This chapter explores the role of the state as policymaker, regulator and owner in creating an enabling environment for SOEs to lead by example on sustainability. Following a review of the state’s regulatory and policy-making functions, the chapter looks at how the state as owner and shareholder can systematically integrate sustainability into its ownership policies and practices. It presents a four-step framework for doing so, namely: 1) embedding sustainability into ownership policies; 2) setting clear expectations; 3) monitoring SOE performance; and 4) reporting on outcomes. Drawing on country practices, the chapter provides illustrative examples and practical insights to highlight emerging approaches and lessons learned.
State‑Owned Enterprises and Sustainability
Leading by Example
Abstract
The state has a critical role to play in fostering sustainable practices among SOEs, both through its responsibility for setting the policy and regulatory framework and through its role as owner and shareholder. As a policymaker and regulator, the state is responsible for establishing the legal and institutional framework underpinning sustainable practices and policies. This includes providing an enabling environment for companies – whether state-owned or private – to make decisions and manage risks and opportunities.
In parallel, where the state has set sustainability goals, it can, as an owner and shareholder of SOEs, influence SOEs’ governance and performance by setting concrete and ambitious sustainability-related expectations. These expectations should align and be coherent with national sustainability goals and encourage SOEs to lead by example. In sectors where SOEs dominate, their alignment with national sustainability priorities can have a transformative effect (Figure 2.1).
While this report focuses primarily on the role of the state as owner, this chapter begins with a brief overview of the state’s regulatory and policy-making functions, which provide the broader environment in which SOEs operate (Section 2.1). The chapter then explores how the state, as owner and shareholder, can integrate sustainability into its ownership policy and practices (Section 2.2).
Note: The “state” is used here as an encompassing term, referring to the group of institutions, agencies and other government stakeholders that play a role in shaping, implementing and ensuring coherence in the area of sustainability. Different roles can, and sometimes must, be exercised by different institutions to ensure a proper separation of responsibilities; however the end-goal should be to ensure that decisions are taken on a whole-of-government basis to ensure coherence in outcomes.
Governments use a wide range of legal and regulatory tools as incentives for companies, including SOEs, to move towards more sustainable practices. These tools aim to address environmental and social externalities, improve transparency, and incentivise the transition to low-carbon and inclusive economies. To better understand their implications for state ownership and the governance of SOEs, this section highlights:
key sustainability-related regulations and policy frameworks relevant for SOEs.
SOE-specific considerations for policy effectiveness.
the importance of ensuring policy coherence at the whole-of-government level.
2.1.1. Key sustainability-related regulations and policy frameworks
Table 2.1 provides a non-exhaustive list of sustainability-related laws, regulations and policies that are most relevant for SOEs, either because they directly apply to them or because they shape the regulatory environment in which SOEs operate.
Note: *In Switzerland, the 2021 Ordinance on Due Diligence and Transparency focuses on minerals and metals from conflict-affected areas and child labour (Swiss Confederation, 2024[1]).
Source: OECD own compilation, 2025.
The government may also devise cross-cutting sustainability strategies and action plans at the national level. These include national sustainable development strategies, green industrial policy plans or “just transition” strategies that may involve or give a prominent role to SOEs. While such strategies provide high-level direction, they are increasingly accompanied by binding regulations that translate sustainability goals into concrete obligations.
For example, several governments have adopted sustainable procurement policies for public sector purchases (e.g. Colombia, New Zealand). These policies may be particularly helpful to influence business practices and shift markets toward more sustainable outcomes. Indeed, as one of the largest consumers of good and services, governments have a unique ability to directly influence sustainability-related outcomes through procurement contracts. Most European countries include sustainability-related criteria into their public procurement processes, as part of the EU framework for green and sustainable public procurement.1 Such measures do not directly target SOEs, although they may be applicable to SOEs’ own procurement practices when fulfilling a government purpose and to SOEs as bidders (OECD, 2022[2]).
Within the European Union, these national efforts are being further supported and harmonised under the broader policy umbrella of the European Green Deal. The EU’s climate and sustainability strategy has translated into a wide-ranging legislative package which includes binding sustainability targets and regulatory measures for member states (Box 2.1). These include sector-specific and market-wide measures which impact SOEs and private-sector companies alike (OECD, 2022[2]).
Over the last few years, the European Commission has adopted an ambitious policy programme to deliver on the UN’s Sustainable Development Goals (SDGs). It consists of several important initiatives, directives and regulations bearing on corporate sustainability matters, including:
The European Green Deal (2019): a strategic roadmap to accelerate the EU’s transition to climate neutrality by 2050, including a target to reduce emissions by at least 55% by 2030 (compared to 1990 levels). It sets a legislative framework for all member states to take certain actions such as moving to a circular economy, reversing biodiversity loss and cutting pollution. It also outlines investment needs for meeting related objectives and provides mechanisms for addressing the social and economic effects of the transition towards a climate neutral economy (“just transition mechanism”).
The EU Taxonomy (2020): a framework for green classification of economic activities for investment purposes. It is designed to improve transparency, minimise the risk of “greenwashing”, and support market participants to compare companies and investment portfolios.
The “Fit for 55” package (2023): a major revision of EU climate and energy legislation aimed at meeting 2030 emissions reduction targets. Measures aim at reducing reliance on fossil fuels, and expanding the use of renewable energy.
The Corporate Sustainability Reporting Directive (CSRD, 2023): expands sustainability reporting obligations for large EU and non-EU companies with significant EU business, with first reports due in 2025. Companies must disclose sustainability information in line with the new European Sustainability Reporting Standards (ESRS), which set higher sustainability reporting requirements than the previous Non-Financial Reporting Directive (NFRD).
The Corporate Sustainability Due Diligence Directive (CSDDD, 2024): establishes obligations for large companies to identify, prevent and mitigate adverse human rights and environmental impacts in their operations and value chains. It also introduces civil liability and enforcement mechanisms to strengthen corporate accountability.
