As countries begin to recover from the COVID-19 pandemic, resources are being mobilised to accelerate the transition away from fossil fuels towards cleaner and more sustainable sources of energy. The energy transition is a central policy priority in the fight against climate change, and aims to secure a safer and more sustainable future for people and the planet. Yet, without adequate accountability in company operations and financing for the energy transition, this important agenda could be compromised. The emerging energy crisis resulting from Russia’s invasion of Ukraine and sanctions targeting Russia has further highlighted the need for transparent ownership around energy companies and their investments.
Ensuring transparency about the individuals who ultimately own and control companies, their ‘beneficial owners’, is a necessary step toward securing transparency and accountability in the energy transition. For countries that produce the raw materials on which energy systems rely, the shift to clean energy requires profound transformation. A focus on transparency and accountability in extractives is critical for both clean energy and non-renewable energy industries, as countries lay the groundwork to achieve energy transitions that balance sustainability, economic prosperity, and social equity.
This brief explains how beneficial ownership transparency can support the achievement of a just and equitable energy transition by:
- Outlining the changing context in which implementation of beneficial ownership transparency reforms is taking place.
- Exploring the potential role of beneficial ownership transparency in the energy transition.
- Considering how information about company ownership can increase accountability in non-renewable and clean energy industries, and in financing for the transition.
Why beneficial ownership transparency matters for the energy transition
- Beneficial ownership transparency is a promising and concrete accountability tool for clean energy industries. It will be most effective if it is treated as one among a range of accountability tools, if it is embedded from the outset at multiple links in energy value chains, and if implementation builds on lessons learned from the extractive sector.
- Beneficial ownership transparency is already an established governance reform in the extractive industries which, when implemented effectively, can help mitigate the social, economic, and political challenges associated with resource-rich countries.
- The energy transition and the emerging energy crisis are likely to exacerbate long-standing risks in the extractive industries, such as corruption and illicit financial flows, as the use of fossil fuels winds down and countries and companies seek to maximise short-term returns.
- Vast resources will be committed to the energy transition. Beneficial ownership information can play a role in domestic resource mobilisation and accountability for public spending and in supporting energy security.
- Regarding private financing for the energy transition, beneficial ownership information can support commitments to environment, social and governance standards and help ensure more comprehensive accounting for the emissions created by business activities.
- Countries producing critical minerals will face economic, political and social challenges as demand grows for the minerals upon which clean energy technologies rely.
- In sum, additional effort and resourcing is therefore needed from governments, companies and civil society to build accountability into the clean energy sector and help prevent the possible emergence of what has been labelled a ‘green resource curse’.
Multiple stakeholders must act to achieve meaningful and continuing reform to raise global standards on beneficial ownership transparency.
We recommend that governments:
- Require and publish the beneficial ownership information of extractive companies and companies along clean energy value chains, including suppliers and subsidiaries;
- Prioritise beneficial ownership transparency as part of tax transparency and public procurement reforms;
- Make the control of state-owned enterprises transparent, along with beneficial ownership of their subsidiaries and joint ventures;
- Require beneficial ownership transparency information to be made publicly available in the contracts that set the terms for electricity generation projects; and
- Accelerate the widespread use of beneficial ownership information in the detection of fraud, by implementing central registers that cover the entire economy, are public and aligned to recognised open data standards.
We recommend that companies:
- Publicly disclose information on their beneficial owners in line with the 2019 EITI Standard, at least on an annual basis;
- Publicly disclose, on at least an annual basis, the beneficial owners of entities the company wholly owns, and where feasible, the beneficial owners of any partially-owned entities;
- Engage in rigorous due diligence, and publish an anti-corruption policy that includes details on how the company collects and uses beneficial ownership data in its processes regarding joint venture partners, contractors and suppliers;
- Include beneficial ownership transparency in ec
onomic, social and governance commitments, and use the data to help account for emissions from their business activities; and
- Openly declare and publish support for beneficial ownership transparency policies.
We recommend that civil society actors:
- Monitor beneficial ownership disclosure regimes in the energy and extractive industries to ensure they embody best practices, including in collecting structured data, data verification, and sanctions and enforcement;
- Champion measures to move beyond transparency when designing and delivering anti-corruption programmes, fostering participation across varied stakeholder groups to deliver increased accountability;
- Use beneficial ownership data to perform cross-border investigations into the investments of politically exposed persons and bad actors in both producer and consumer countries; and
- Stimulate public debate on renewable energy governance through the use of beneficial ownership data in the sector.