Lessons for an accountable transition: Leveraging beneficial ownership information for natural resource governance

Introduction

Beneficial ownership transparency (BOT) is an area of policy reform that consists of the disclosure of information on the beneficial owners of companies and other types of corporate vehicles. A beneficial owner is an individual who ultimately owns, controls or benefits from a corporate vehicle. [4] Disclosing information about the relationship between corporate vehicles and their beneficial owners is a way to promote integrity in the public and private sectors and to improve the quality of overall state governance. BOT creates an effective mechanism to deter corruption, fraud, tax evasion and other criminal activities by reducing secrecy and limiting the variety of channels that can be used to facilitate – and ultimately make invisible – various illicit extractive activities. Making beneficial ownership information widely accessible further increases the likelihood of its impact. [5]

Countries may decide to start implementing beneficial ownership transparency for a variety of policy aims. Many countries have begun allowing citizens to access information on who controls and owns corporate vehicles in the extractive and energy sectors. Whether responsible natural resource governance was a primary policy aim or only a possible secondary outcome for these countries, growing evidence underscores the importance of BOT for these sectors. Countries that started implementing BOT by focusing on the extractive sector have most often participated in the Extractive Industries Transparency Initiative (EITI).

With the EITI Standard requiring the establishment of beneficial ownership registers that are accessible to the public, many EITI countries have since been implementing reforms to achieve this goal. [6] BOT has enabled multiple stakeholders, from tax and other regulatory authorities to investigative journalists, to access relevant data on extractive companies, either in economy-wide or sectoral registers. The use of data on beneficial owners helps identify risks and inform decisions throughout the extractives value chain.

The experience of reform among implementers and data users in extractives has generated lessons for other sectors, and it has contributed to the growing body of evidence on BOT implementation. These lessons are particularly noteworthy in the context of the energy transition: renewable energy is expected to account for over 90% of global electricity capacity expansion between 2022 and 2027, [7] while projections suggest a 500% increase in demand for transition minerals like cobalt or lithium by 2040. [8]

This rapid intensification of demand comes with revenue generation prospects that make the sector prone to attract illicit activities. For instance, in the past decade, the renewable energy sector already recorded over 200 allegations of human rights abuses. [9] Without solid mechanisms in place, corruption, crime, fraud and poor management of natural resources will be significant barriers to sustainable growth in the sector. [10] In this moment of critical transition, this briefing explores lessons from the extractive sector that carry relevance for both extractive industries, including transitional minerals, and potentially for the renewable energy sector.

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