Source: European Commission (n.d.[3]) EU taxonomy for sustainable activities, https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en; European Commission (2025[4]) Questions and answers on simplification omnibus I and II, https://ec.europa.eu/commission/presscorner/detail/bg/qanda_25_615 .
2.1.2. SOE-specific considerations for policy effectiveness
While many sustainability-related policy instruments are designed to apply universally to all market participants, certain may be less effective when applied to SOEs. For example, price-based mechanisms, such as carbon taxes or emissions trading schemes, are widely used to address negative externalities and correct market failures (see Box 2.2). These adjustments typically assume that market actors will respond rationally to price signals by adjusting their behaviour accordingly.
Current market policies tend to focus on carbon pricing, which essentially aim at tying the external cost of GHG emissions (e.g. damage to health, resources or infrastructure) to their sources through a price – usually in the form of a price linked to the carbon dioxide (CO2) emitted.
Main carbon pricing mechanisms include:
Carbon taxes: aim at rendering low and zero carbon energy more competitive compared to alternatives. By increasing the price of high-carbon energy, carbon prices reduce demand for carbon-intensive fuels, as they encourage emitters to find ways for emission reduction. Moreover, a strong commitment to carbon prices creates certainty for investors in the use of zero and low-carbon technologies, and the development of new ones. While climate-related taxes are on the rise, the overall progress in imposing carbon pricing remains modest.
Emissions trading systems (ETS): refers to systems where emitters can trade emission units to meet their emission targets. A number of jurisdictions have started introducing ETS to reduce carbon consumption. Most notably, the EU ETS was introduced in 2005 and operates in all reporting EU jurisdictions, as well as Iceland, Liechtenstein and Norway. Similar instruments have also been developed in other countries.
There are other carbon pricing instruments, such as carbon offsetting and carbon crediting mechanisms. Certain studies indicate that in the absence of such mechanisms, companies wanting to align their operations and strategies with sustainability expectations could benefit from implementing an internal carbon pricing mechanism (“shadow carbon pricing”) to help them meet both the broad goals of the state as their shareholder and their own financial objectives, and to anticipate the emergence of effective carbon pricing mechanisms.
A harmonised climate policy architecture should ensure that carbon pricing is implemented in tandem with the removal or phasing out of inefficient fossil fuel subsidies.
Source: OECD, 2022, Climate Change and Corporate Governance, Corporate Governance, OECD Publishing, Paris, https://doi.org/10.1787/272d85c3-en; OECD, (2022[2]) Climate Change and Low-carbon Transition Policies in State-owned Enterprises, OECD Publishing, https://doi.org/10.1787/e3f7346c-en; Blanchard, O., C. Gollier and J. Tirole (2023[5]) The Portfolio of Economic Policies Needed to Fight Climate Change, Annual Review of Economics, https://www.annualreviews.org/doi/pdf/10.1146/annurev-economics-051520-015113 (accessed on 20 September 2023); Lin, J., (2022[6]) China’s State-Owned Enterprises Hold Keys to Carbon Neutrality, https://www.alliancebernstein.com/corporate/en/insights/esg-in-action/esg-in-action-chinas-state-owned-enterprises-hold-keys-to-carbon-neutrality.html (accessed on 20 September 2023); Benoit, P. (2020[7]) Engaging State-Owned Enterprises in Climate Action: Workshop Report, Center on Global Energy Policy, https://www.energypolicy.columbia.edu/publications/engaging-state-owned-enterprises-climate-action (accessed on 20 September 2023).
However, research is so far inconclusive as to whether such market-wide interventions are effective in the case of SOEs. Some studies suggest that such approaches may have limited impact on SOEs’ behaviour due to the overall absence of competition where SOEs exhibit high market concentration, the existence of non-financial objectives and their dependence on government subsidies amongst other aspects (Benoit et al., 2022[8]).2 A more recent study found that cap-and-trade schemes can still produce positive outcomes by resolving co-ordination challenges across government entities (mostly due to conflicting incentives) as they create political pressures on governments to ensure SOEs reduce emissions (Loughborough University, 2024[9]).
Beyond decarbonisation, SOEs may respond differently than private-sector firms to sustainability-related regulations and policies, including in areas such as corporate governance, anti-corruption, human rights due diligence and disclosure. These differences often stem from SOEs’ specific characteristics and governance, including dual mandates, softer budget constraints and varying degrees of political oversight (OECD, 2020[10]).
Taken together, these insights highlight the importance of considering institutional realities when designing and applying sustainability policy instruments to SOEs. A better understanding of what drives SOE behaviour – and how this differs from that of private firms – is essential for improving their effectiveness.
2.1.3. Ensuring policy coherence at the whole-of-government level
A clear and coherent legal and regulatory framework is generally considered the first step towards effective implementation of sustainability objectives. However, ensuring policy coherence at the whole-of-government level is often complex as it requires balancing competing priorities, navigating trade-offs and co-ordinating across institutions and sectors.
In many jurisdictions, public sector practices – including those involving SOEs – do not always align with stated sustainability commitments. For example, while some governments have endorsed ambitious environmental goals, the public sector continues investing in high-carbon infrastructure or providing fossil fuel subsidies (IISD, 2018[11]; World Bank, 2022[12]). In 2019, the public sector accounted for 38% of global energy investments – of which a sizeable share was channelled through SOEs or state-owned financial institutions – directed to support fossil fuel generation (OECD, 2022[2]). These inconsistencies point to the importance of improving coherence between the state’s ownership policy and practices and longer-term environmental or social commitments.
Certain sustainability-related measures – such as fossil fuel taxes or emissions pricing – may disproportionately affect marginalised or vulnerable groups (e.g. lower-income households, workers in high-emission sectors). To mitigate these risks, governments need integrated policy approaches that include complementary measures, such as social protections, skills retraining, and targeted support for affected communities.
Examples from international experiences illustrate different approaches to achieving a more coherent and just transition (SEI et al., 2021[13]):
Spain’s Just Transition Strategy (2019-2027) provides early retirement and retraining for coal miners along with environmental restoration measures.
