The transition to cleaner, renewable energy sources is crucial to the health of the planet. Yet the renewables sector is likely to face political, social, and governance challenges—including risks of corruption and conflict of interest—similar to those that have been observed in extractive industries and other sectors. One of the tools that anticorruption advocates have emphasized as crucial across sectors—transparency regarding the true beneficial owners of private companies—may be highly important in addressing corruption and conflict of interest risks in the sustainable energy transition for several reasons:
- First, as a new joint report from the Extractive Industries Transparency Initiative (EITI) and Open Ownership explains, beneficial ownership transparency can make financing of green energy projects—a crucial part of national energy transition plans—more transparent and accountable. In addition, government subsidies, regulations, and contracts play an important role in fostering renewable energy projects and facilitating the transition away from fossil fuels. The companies that receive, or otherwise benefit from, such subsidies, regulations, and contracts should be required to disclose their beneficial owners, and beneficial ownership data should be analyzed by officials and accountability actors to ensure that incentives are economically effective and fairly allocated, rather than disproportionately benefiting politicians or their close associates (so-called “politically exposed persons,” or PEPs). Relatedly, the expansion of access to electricity generated from renewable sources requires appropriately designed power purchase agreements (PPAs), and beneficial ownership information on the firms participating in PPAs can mitigate potential conflicts of interest and increase accountability. More broadly, ensuring transparency about the individuals who stand to win or lose under different energy policy approaches in producer countries will help the public monitor the forces shaping key policy decisions—choices that will determine whether a country transitions away from fossil fuels and toward clean energy in a way that maximizes public benefits and minimizes harms. In this context, beneficial ownership disclosure can enable scrutiny of the vested interests that could be working to lock a country into continued reliance on fossil fuels—for revenue generation, energy production, or both— and blocking a transition to renewable energy.
- Second, many green energy technologies require minerals such as nickel, lithium, and cobalt. A number of lower- and middle-income countries that have high levels of corruption are sources of a significant proportion of these minerals. Experience shows that mining booms can increase the incentives for corruption and rent-seeking (for example, collusion around licensing agreements and the acquisition of land where mining may take place). A new report from the Natural Resource Governance Institute on the governance of cobalt recommends that governments require license applicants and holders to disclose their beneficial owners, define which PEPs are prohibited from holding interests in assets because doing so would create a conflict of interest, and conduct due diligence by screening applicants – including their personnel and beneficial owners – against integrity metrics (e.g., PEP prohibitions, adequacy of internal anti-corruption systems, past involvement in corruption, and potential political connections or conflicts of interest).
Of course, beneficial ownership transparency is not by itself sufficient. It is most effective when implemented alongside other accountability tools. But it is certainly an important tool, and one that governments and companies should embrace and embed across energy value chains. The good news here is that over 100 countries have already committed to centrally collecting and publicly publishing data on the beneficial ownership of companies in one or more sectors. The bad news is that there are still quite a few countries that don’t collect beneficial ownership data at all, or that make it available only to law enforcement agencies. Even in those countries that have nominally committed to public beneficial ownership registers, effective implementation is often lacking. For example, the EU’s fifth Anti-Money Laundering Directive requires member states to make their beneficial ownership registers publicly accessible, but many EU countries place this information behind paywalls or restrict access to EU citizens, measures that make it difficult for journalists and civil society organizations to access the data.
Governments that have already made commitments to beneficial ownership transparency need to do more to make these reforms effective by working to meet the highest standards of emerging good practice for beneficial ownership disclosure and, especially in high-risk sectors, screening beneficial ownership information for corruption risks. Bilateral and international assistance efforts should provide more support to low- and middle-income countries that lack capacity and resources, and therefore need assistance in collecting, publishing, and screening comprehensive beneficial ownership information. And more energy and mining firms should join the ranks of companies that have committed to disclose beneficial ownership information and use beneficial ownership data in conducting due diligence on their joint venture partners, contractors, and suppliers. Action on this front is an essential step to ensure that citizens can scrutinize who stands to benefit most from national energy policies and hold governments and companies accountable to deliver a just and sustainable energy transition.