Alternative Investments and Secrecy Jurisdictions
Environmental, Social and Governance Issues in the Context of the Financial Crisis
by Stephanie Fried
first published 1 November 2008
Over the past two decades, people negatively affected by development projects, and environmentalists and human rights advocates who support them, have "followed the money" to influence the public and private financial institutions backing damaging projects, such as multilateral development banks and export credit agencies. Improved environmental and social policies and standards have been one result.
But environmentally- and socially-destructive mega-projects are increasingly being funded by "alternative investments" such as hedge funds, private equity and sovereign wealth funds that are not subject to significant transparency, governance or reporting requirements. Moreover, public financial institutions are themselves investing in these "alternative" vehicles, which are often based in "secrecy jurisdictions", such as offshore tax havens.
In the midst of the current global financial crisis, however, the Asian Development Bank is pushing for even less transparency and even further deregulation for such high risk investments. Regulatory authorities urgently need to consider another approach. They should focus instead on much stronger transparency and accountability requirements and address the use by public financial institutions of "secrecy jurisdictions".