Greece’s Just Transition Development Plan includes income-support, social protection and labour reskilling for coal-dependent regions.
Canada has directed significant public investment towards skills development and economic diversification, to support affected workers and communities.
With the appropriate policy mix, governments can create incentives that advance sustainability goals while avoiding regressive impacts. This requires a whole-of-government approach and co-ordination across institutions, including SOEs, when implementing public policies.
To support these efforts, the OECD has developed recommendations that support an integrated approach to policymaking. These include the OECD Recommendation on Policy Coherence for Sustainable Development and the OECD Recommendation on the Role of Government in Promoting Responsible Business Conduct, which also align with other international standards such as the International Labour Organization’s Guidelines for a Just Transition (ILO, 2015[14]). In line with these instruments, the state’s ownership policies should promote coherence with broader national and international sustainability-related commitments.
Where the state has set sustainability goals, state shareholders should expect SOEs to lead by example. This means aligning and, if relevant, going beyond regulatory requirements to ensure that SOEs pursue long-term value creation, consistent with the principle that the state exercises ownership in the interest of the general public. In line with the SOE Guidelines, the state (through relevant ownership entities) should therefore promote sustainability through clear policies and expectations and integrate responsible practices into SOE governance.3 Such policies and practices should, at minima, align with national sustainability goals, although they may even encourage SOEs to go beyond and lead by example.
Where the state has set sustainability goals, they should be integral to the state’s ownership policy and practices (Guideline VII.A).
This section outlines a four-step process the state can follow to integrate sustainability goals within ownership policies and practices (Figure 2.2). This includes:
1. integrating sustainability considerations into state ownership policies and practices
2. setting concrete and ambitious expectations for SOEs and supporting their implementation
3. monitoring and assessing SOE performance with expectations
4. reporting on sustainability.
These steps are part of an iterative process as the key findings of the monitoring and assessment process can serve to inform regular updates to existing policies and practices governing state ownership.
2.2.1. Step 1: Integrating sustainability into state ownership policies and practices
To ensure policy coherence, an important first step is for the state to integrate sustainability considerations in 1) its ownership policy or relevant policies applicable to SOEs; and 2) its ownership practices.
To ensure policy coherence, the state’s ownership policy and practices should be aligned with broader national objectives on sustainable development, including international commitments (Guideline VII.A.1).
Integrating sustainability into the state ownership policy
As recognised in the SOE Guidelines, the ownership policy can play a key role in promoting sustainability by clearly setting expectations for SOEs and linking these to the state’s rationale for ownership (see Box 2.3 for case studies). It provides a tool to convey long-term sustainability objectives to SOEs, the market and the general public, ensuring a shared understanding of the state’s goals in this area (OECD, 2022[2]).
To support integration, the state owner should ensure that ownership policies are aligned with relevant national laws, regulations, policies or strategies, as well as international commitments to which it is party. This includes identifying relevant targets such as those embedded in climate or human rights frameworks, and reflecting them in the state’s expectations of SOEs. Priority should be given to binding national and international instruments, although voluntary standards also provide useful guidance.4
Several countries demonstrate good practices in this area:
Finland, Norway and Sweden explicitly reference international frameworks in their ownership policies, such as the OECD SOE Guidelines and Guidelines for Multinational Enterprises on Responsible Business Conduct (MNE Guidelines), the UN’s 2030 Agenda and SDGs, the UN Guiding Principles on Business and Human Rights, the Ten Principles of the UN Global Compact, and the ILO MNE Declaration. Some countries also reference more specific or sectorial initiatives, such as the Extractive Industries Transparency Initiative (EITI) (OECD, 2022[2]).
The SOE Guidelines also recommend that the development of ownership policies should involve consultation with relevant government bodies and stakeholders to ensure policy coherence and legitimacy (OECD, 2024[15]). For example:
Sweden’s ownership entity consults with relevant government departments, such as the Ministry of Environment, when developing its ownership policy.
Finland’s ownership entity engages relevant stakeholders, such as environmental NGOs, when developing sustainability-related aspects of the state ownership policy.
Where ownership is decentralised, strong co-ordination mechanisms between entities with oversight responsibilities and other relevant government departments can help to ensure that SOEs are not subject to competing or contradictory mandates. In such cases, standardised templates, such as Switzerland’s model template for setting key performance targets (including sustainability-related targets), can ensure a consistent approach across the SOE portfolio.5 In the absence of a state ownership policy, sustainability expectations or requirements for SOEs can also be set through other SOE-specific policies; individual expectations or mandates for SOEs; and general laws or regulations applicable to all market participants (see Table 2.2).
Finland’s state ownership policy was updated in 2024. Similar to its previous version (2020), it explicitly states that state ownership may be used to advance sustainable development goals. The policy includes a chapter dedicated to the issue of sustainability, which clarifies the state expectations in this area. More particularly, SOEs are required to: i) integrate CSR standards into their business operations; ii) recognise the impact of their operations on the environment; iii) align with the government’s objective to become carbon neutral by 2035; iv) consider human rights issues in their activities and across their supply chains; v) avoid aggressive tax planning; and vi) inform shareholders about important sustainability-related issues (Finnish Government, 2024[16]).
In Sweden, the government updated its State Ownership Policy in 2025 which defines high-level expectations of the Swedish Government for SOEs. More specifically, SOEs are expected to: i) “act in an exemplary way that safeguards public trust”; ii) “generate sustainable value creation”; iii) “have long-term ambitions and good transitioning capacity”; and iv) act transparently in relation to their stakeholders. The state ownership policy further highlights specific requirements related to the role of SOEs, including setting strategic targets for sustainable value creation and conducting an open and constructive dialogue with stakeholders amongst other aspects (Government Offices of Sweden, 2025[17]).
In Thailand, the state ownership policy, as embodied in the Principles and Guidelines on Corporate Governance for State-owned Enterprises B.E. 2562 (2019), establishes sustainability-related expectations for SOEs. These include RBC requirements as well as expectations for SOE boards to develop policies and operational plans that prioritise sustainable operations and innovations, amongst other aspects. SOEs are also expected to align with the Thai five-year Development Plan which sets forth requirements for SOEs to engage in the circular economy, minimise GHG emissions by 20-25% by 2030, and develop a Business Continuity Management Plan to ensure resilience against natural disasters and climate change, amongst other aspects.
