Financial disciplining of extractive industries and the SDGs

Extractive industry corporate social responsibility [CSR] has come to be judged through the lens of sustainable development, hardening around multilateral codes such as the Sustainable Development Goals [SDGs], through certification and reporting schemes, and under stakeholder pressure. Banks, investment firms and financial regulation/governance - 'Finance' - have gained increased capacity to monitor extractive industry CSR through three channels: first, financial firms are using ESG [Environmental, Social, and Governance] data analytics; second, compelled to monitor through the requirements of financial regulations imposed under the Markets in Financial Instruments Directive I and II [MiFID, Europe], Dodd-Frank [US] and OECD, global banks are influenced when allocating or withholding capital; third, extractive MNEs' with headquarters, business operations, or banking relationships in the US or Europe have fallen under the reporting requirements of banking regulations such as Dodd-Frank and MiFID. Interweaving concepts from extractive industry economics, international business, banking theory and law & finance, this chapter uses five vignettes to inductively construct a framework depicting this financial disciplining. The resulting framework finds variation across and within industry [mining versus oil & gas, and within each industrial sector]. The efficacy of financial disciplining is conditioned by a respective extractive MNE's home- and host-countries. But supranational regulatory power and access to global finance appear to increase, and to make more uniform, the effects of the disciplining on all extractive MNEs. In addition, financial disciplining often leads to changes in management, corporate ownership and/or corporate structure.