Financial institution support for the EITI
Financial institutions, including lending institutions and institutional investors, play a significant role in shaping transparency practices for all business sectors and they are a critical pillar of the EITI. Financial institutions supporting the EITI reflect the growing attention that global financial markets place on transparency and good governance.
"We believe that the EITI contributes to a better investment climate by reducing instability and that cooperation between key stakeholder groups enhances understanding of key challenges as well as it enhances prospect for investment returns from companies operating in participating countries.
The work of EITI is at the core of this chain of transparency, accountability and impact. As investors we need reliable, robust and credible data that is transparent and easily accessible. As financial institutions we support the EITI as a means to monitor the performance and conduct of the multinational extractives companies that they fund."
Sasja Beslik, Head of Sustainable Finance Nordea Wealth Manager and EITI Board member
The EITI offers credible insights into institutional strength and governance in its member countries. It raises the bar for market information and provides access to more complete financial information on companies that form part of investors’ portfolios. The EITI encourages good resource governance in host countries, which ultimately benefits portfolio investments in extractive companies. By supporting the EITI, financial institutions ensure that they are part of shaping the global governance of the oil, gas and mining sectors. The governments of the EITI member countries take note of investor expectations.
Relevance of the EITI for financial institutions
The EITI process provides more complete financial information on companies and countries.
The EITI informs country ratings and investments.
The EITI establishes forums for discussion and reforms.
The EITI improves the investor’s reputation.
For the EITI, financial institutions can play a key role in encouraging companies both to support the EITI and to play a meaningful role within it.
The EITI requires disclosures from the government and state-owned enterprises (SOEs) of their level of ownership in mining, oil and gas companies operating within the country’s oil, gas and mining sector, including those held by SOE subsidiaries and joint ventures, and any changes in the level of ownership during the reporting period (EITI Requirement 2.6).
The EITI requires companies operating or bidding in the extractives sector in implementing countries to publish beneficial ownership information (EITI Requirement 2.5). This enables industry stakeholders and investors to know who they are doing business with. Having information on the identity of joint venture partners of companies would improve the investor’s visibility on companies and the risks associated with certain projects. It also contributes to clear and consistent reporting requirements and a more stable investment.
There is complementarity between EITI’s beneficial ownership requirements and compliance with other regulations requiring beneficial ownership disclosures such as Know Your Customer and the Financial Action Task Force for the banking sector.
Having institutional investors and financial intuitions contribute to EITI governance and be directly represented on the EITI Board sends an unequivocal message to operating companies that their owners expect them to be participate in collective problem-solving and leadership. It sends an equally clear message to hosting governments that responsible investors wish to see well-informed reforms. With investors and financial institutions using data and information made available through the implementation of the EITI Standard, it is important that they help shape its implementation and evolution.
Why financial institutions support the EITI
The benefits and rationale for supporting the EITI vary according to the type of financial institution as well as their exposure by asset class and geographic spread. Nonetheless, there are a number of key reasons for supporting the EITI, including:
Reputational benefits. Support for the EITI demonstrates a financial institution’s commitment to transparency and improvements in both corporate and public-sector governance. EITI support sends a clear signal to markets of a financial institution’s commitment to anti-corruption and broader governance standards.
Forum for discussion and collaboration with other financial institutions. The EITI provides a forum for financial institutions to share experiences and practices thematically and geographically.
A seat at the table. Supporting the EITI allows financial institutions to be a part of this evolving debate about extractives governance. By having a voice through the investor stakeholder group represented on the EITI Board, financial institutions can shape the global governance of the sector.
Beyond financial support
Financial institutions can help further the EITI’s core mission beyond mere financial contributions in several ways. These include:
Outreach to non-EITI supporting companies. Supporting financial institutions can hold briefing meetings with companies with whom they do business. They can explain the business case for supporting the EITI and explore ways in which these companies can participate.
Outreach to governments. In the course of interactions with governments, the support of financial institutions for the EITI could take several forms and may only be applicable for financial institutions specialised in emerging market fixed income. In EITI implementing countries, financial institutions can encourage governments to bolster the case for investment by sourcing key data from EITI Reports and enhancing the link between EITI implementation and the broader investment climate. In non-EITI implementing countries, financial institutions can explain the role of the EITI and broader transparency improvements in improving the investment environment.
Collaboration with credit rating agencies. As key consumers of credit rating reports, financial institutions can help enhance rating analysts’ awareness of disclosures through the EITI and encourage them to draw on such sources to support their qualitative judgements regarding institutional capacity, governance reform and anti-corruption efforts. Financial institutions can help credit rating analysts support their assessments by showing how they use EITI information.
If your company would like to be listed as a supporting financial institution and sign the statement of support, an annual fee of USD 9,950 is required. To become an EITI Supporting Financial Institution, please complete and submit the Supporting Financial Institution Form and send your company logo in high resolution to Andrew Irvine, Corporate and Legal Manager at the EITI International Secretariat.
For further questions, please contact Andrew Irvine.