Norway updated its state ownership policy, called Report to the Storting (White Paper on Ownership Policy no.6) in October 2022 to adapt “to the opportunities and challenges of this decade, with a view to generate increased value creation throughout Norway and to maintain sound and sustainable management of state ownership.” With a strong emphasis on Norway’s ambition to transition to a low-carbon economy by 2050, the ownership policy identifies different ways through which the SOE sector can contribute to sustainable development. In addition, the heightened sustainability orientation of the policy is also reflected in the state’s goals as an owner. For commercial companies the state’s goal is “the highest possible return over time in a sustainable manner”, and for companies that do not primarily operate in competition with others, the goal is “sustainable and the most efficient possible attainment of public policy goals” (The Royal Ministry of Trade, 2022[18]).
Ireland adopted a Climate Action Plan in 2019 (CAP 19) which sets out the first ambitious emission reduction targets for the public sector. More concrete requirements for SOEs were introduced in 2021, through the adoption of the Climate Action and Low Carbon Development Act 2021 and the related Climate Action Plan 2021 (CAP 21). Both recognise that SOEs “are already playing a significant role in the decarbonisation of Irish society.” In July 2022, a Climate Action Framework for the commercial semi-state sector was approved by the government and has subsequently been adopted by all Irish SOEs. The framework provides a means for SOEs to demonstrate how they are meeting their obligations under the Climate Action and Low Carbon Development Act (Government of Ireland, 2021[19]).
Source: OECD, (2024[20]), Ownership and Governance of State-Owned Enterprises, https://www.oecd.org/en/publications/ownership-and-governance-of-state-owned-enterprises-2024_395c9956-en.html
Ultimately, clear, practical and achievable sustainability expectations set by the state and guided by the ownership policy can support the alignment of SOEs’ strategy with long-term national priorities. In France, for example, the state’s central ownership agency (APE) has issued a CSR Charter (Table 2.2) requiring SOEs to align their corporate strategies with sustainability goals. The example of EDF (see Box 2.4) demonstrates that this approach can lead to a significant shift in the company’s strategic direction, without requiring the state to interfere in its operational autonomy (see also Section 2.2.2 “Step 2” for more details on setting sustainability expectations for SOEs).
Électricité de France (EDF) is France’s integrated electricity provider. It generates electricity, carries out electricity transmission and distribution services, and engages in supply optimisation and trading. It is fully-owned by the French state through the Agence des Participations de l’État (APE), and is involved in actioning France’s gas independence plans and renewable energy transition.
As a shareholder, APE sets clear sustainability expectations for its portfolio companies through its “CSR Charter”. EDF has embedded APE’s expectations at the core of its corporate purpose (“raison d’être”) and long-term strategy, which commit "to build a net zero energy future with electricity and innovative solutions and services, to help save the planet and drive well-being and economic development.” This supports the implementation of its transition plan, which is to achieve carbon neutrality before 2050.
In addition, EDF has also committed to scaling up investments in renewable energy (including nuclear energy) and innovative low-carbon technologies, ensuring a sustainable transition of the French energy sector. EDF also adheres to the APE’s CSR Charter by promoting workforce diversity and human rights in supply chains.
Source: EDF (n.d.[21]) La raison d’être du groupe EDF, https://www.edf.fr/groupe-edf/raison-d-etre; APE (2021[22]) La responsabilité sociale et environnementale des entreprises, Ministère de l’Économie des Finances et de la Souveraineté industrielle et numérique, https://www.economie.gouv.fr/agence-participations-etat/charte-sous-traitance
Integrating sustainability into state ownership practices
To act as an active and informed owner, the state should integrate sustainability considerations into its ownership practices. This includes: 1) embedding sustainability into ownership strategies; 2) assessing environmental, social and governance (ESG) risks at the portfolio level and their materiality; and 3) building institutional capacity and co-ordination to enable better decision making and performance monitoring (see also Section 2.2.3 “Step 3”).
Embedding sustainability into ownership strategies
Ownership entities can embed sustainability expectations into long-term shareholder or investment strategies. These strategies should articulate clear action plans and identify timelines and long-term outcomes to reach their stated goals. In some cases, scenario planning can help to guide decision making with alternative assumptions. For example, Austria’s ÖBAG includes sustainability considerations into its investment strategies and has conducted a comprehensive materiality assessment to guide portfolio-level decision making.
In certain cases, state ownership entities have developed specific sustainability strategies. Greece’s Growthfund, for example, has adopted a three-pronged sustainability strategy focused on transparency, stewardship and operational excellence to ensure sustainability integration across its SOE portfolio (Box 2.5).
Growthfund is Greece’s national fund responsible for overseeing a portfolio of state-owned enterprises operating across diverse sectors. With a mandate to serve the public interest, Growthfund seeks to create long-term value by actively supporting its SOEs in advancing their sustainability performance (referred to as “ESG performance”) through a dedicated sustainability strategy and targeted tools and resources.
Growthfund’s sustainability strategy builds on three key pillars: 1) transparent reporting; 2) SOE stewardship; and 3) overarching principles for operational excellence. To support SOE stewardship, Growthfund has taken three main actions:
Expectations documents: addressed to SOEs’ management teams highlighting priority sustainability expectations, such as organisational preparedness and proactive engagement.
Education and awareness building: launched an online education platform called “Sustainability Academy” which develops sustainability skills and expertise amongst SOE personnel.
ESG data template and reporting handbook: provides its SOEs with ESG data templates to ensure consistent and regular collection of ESG data. A dedicated reporting handbook further educates SOE personnel on ESG reporting requirements.
Source: Growthfund, (2022[23]) Environmental Social & Governance (ESG) Policy, https://growthfund.gr/wp-content/uploads/2023/08/D13_ESG-Policy_en.pdf.
