Global Anti-Money Laundering Team is responsible for maintaining our KYC and AML procedures. Among other things, the KYC and AML due diligence process incorporates adverse media screening using well-known subscription databases to identify potential clients which may present a legal, compliance or reputational risk, including any persons or entities accused or convicted of human

trafficking, slavery or forced labor. The risk that clients are engaged in human trafficking, arising from the location of their operations, is also included in the AML process.

Adverse media checks are regularly refreshed against Northern Trust’s client population and alerts of potential matches are reviewed on a daily basis. Once a subject of adverse media is affirmatively deemed to be a

true match to a Northern Trust client or related party, the adverse media is appropriately evaluated and escalated to mitigate the risk to Northern Trust.In instances where there is significant adverse media detected, this is raised to Financial Crimes Compliance management, senior business leaders, the relevant Business Unit Risk Management teams and the Modern Slavery Working Group, who determine next

steps, which may include a relationship exit. Our Modern Slavery Executive Steering Group receives periodic reporting and acts as a point for escalation for contentious or potential reputational issues.

During 2023, on three occasions, our screening processes identified Modern Slavery related concerns, which were escalated to the respective senior leaders, the Modern Slavery Executive Steering Group and the relevant Business Councils and, once confirmed, the relationships were terminated.

The Global Anti-Money Laundering, Countering the Financing of Terrorism, and Countering Proliferation Financing Compliance Policy (AML/CFT/CPF Policy) provides examples of financial crimes that may generate criminal proceeds or create reputational risk, including Modern Slavery.

Specifically, the AML/CFT/CPF Policy includes the following statement to describe examples of significant adverse media identified during our screening processes:

“Examples of financial crimes that may generate criminal proceeds or otherwise create reputational risk include, but are not limited to, tax evasion, fraud, insider trading, participation in an organized criminal group and racketeering, Modern Slavery, elder abuse, illicit trafficking in narcotics drugs, corruption and bribery, Ponzi schemes, extortion, and robbery or theft.”

Northern Trust Asset Management (NTAM) has a publicly available Sustainable Investing Philosophy.⁸ Sustainable Investing encompasses strategies and client assets managed in accordance with client specified responsible investing terms (historically referred to as “socially responsible”), as well as portfolios that leverage contemporary approaches and datasets, including Environmental, Social, and Governance (ESG) analytics and ESG thematic investing. Sustainable Investing includes portfolios designed by NTAM as well as those portfolios managed to client-defined methodologies or screens.

As risk-aware investors, we believe material ESG factors are indicators that can affect a company’s future financial viability and clients’ long-term investment returns. We recognize that failure of companies to appropriately manage human rights and Modern Slavery can have severe consequences for victims. Modern Slavery also carries risks for companies such as brand, reputation, litigation, supply chain interruptions, labor strikes and customer boycotts which in turn can all have significant short-and long-term financial implications for companies.

As outlined in our Sustainable Investing Philosophy, NTAM employs a custom suite of screens that serve as the foundation within the ESG funds that we manage. Since inception, these screens have included factors that seek to identify and exclude companies that have been deemed to violate any of the Ten Principles of the UN Global Compact of which Principle Four⁹ states that, “Businesses should uphold the elimination of all forms of forced and compulsory labor,” and Principle Five states that, “Business should uphold the effective abolition of child labor.”

Through the use of various third-party research and screening tools, we seek to mitigate Modern Slavery risks in our ESG funds by identifying controversies and assessing the existence of social systemic issues which either constitute or may be linked to Modern Slavery, including forced labor, human trafficking, bonded labor, restrictions on freedom of association, poor/unsafe working conditions, and excessive work hours. These tools capture allegations linking companies from our portfolios as either engaging in or knowingly benefiting from such practices which are in turn flagged for further analysis. As part of the evaluation, we take into consideration various dimensions such as the severity of impact; insofar as the issue relates to a supplier, the company's links to that supplier; and the company’s management of the issue and preparedness to prevent recurrences.

Further to company-level screening, our ESG methodology, as applied to our ESG product range includes human rights violations by State Owned Entities (SOEs) in fragile emerging markets. This methodology employs data sourced from Freedom House, a U.S.-based nonpartisan organization founded in 1941 to champion the advancement of freedom globally, to identify the countries in scope. The fragile countries are identified as those with weak civil liberties, political rights, religious freedoms, and freedom of press. Once the countries are identified, our investment process then excludes companies based on two criteria:

Companies that are SOEs with 85 percent or more ownership by the state given the limited ability for direct engagement, and
SOEs with either a severe or very severe human rights controversy score.

