Investors' statement on transparency in the Extractives

As institutional investors with exposure to companies operating around the world, we believe it is in the interest of the companies in which we invest to operate in a business environment that is characterised by stability, transparency and respect for the rule of law. These factors are essential to securing economic prosperity and social cohesion, which, in turn, enable the companies in which we invest to prosper.

However, they are frequently undermined by poor standards of governance and transparency, which can give rise to
corrupt operating environments. We are concerned that extractive companies are particularly exposed to the risks posed by operating in these environments. 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.

We believe that improved transparency about both payment and revenue flows is an important contributor to good governance by host governments, although its effectiveness will depend on the success of wider initiatives to combat corruption and the misuse of revenues.

We recognise that the root of the governance problem often lies in underdeveloped local capacity in many host countries. However, in the light of the G8 discussions on corruption and increased international attempts to create transparency about revenue flows, we believe that the corporate sector has an important opportunity to support government and multilateral institutions by taking action to protect its own long-term interests.

We acknowledge that the corporate sector cannot singlehandedly reform long-standing business practices such as lack of transparency over payments to government, nor can individual companies act alone without compromising their immediate commercial interests.

However, we believe that reform will give the extractive companies in which we invest an opportunity to be seen as contributors to, and not just beneficiaries of, economic development and reconstruction.

We therefore encourage the development of mechanisms to promote payments transparency that respect the following principles:

• Confidentiality: to ensure that existing contractual agreements and commercially sensitive information are respected;


• Universality: to ensure that improved disclosure standards apply to all parties. This includes joint ventures, stateowned
  extractive companies and their host governments;


• Comprehensiveness: ensuring that all relevant payments and revenues paid to governments are captured, and


• Comparability: to enable data for different countries to be compared easily.

We commend the Extractive Industries Transparency Initiative (EITI) process led by the UK Government for seeking to develop an effective system of disclosure regarding payments in the mining, oil and gas sectors, which is supported by home and host governments, commercial and national companies, and other stakeholders.

Within the framework of the G8 discussions on payments transparency and the EITI, we are calling on the companies in which we invest to:

• Support the principles of payments disclosure developed by the EITI process;


• Work proactively with host country governments and other stakeholders, including other companies, to develop and implement payments transparency agreements within those countries that sign the principles;
  
• Become, or continue to be, active participants in the process to promote take-up of payments transparency agreements
  by host country governments that are not yet signatories to the principles.

We believe that the EITI principles may be relevant to other sectors, and welcome appropriate initiatives with similar objectives.
As institutional investors representing US$8.3 trillion we actively support the development of international mechanisms to address payments transparency, and encourage other investors to join us in this statement.

March 2005
WALDEN ASSET
MANAGEMENT

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For further information on this Statement or contact details for
the Investors listed below, please contact Karina Litvack,
Director, Head of Governance & Socially Responsible
Investment, F&C Asset Management plc –
karina.litvack@fandc.com or 020 7506 1219.

Payments Disclosure Group of Investors

F&C Asset Management (UK) – Karina Litvack
Baillie Gifford & Co (UK) – Kenny Bell
Banco Fonder (Sweden) – Tonica Hirdman
Bâtirente (Canada) – Daniel Simard
Boston Common Asset Management (US) – Geeta Aiyer
CalPERS (US) – Ted White
Calvert Group Ltd (US) – Dr. Julie Gorte
CCLA (UK) – Neville White
Central Finance Board of the Methodist Church (UK) – Bill Seddon
Christian Brothers Investment Services (US) – John Wilson
Co-operative Insurance Society (UK) – Jo Allen
Deutsche Asset Management (UK) – Andrew Tusa
Dexia Asset Management (Belgium/France) – Hugo Lasat
Domini Social Investments (US) – Adam Kanzer
The Dreyfus Premier Third Century Fund Inc and The Dreyfus
Socially Responsible Growth Fund Inc (US) – Paul Hilton
Ethical Funds (Canada) – Robert Walker
Ethos Investment Foundation (Switzerland) – Caroline Schum
Fidelity Investments (UK) – Trelawny Williams
Folksam Insurance Group (Sweden) – Carina Lundberg
Förster AP-fonden (AP1) (Sweden) – Nadine Viel Lamare
Frater Asset Management (South Africa) – William Frater
Gartmore Investment Management plc (UK) – Tony Little
Goldman Sachs Asset Management International (UK) – Alex Marshall
Henderson Global Investors (UK) – Rob Lake
Hermes Investment Management Limited (UK) – Jennifer Morris
Hospital of Ontario Pension Plan (HOOPP) (Canada) – Julie C. Cays
HSBC (UK) – Ivor Godfrey-Davies
I.DE.A.M. – Integral Development Asset Management (France) – David Diamond
ING Investment Management (The Netherlands) – Anna Pot
Insight Investment Management (UK) – Rachel Crossley
JPMorgan Asset Management (US) – Amy Davidsen
Jupiter Asset Management (UK) – Simon Abrahams
Legal & General Investment Management (UK) – Tim Breedon
Local Authority Pension Fund Forum (UK) – Tessa Younger
Merrill Lynch Investment Managers (UK) – Alex Popplewell
Morley Fund Management (UK) – Toby Belsom
Newton Asset Management Ltd (UK) – Ian Burger
New York State Common Retirement Fund (US) – Alan G. Hevesi
Nottinghamshire County Council (UK)
Ohio Public Employees Retirement System (US) – Cynthia Richson
Ontario Teachers’ Pensions Plan (OTPP) (Canada) – Catherine Jackson
PGGM (The Netherlands) – Karina Litvack, F&C
Railpen Investments (UK) – Frank Curtiss
RCM (UK) – Bozena Jankowska
Rio Tinto Pension Investments Ltd (UK) – Stephen Burley
Robecco (The Netherlands) – Erik Breen
Sarasin (Switzerland) – Eckhard Plink
Schroders Investment Management (UK) – Sue Livingston
Services Employees International Union (SEIU) (US) – Steve Abrecht
SNS (The Netherlands) – Theo Dijkstra
State of Conneticut (US) – Denise L. Nappier & Donald A. Kirshbaum
State Street Global Advisors (US) – Bill Page
Storebrand (Norway) – Stephen Williams
Swiss Re Asset Management (Switzerland) – Paolo Sismondi
TIAA-CREF (US) – Peter Clapman
Trades Union Congress (UK) – Tom Powdrill
Trillium Asset Management (US) – Steve Lippman
UBS Global Asset Management (UK) Ltd – Ian Pitfield
Universities Superannuation Scheme (UK) – Raj Thamotheram
Walden Asset Management (US) – Tim Smith

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