Assessing risk and materiality
An essential part of sustainable ownership practices is identifying and managing ESG-related risks and opportunities at the portfolio level. As noted earlier, SOEs often operate in sectors exposed to heightened risks – including environmental-, social- (e.g. human rights) and governance-related (e.g. corruption). Unmanaged, these risks can affect long-term value creation, increase fiscal exposure and lead to stranded assets or reputational liabilities. This is particularly relevant in the case of SOEs where the state may face financial consequences – such as reduced or volatile dividends, unsustainable debt levels (particularly if state-guaranteed), or transition risks associated with high-carbon stranded assets.6 Beyond risk management at ownership level, SOEs should also conduct due diligence at a corporate level (as elaborated in Chapter 3).
International practice offers useful models for implementing materiality assessments and risk identification tools, as well as for their management:
In Norway, the centralised ownership entity conducts portfolio-wide assessments of climate-related risks (Box 2.6).
Austria’s ÖBAG has conducted detailed materiality assessments based on international benchmarks and stakeholder consultations (Box 2.6).
Other countries, such as Finland, the Netherlands and Sweden, have conducted assessments to identify material risks and opportunities across their SOE portfolios and evaluate their impact on SOE long-term value creation. In some cases, these assessments have also informed shareholder or board decisions on acquisitions, divestitures or restructuring – such as breaking up large SOEs into distinct entities focused on renewable versus high-carbon activities.
Finland has developed tools based on key performance indicators to manage material sustainability risks and opportunities (see Box 2.7).
In 2017, Norway’s centralised ownership entity, located within the Ministry of Trade, Industry and Fisheries, in collaboration with other ministries, commissioned an independent assessment of the state’s exposure to climate-related risks through its partial or full ownership of 37 selected companies. The purpose of the assessment was to evaluate how these companies aligned with the government’s expectations regarding climate and environment. The assessment focused on four areas: performance, transparency, risk and opportunity management, and emissions reduction. The assessment served as a capacity-building tool for the ownership entity, helping to identify both areas for improvement and examples of SOEs demonstrating leadership in sustainability.
In 2023, Austria’s state holding company, ÖBAG, conducted a comprehensive materiality assessment to identify material sustainability issues across its SOE portfolio. The assessment comprised three key components:
1. a definition of material sustainability topics related to environmental, social and governance (ESG) considerations relevant to ÖBAG’s operations
2. the conduct of a survey of stakeholders’ expectations (“evidence-based survey”)
3. the formulation of a sustainability strategy based on identified opportunities and strategic options.
For this purpose, ÖBAG reviewed international best practices and benchmarked them against its existing strategy and sustainability agenda. An initial “long list” of material topics was developed and subsequently narrowed down to a “short list” of ten priority issues through workshops and consultations with ÖBAG management and external stakeholders, including academic and scientific experts. The results of the materiality assessment were published in ÖBAG’s report on business activities and sustainability for 2023.
Source: OECD, (2022[2]), Climate Change and Low-carbon Transition Policies in State-owned Enterprises, https://doi.org/10.1787/e3f7346c-en; ÖBAG, (2024[24]), Priorisierung von Nachhaltigkeitsthemen mit Impact, https://oebag.gv.at/perspektive/priorisierung-von-nachhaltigkeitsthemen-mit-echtem-impact/ .
As part of Finland’s 2024 state ownership policy, the Ownership Steering Department has developed a programme defining the state’s sustainability objectives for its SOE portfolio, currently comprising 71 SOEs. The programme’s key objective is to improve sustainability in ownership steering in view of “growing and preserving shareholder value.” However, it also serves as a tool for the state owner to monitor its expectations in this field.
The programme identifies six priority areas that are considered material for most Finnish SOEs:
1. Climate (green transition)
2. ESG-linked management remuneration
3. Responsible employment practices and diversity in the workforce
4. Biodiversity
5. Due diligence, including throughout the value chains
6. Human rights
SOEs alignment with these priority areas are monitored closely by the state owner. For each priority area, relevant objectives, sub-objectives and key performance indicators (KPIs) are identified to monitor implementation by SOEs and ownership steering effectiveness (see example below). Relevant KPIs are tracked in an existing reporting system which includes quarterly data reporting and annual reporting of sustainability-related targets in the SOEs’ budget plans and strategy. Progress in implementing the programme is reported on an annual basis in the annual aggregate report prepared by the Department.
Source: Government of Finland (2024[25]) State-owned sustainable growth: Government Resolution on Ownership Policy 2024, https://julkaisut.valtioneuvosto.fi/handle/10024/165658OSD .
Institutional capacity and co-ordination
Effective implementation depends on institutional capacity and co-ordination mechanisms. To support these efforts, some ownership entities have established in-house teams with sustainability expertise (e.g. Finland, Netherlands, Norway, Sweden), while others, such as Austria’s ÖBAG, have opted for a cross-cutting approach by embedding sustainability expertise in relevant departments. This integrated model avoids isolating sustainability into a single unit and promotes whole-of-organisation consideration of sustainability issues.
Regardless of the ownership model, bodies in government with an ownership co-ordination function should consider regularly consulting relevant ministries or soliciting specific expertise on sustainability to inform decision making. This expertise can ensure accurate identification and interpretation of sustainability-related data collected from SOEs, and support the mainstreaming of sustainability-related considerations into state ownership practices and decision making.
To support alignment of ownership policies and practices with national sustainability goals, state owners may consider the following practices:
Communicate long-term sustainability-related commitments and goals. Transparently communicate the state’s long-term sustainability-related commitments and goals (e.g. on value creation, carbon neutrality) preferably through the state ownership policy.
Ensure alignment of SOE objectives with national commitments and goals. Reference relevant objectives and targets to meet national commitments and goals (e.g. SDGs, Paris Agreement, OECD SOE Guidelines and OECD MNE Guidelines) in the state ownership policy.
Promote policy coherence. Consult with relevant ministries, public institutions and stakeholders to ensure policy coherence. This includes encouraging whole-of-government co-operation and harmonisation, particularly in decentralised ownership frameworks.