In combining the data, research and the subsequent analysis, it is then incorporated into NTAM’s quantitative and fundamental investment processes and portfolio construction. The result of these efforts allows the Sustainable Investing and Stewardship teams to flag companies that we consider to require additional research, divestment and or targeted engagement.

We believe positive economic and societal change and financial performance are best achieved when Modern Slavery analysis is combined with active stewardship. Accordingly, NTAM’s Stewardship team actively engages with various entities across all of our portfolios to promote human rights transparency and raise reporting standards with the companies in which we invest. Through comprehensive research and dialogue with companies on their global supply chain practices, we seek to mitigate Modern Slavery risks in our portfolios to drive better social and investment outcomes.

In 2023, NTAM’s Stewardship team evolved its approach to identify investee companies with heightened risks associated with human rights and Modern Slavery. The changes implemented will allow more timely review of ongoing and emerging controversies. We developed a framework for identifying, evaluating and monitoring companies for engagement using a combination of MSCI and Sustainalytics data points focusing on supply chain labor standards, controversial sourcing, controversies related to forced labor, and global norms. The details of the factors underlying the framework are shared below:

Supply Chain Labor Standards
We assessed the severity of controversies related to a firm’s supply chain. Factors affecting this evaluation include, but are not limited to, a history of involvement in supply chain-related legal cases, widespread or egregious instances of abuses of supply chain employee labor rights, supply chain employee safety, resistance to improved practices, and criticism by NGOs and/or other third-party observers. The companies selected were found to have either severe or extremely severe controversies related to labor standards in the supply chain.

Exposure and Management of Supply Chain Labor Risk
We examined to what extent a company’s business is vulnerable to supply chain labor risk and how well they manage those risks and opportunities. Companies with high exposure and low management scores were targeted.

Exposure to Controversial Sourcing
We examined the extent to which companies are at risk of incurring regulatory compliance costs, reputational damage, or supply chain disruptions resulting from reliance on raw materials that originate in areas associated with severe human rights and labor rights abuses. We targeted companies with high exposure and limited supplier engagement and found that all companies in this category were IT companies.

Controversies Related to Human Rights and Forced Labor in the Supply Chain
We reviewed the number of incidents that have been reported involving human rights violations, including forced labor, in supply chains. The companies targeted were found to have reported incidents with either a moderate or severe impact on employees in the supply chain.

Global Norms
We reviewed and will continue to monitor the companies’ alignment to the United Nations Global Compact Principles.

From our initial review of the factors above, we selected 20 companies for continued monitoring and engagement. The Stewardship team will encourage companies through dialogue to commit to labor practices that reduce Modern Slavery risks. With this new process, the team has set up alerts to be notified as soon as there are any changes, positive or negative, to the factors above, including if any of the entities become implicated in additional controversies. Companies that are in the early stages of implementing a due diligence process will be encouragedto strengthen their stakeholder relationships through industry and trade associations, and build internal capacity in human rights management. It should be noted that our ability to engage is reliant on companies’ reciprocation efforts to meet and have a dialogue. Out of the 20 companies we identified, we were able to successfully meet with seven.

When the Stewardship team initially contacts companies to raise concerns, they request a dialogue with representatives of management or the board of directors. NTAM’s preference is to continue that dialogue to resolve raised concerns. However, if a company fails to make sufficient progress over time, the Stewardship team may recommend an escalation. An example of an escalation would be leveraging proxy voting options which may include supporting a shareholder proposal or opposing the re-election of one or more directors.

All seven of the companies we engaged with in 2023 acknowledged the concerns we identified with respect to the supply chain risks of forced labor in the supply chain and are in various stages of remediation. The Stewardship team will continue its dialogue with the seven companies and will continue to pursue dialogue with the other 13 companies which we have identified as having heightened risks associated with human rights and modern slavery. In addition, we will continue to monitor the five factors through our third-party research providers for any positive or negative changes which may add or remove companies from our target list of investee companies to engage with.

