French reserve fund takes first step on extraction sector corruption and governance engagement

Fund joins EITI as precursor to lobbying high risk oil, gas and mining companies.

The €29bn ($40.5bn) French pensions reserve fund (FRR) has taken an initial step in a strategy to lobby high risk companies in the oil, gas and mining sectors to fight corruption and promote good governance, by joining the Extractive Industries Transparency Initiative (EITI). The EITI, launched in 2002 at the World Summit on Sustainable Development in Johannesburg, aims to fight bribery in countries with major extraction industries – notably in developing countries – by promoting transparency over payments by companies to governments and government-linked entities, and the publishing of related revenues by governments. The EITI campaigns to reduce poverty and promote economic growth as a result.
FRR joins more than 80 institutional investors, including some of the world’s biggest pension funds, collectively managing over US$14 trillion, as an EITI member. The French fund said joining was part of its new engagement policy, first announced by its executive and supervisory boards in April 2008, to examine portfolio companies activities and attitudes with respect to widely accepted international principles and then engage with a smallnumber of high risk cases.
Nada Villermain Lecolier, head of responsible investment at FRR said analysis of its investment holdings by EIRIS, the SRI research company, had revealed a number of problems in the extractive industries, including environmental concerns. She said specific company lobbying would follow: “We want to learn about how the initiative works and about the eventual economic spill-over effects in the concerned countries.
Preparing engagement with companies is in progress, but too early to talk about at this stage.”
 EITI members sign up to lobby portfolio companies that are directly or indirectly in the oil, gas and mining sectors to join the initiative and, for those already committed to support it to play an active part in its implementation.
In recent months, the FRR has ratcheted up its governance pressure on high-profile international issues. In June this year, the fund announced it was adopting a position of ‘vigilance’ on risks that the companies it invests in could be hit financially by government clampdowns on the use of tax havens.