Embed sustainability into ownership practices. Integrate sustainability considerations into their own ownership practices (e.g. SOE-related strategies and investments, monitoring function) to align decision making with long-term value creation.
Perform portfolio-wide assessments. Conduct portfolio-wide risk and materiality assessments to identify sustainability-related risks and opportunities and inform key shareholder decisions.
Develop in-house expertise. Establish in-house or engage sustainability expertise to mainstream sustainability-related considerations into ownership practices, better monitor sustainability-related performance and inform decision making.
Standardise tools and metrics. In decentralised ownership frameworks, develop common tools and frameworks, such as data templates, strategic target setting models, or key performance indicators to ensure consistency and avoid fragmentation of approaches across the SOE portfolio.
2.2.2. Step 2: Setting clear and ambitious expectations for SOEs and supporting their implementation
Once sustainability-related considerations are integrated into the state’s ownership policies, the next step is to define and clearly communicate ambitious expectations for SOEs. These expectations should be aligned across the SOE portfolio and supported by mechanisms that promote effective implementation. This section outlines how ownership entities can:
1. define and communicate concrete and ambitious sustainability-related expectations
2. manage trade-offs through regular dialogue with SOEs
3. support implementation through targeted tools and mechanisms
4. ensure that sustainability objectives respect a level playing field.
Define and communicate concrete and ambitious expectations
As recommended by the SOE Guidelines, the state owner should articulate high-level sustainability expectations for SOEs, including on RBC, in a clear, consistent and ambitious manner (Guidelines VII.A.1 and VII.D). These expectations, ideally embedded in the ownership policy, set the tone for SOEs’ strategic direction and decision making at the enterprise level.
Where the state has set sustainability goals, they should be integral to the state’s ownership policy and practices. This includes setting concrete and ambitious sustainability-related expectations for SOEs (Guideline VII.A.1) and communicating and clarifying the state’s expectations through regular dialogue with the boards (Guideline VII.A.2).
High-level expectations should apply across the entire SOE portfolio, while allowing for sector-specific tailoring, where relevant and material. Depending on the ownership model, these expectations can be set through:
ownership policy and other strategic frameworks (see also above)
letters of expectations or individual mandates for SOEs set through other means
dialogue with SOEs’ governing bodies, as certain sectors and/or individual enterprises may face specific challenges and risks due to the nature of their activities.
For instance, energy and transport SOEs may require detailed transition plans and GHG reduction targets, while SOEs in extractives or infrastructure may be expected to undertake enhanced environmental and human rights due diligence. The state owner should then consider tailoring its expectations depending on what is relevant and material to a particular enterprise or sector’s operations and activities. Table 2.4 summarises common types of sustainability-related expectations for SOEs across key areas, such as strategy, governance and procurement – and illustrates how these are being implemented in practice by various countries.
Source: OECD own compilation based on cited countries’ state ownership policies.
High-level expectations should be communicated in a clear and concise manner. The SOE Guidelines also recommend that where the state is not the sole owner, it should share its expectations in a transparent manner through its state ownership policy and through the exercise of its shareholder rights. In doing so, the state should respect the rights and fair treatment of other shareholders.
Manage trade-offs through regular dialogue
To promote effective implementation, expectations should not only be clearly communicated but also supported through ongoing dialogue. According to a survey, in most OECD countries, shareholder dialogue is essential in ensuring mutual understanding between the ownership entity and the SOE board on high-level expectations (OECD, 2022[2]). Regular interaction between the owners and SOE boards enables mutual understanding of evolving priorities, potential trade-offs and the implications at the national level (Guideline VII.A.2). As part of this dialogue, ownership entities should communicate expectations clearly and early, especially when new obligations arise, and facilitate mutual understanding of potential trade-offs when integrating sustainability-related considerations. For example, trade-offs might include foregoing short-term profitability versus long-term transition investments, or prioritising decarbonisation objectives as opposed to employment retention policies (OECD, 2022[2]). In turn, such clarity can help SOE governing bodies translate expectations into meaningful strategies and targets at the corporate level.
Communicating and clarifying the state’s expectations on sustainability through regular dialogue with the boards (Guideline VII.A.2).
The process is not necessarily top down. Where boards are already integrating sustainability into decision making, shareholder dialogue can play a complementary role, by aligning expectations, reinforcing accountability, supporting consistency across the portfolio, and providing a forum to address tensions and evolving priorities.
It is important to underline that board autonomy and independence should be respected to avoid duplicating governance responsibilities. Therefore, discussions should be conducted within a structured framework for communication between the state owner and the SOEs’ highest governing body, and respect SOEs’ full operational autonomy to achieve their defined objectives, as set out in the SOE Guidelines. Existing practices suggest that communication can take place through several channels as outlined in Table 2.5, including:
general shareholder meetings
regular shareholder dialogue
ad hoc workshops and stakeholder consultations
board level discussions on expectations
Source: OECD interviews with cited countries, 2024.
Support implementation through targeted mechanisms
To translate expectations into action by SOE governing bodies, the state as owner could encourage their implementation, and more generally the take-up of good practices through targeted support mechanisms. These include:
educational and training material, or specific guidance that may be helpful in ensuring a common understanding of state expectations on SOEs (see example in Box 2.8)
technical assistance, including advisory support
awards and other incentives
A list of targeted support mechanisms is provided under Table 2.6 which summarises selected country examples.
Source: ClimateWorks, (2023[26]) BPKP launches ESG assessment guidelines for Indonesian State-owned enterprises, https://www.climateworkscentre.org/news/bpkp-launches-esg-assessment-guidelines-for-indonesian-state-owned-enterprises/, OECD, (2022[2]) Climate Change and Low-carbon Transition Policies in State-owned Enterprises, https://doi.org/10.1787/e3f7346c-en, Government Offices of Sweden (2021[27]), Annual report for state-owned enterprises 2021, https://www.government.se/4a8226/contentassets/b31448c8f5154a3eae7489cfee1d8b8f/annual-report-for-state-owned-enterprises-2021-complete.pdf, OECD, (2020[28]). OECD Business and Finance Outlook 2020: Sustainable and Resilient Finance, https://www.oecd-ilibrary.org/finance-and-investment/oecd-business-and-finance-outlook-2020_eb61fd29-en
The Dutch government has developed a specific manual aimed at supporting the implementation of its SOE sustainability-related expectations, as set out in its state ownership policy of 2022.