Case Study: Ralph Lauren Corp (NYS:RL)

All of the companies with whom we engaged are actively working towards remediation. For example, we engaged with Ralph Lauren Corp. (NYS:RL), who, along with several other companies, has been accused of sourcing materials or products made using forced labor in Xinjiang, China and subject to an ongoing investigation by the Canadian Ombudsperson for Responsible Enterprise (CORE). On the basis of the information available, we found that Ralph Lauren has adopted strong policies to address human rights risks in the supply chain, including on-site social compliance assessments of suppliers and grievance mechanisms to enable workers to escalate concerns at a corporate level. Ralph Lauren states that it has a zero tolerance policy for forced labor and complies with all applicable laws and regulations wherever it operates. As with many other retailers, Ralph Lauren has invested and uses fiber-origin tracing technology to assess what region cotton may have been sourced from. In addition, Ralph Lauren reports that it undertakes third-party audits, has established traceability roadmaps for its supply chain, and conducts transparency mapping for all raw materials. It also participates in a variety of industry led initiatives to problem solve ways to tackle risk of forced labor not only in the supply of raw materials but also within manufacturing facilities. NTAM will continue to monitor the ongoing investigation by CORE and engage with Ralph Lauren to build a better understanding of the scope and depth of the company’s work.

To ensure the program efficacy, our Proxy Committee, with input from our Sustainable Investment Council, reviews our proxy voting and engagement policies annually to identify issues and concerns about how we oversee implementation of our stewardship¹⁰ objectives. Additionally, the risk, compliance and legal teams, along with leadership of the stewardship team, oversee the stewardship team’s adherence to proxy voting and engagement policies. The work and progress of the Sustainable Investing and Stewardship programs is publicly communicated to clients and investee companies. We also report on other aspects of stewardship, such as engagements with company management, and provide full disclosure of voting records and quarterly reports of stewardship activities.

Our commitment to addressing Modern Slavery in our investments will continue in 2024 as we assess various opportunities to strengthen our resources and expertise through participation in industry initiatives dedicated to addressing human rights issues from an asset management perspective, including the PRI Advance¹¹ program which we joined in the second quarter of 2023. The PRI Advance is a collaborative initiative where institutional investors seek to advance human rights and positive outcomes for people through investor stewardship. We also have an ambition to expand the scope of our targeted engagements from 20 to 30 companies in 2024.

D. OUR APPROACH TO REMEDIATION

When we identify Modern Slavery in our operations or supply chain, our response will be guided by what is in the best interests of the individuals at risk. For 2023, there is nothing to report with respect to measures taken during the reporting period to remediate the loss of income to the most vulnerable families that results from any measure taken to eliminate the use of forced labor or child labor in its activities and supply chains.

As mentioned in Part 3 above, our approach to identifying and addressing adverse human rights impacts, including Modern Slavery, is informed by the UNGPs. An overview of our approach to remediation is set out below.

	Cause	Contribute	Directly Linked
Degree of Involvement	An entity may cause Modern Slavery if its operations directly result in Modern Slavery practices.	An entity may contribute to Modern Slavery if, throughits actions or omissions, it facilitates or incentivizes Modern Slavery practices.	An entity may be directly linked to Modern Slavery via a business relationship, where it does not cause or contribute to the Modern Slavery risk.
Prevention & Mitigation	Cease or prevent the impact.	Cease or prevent contribution and use leverage to mitigate impact.	Seek to prevent and mitigate the impact. Appropriate steps may depend on leverage, availability of alternate vendors, significance of contractual relationship, severity and consequence of termination.
Remediation Measures	Provide for, or cooperate in, remediation.	Provide for, or cooperate in, remediation.	Take a role in remediation, including using leverage to encourage remediation by entities that caused or contributed to the impact.

As described in our Supplier Code, if a supplier is found to be engaging in Modern Slavery, or identifies Modern Slavery in its supply chain, we will engage with the supplier to encourage remediation of the situation. If the situation is not remediated (or not remediable) the Bank may terminate the relationship with the supplier and disqualify the supplier from participating in any future bidding processes.

As outlined above under the heading Actions to Assess and Address Modern Slavery Risks, Northern Trust provides its employees, suppliers and other stakeholders with numerous avenues to report Modern Slavery concerns. Anonymous reporting is permitted and we prohibit retaliatory action.