What is PWYP’s ask?

Publish What You Pay (PWYP) calls on investors to support the development of regulations that would require companies to report their payments to governments on a country-by-country basis and by payment type. This would create the conditions needed for investors to better judge the risks of company exposure in different country contexts.

Why does PWYP focus on investors?

Investors with exposure to companies operating around the world have found that it is in the interest of their investee companies to operate in an environment that is characterised by stability, transparency, and respect for the rule of law. It is these conditions that allow business to prosper.

Unfortunately in many countries that are rich in natural resources such as oil, gas and minerals, the mismanagement or misappropriation of revenues generated by extractive industries have had devastating consequences – undermining the rule of law, diminishing productive investments, allowing funds to leak away into illegal hands and fostering frustration and unrest. Poor governance of resource revenues has led to lower development prospects for citizens, as well as unstable operating environments and lower returns for companies and their investors.

As investors representing some US$12.3 trillion in funds have stated: “Companies that make legitimate, but undisclosed, payments to governments may be accused of contributing to the conditions under which corruption can thrive. This is a significant business risk, making companies vulnerable to accusations of complicity in corrupt behaviour, impairing their local and global “licence to operate”, rendering them vulnerable to local conflict and insecurity, and possibly compromising their long-term commercial prospects in these markets.”

Through reformed accounting standards and stock exchange listings regulations requiring company financial reporting broken down country-by-country, and by payment type, investors will be able to assess the risks of their investments in the oil, gas and mining sectors: where, in what amount, and on what terms is their money being spent in what are often very high-risk operating environments in impoverished countries with unstable governments.

Citizens of producing countries would also be able to use the companies’ reports to see how much revenue their governments were receiving, a step towards holding them to account for these resources and reducing the ‘Resource Curse’. Thus this step of good corporate governance would go beyond maximising shareholder value. Recognizing multiple stakeholders is an important reflection of the broader society use of information in supporting a sustainable value creation.

PWYP’s engagement with investors on revenue transparency

Extractive Industries Transparency Initiative

At the original launch of the Extractive Industries Transparency Initiative (EITI) in June 2003, 38 investment institutions signed the ‘Investors’ Statement on Transparency in the Extractives Sector’ supporting the EITI. This statement was reaffirmed in October 2006 with support from an enlarged group of 70 international investment institutions representing combined assets of $12.3 trillion.

The process was led by UK-based investor F&C Asset Management and signatories included CalPERS, Dresdner RCM Global Investors, Fidelity Investments, Merrill Lynch Investment Managers, New York State Common Retirement Fund, PGGM, Schroders Investment Management, SSgA Limited and TIAA-CREF.

The Investors’ Statement demonstrated to extractive companies and host governments that the capital markets unambiguously support the EITI principles and place a value on strong and transparent fiscal practices, and support constructive moves towards better governance.