Published in July 2023 (and revised in 2025), the handbook provides guidance to SOEs on the formulation, monitoring and reporting of sustainability (referred to as “CSR” in the document) objectives and policies. The handbook reiterates the Dutch state’s expectation for SOEs to “be ambitious and to set an example.” For this, the state assumes that they comply with relevant (inter)national standards and frameworks and are transparent about them, set their own targets and demonstrate that they are frontrunners in their sector.
Note: The Handbook also includes expectations for SOEs to implement mandatory EU laws and regulations such as the EU Taxonomy and Corporate Sustainability Reporting Directive.
Source: Ministry of Finance of the Netherlands, (2025[29]), CSR handbook.
Maintain a level playing field
While setting sustainability-related expectations is an important lever for achieving public policy outcomes, state owners must take care to avoid distorting the competitive landscape. In line with the SOE Guidelines and as elaborated below, this includes ensuring that:
1. Public policy objectives (PPOs) and/or public service obligations (PSOs) are clearly defined, transparently disclosed, and where relevant costed and compensated.
2. Preferential treatment, such as subsidies or below market support to SOEs and by SOEs active in the marketplace, is avoided.
Public policy objectives or public service obligations
Where the state is the sole or majority shareholder, it may assign PPOs and/or PSOs to SOEs when they are best placed to achieve sustainability-related goals that serve the public interest. These may include accelerating the energy transition or delivering goods or services that the market would not provide efficiently or effectively (Figure 2.4). PPOs and PSOs may also be achieved via government institutions or private actors, but are often delegated to SOEs for efficiency reasons.
Specifically, PSOs are assigned to SOEs to ensure the appropriate access to essential economic or social services, in a manner sufficient to fulfil the PSO under commercial considerations. Common examples of PSOs include:
universal service and/or affordability requirements
maintenance of public infrastructure.
Some mandates go beyond traditional PSOs to address sustainability goals. These may involve targeted state intervention particularly where market incentives are insufficient to generate the desired outcomes. This could be due to market failure, high upfront costs, or long investment horizons that dissuade private investment. For instance, SOEs may be tasked with:
phasing out inefficient fossil fuel subsidies or shifting to low carbon alternatives (see Box 2.9).
supporting research and development in strategic high-risk technologies that would not otherwise attract private investment.
mainstreaming sustainability-related considerations in lending and investment (e.g. via state-owned banks and financial institutions).
To ensure a level playing field, the SOE Guidelines recommend ensuring that these public policy objectives respond to commercial imperatives, align with the SOE’s main line of business, and be delivered under competitive market settings.
Indonesia has committed to reduce its GHG emissions by 32% by 2030 (or 43% with international support) and to achieve Net Zero emissions by 2060.
To meet these targets, Indonesia has set emissions reduction targets by sector and developed specific regulations and initiatives to encourage decarbonisation of its economy. These include:
Presidential Regulation (PR) No. 22/2017 on National Energy Grand Plan which mandates the target of 23% New Renewable Energy (NRE) in the national energy mix by 2025 and 1% reduction in energy intensity per year
development of a Green Electricity Supply Business Plan which prioritises NRE and its development in Indonesia
a national mandatory biodiesel policy (Permen ESDM No. 12/2015)
removal of fossil fuel subsidies
encouragement of the development of an electric vehicles (EV) ecosystem (Perpres No. 55/2019)
The adoption of such regulations has led to the adoption of numerous initiatives which focus on
reducing emissions
building adjacent businesses (e.g. geothermal, bio-blending gasoil, integrated EV battery development)
exploring “step-out” initiatives (e.g. wind and hydro energy development, carbon capture storage development)
A number of SOEs are expected by the Ministry of SOEs of Indonesia to lead these initiatives. Such expectations include:
certain SOEs to play a role in the EV battery supply chain (Circular No. 565/2022)
a voluntary carbon market pilot project for carbon trading
nature-based solutions development (e.g. protection of peat forests)
energy transition mechanisms (e.g. early retirement programme for coal-fired power plants)
Source: Ministry of SOEs of the Republic of Indonesia, (2022[30]), Climate Change and Low-Carbon Transition Policies in SOE.
While such interventions may be justified in the public interest, there is no consensus on how interventionist the state should be. On the one hand, state-led mandates can help address market failures, accelerate high-risk innovation or achieve sustainability goals not met through purely market-based means. On the other hand, SOEs – particularly large incumbents – may crowd out private sector-led solutions or deter market entry. Conversely, where the state does not intervene, commercial actors – including SOEs – may overlook social returns, leading to underinvestment in long-term transitions, essential services or innovation (IFC, 2023[31]).
State support measures
Care should be taken to ensure that PPOs are not achieved indirectly through state support measures which can distort competition, such as:
below market pricing for inputs such as energy
preferential financing via state-owned banks
favourable procurement or investment terms (OECD, 2023[32]).
An OECD study found that between 2010 and 2020, the top 25% of industrial firms benefiting the most from subsidised or cheap energy were 65% state-owned on average – suggesting that such support may confer a material advantage over private firms (OECD, 2024[33]). SOEs may also act as providers of support, such as when state-owned banks finance other SOEs (or market actors) on concessional terms – such relationships should be based on purely commercial grounds.
Given this tension, the rationale for assigning PPOs or PSOs and any state support measures to or via SOEs to achieve sustainability goals must be carefully assessed. State owners might consider:
whether state intervention via SOEs is likely to maximise long-term value for society in an efficient and sustainable manner
whether new sustainability-related PSOs or PPOs constitute a fundamental change in an SOE’s mission, in which case changes should be clearly justified and transparent
ensuring any assigned obligations are clearly defined, publicly disclosed and – where applicable – transparently costed and compensated in line with Chapter III of the SOE Guidelines and the OECD Recommendation on Competitive Neutrality (OECD, 2021[34]; 2024[35])
ensuring that state support measures do not harm competition.7
To set concrete and ambitious sustainability-related expectations for SOEs, state owners may consider the following practices:
Set expectations in a clear and transparent manner. Expectations should be set out in a clear and transparent manner, preferably in the state ownership policy. Expectations should cover the entire SOE portfolio and contain both cross-cutting and sectorial considerations where relevant.
Communicate expectations clearly and early. Use regular shareholder dialogue to support mutual understanding of potential trade-offs. Such communications should respect SOEs’ board autonomy and independence.
Support implementation. Encourage implementation of sustainability expectations through targeted support mechanisms (e.g. training, implementation guidance, technical assistance and awards).
Ensure transparency and a level playing field. When the state tasks SOEs with sustainability-related PPOs or PSOs, care should be taken to ensure transparency and avoid market distortions. Alignment with related OECD recommendations, including on competitive neutrality, can help safeguard fair competition.
2.2.3. Step 3: Monitoring and assessing SOE performance with expectations
After setting clear expectations for SOEs (see Step 2), the next step is to actively monitor and evaluate how SOEs are meeting these expectations. This involves two complementary dimensions: compliance monitoring – checking that SOEs implement the required actions and adhere to policies in line with high-level expectations; and performance evaluation – assessing the actual sustainability outcomes and impacts of SOE operations. Effective monitoring is crucial for the state to act as an informed and active owner, ensuring progress towards sustainability goals while respecting SOEs decision making bodies. It requires timely access to accurate and material financial and non-financial information and the integration of sustainability-related criteria into existing reporting and monitoring frameworks (or developing dedicated mechanisms if needed). In line with the SOE Guidelines, the ownership entity should regularly review SOE performance on sustainability and oversee their compliance with both high-level expectations and applicable legal and regulatory requirements. Ultimately, state ownership should be positioned to identify when intervention or support is needed and to adjust expectations based on observed performance trends.
The state should monitor the implementation of general expectations for SOEs related to sustainability issues. To this effect, the state should adequately integrate sustainability-related expectations within the existing reporting system, to be able to regularly assess and monitor SOE performance and oversee their compliance with high-level expectations and applicable legal and regulatory requirements (Annotations to Guideline VII.A.3).
Compliance monitoring of high-level expectations
Monitoring compliance is about verifying that SOEs follow the sustainability-related directives, standards and high-level expectations set by the state. This typically includes tracking whether SOEs have adopted the necessary strategies, governance arrangements and reporting practices to fulfil the state’s sustainability objectives (for example, implementing climate action plans, human rights due diligence or diversity policies mandated by the owner). Responsibility for monitoring usually lies with the individual ownership entities responsible for their SOE portfolios or a central co-ordination entity, depending on the governance model. Common methods include requiring periodic reports or questionnaires from SOEs, conducting interviews with SOE boards and management, and leveraging digital reporting platforms to collect and analyse information. Examples of monitoring approaches include (see also Box 2.10):
Peru’s FONAFE monitors SOEs’ compliance with its CSR and corporate governance guidelines through a digital performance monitoring platform which allows to monitor progress based on a standardised methodology. Through this framework, each SOE is invited to provide information and supporting evidence relative to FONAFE’s guidelines on an annual basis. SOEs’ performance is then ranked on a scale ranging from one (non-existent practices) to six (leading practices).
Norway’s ownership entity in the Ministry of Trade, Industry and Fisheries assesses SOEs’ compliance with its high-level expectations through a structured reporting tool which covers: 1) material expectations the company must achieve; 2) how the company meets these expectations; 3) the direction of the company’s work on these expectations; and 4) which expectations should be prioritised and followed-up by the ownership entity in the coming year.
Ireland’s New Economy and Recovery Authority (NewERA) performs biannual compliance checks against the “Framework for the Commercial Semi-State Sector (CSS) to address climate action objectives,” using a standard questionnaire to track progress in key areas (e.g. emission reduction, green investment and climate-related disclosure).
The Netherlands combines regular shareholder dialogue and targeted interviews with SOE boards to gather information. It is also developing a digital dashboard to improve real-time visibility of SOEs’ sustainability performance.
Several other countries (e.g. Finland, France) are moving towards automated monitoring systems (e.g. online monitoring dashboards and databases) to track SOE sustainability metrics more efficiently and in real time.
Ireland’s New Economy and Recovery Authority (NewERA) performs ongoing compliance monitoring with the “Framework for the Commercial Semi-State Sector (CSS) to address climate action objectives” which was approved by the Irish Government in 2022 and subsequently adopted by all the CSS companies (i.e. SOEs). NewERA reports to relevant Departments on the implementation of the framework, which focuses on five main areas:
governance of climate action objectives
emissions measurement and reduction targets
emissions measurement and valuation in investment appraisals
circular economy and green public procurement
climate-related disclosures in financial reporting by individual companies.
NewERA monitors implementation of these commitments on a biannual basis. For this, NewEra distributes twice a year a questionnaire to all CSSs which covers a range of topics within these five areas. The responses are collated and reported on an aggregate basis.
In the Netherlands, progress in meeting sustainability objectives is reviewed by the state owner through
the general meeting of shareholders
regular sustainability (CSR) interview cycle and tools.
As part of its shareholder powers, the state analyses whether sustainability expectations are appropriately reflected in each SOE’s strategy, investments, board appointments and reward system (i.e. remuneration policy) in line with the state’s expectations described in its RBC Guidelines.
In addition, regular discussions occur between the state and the board of individual SOEs. Underperforming SOEs are interviewed at least once at board level. During these discussions, an action plan is discussed to enable the SOE to make progress. Further discussions with the board can take place if the SOE fails to meet the objectives of its action plan.
The state may also use specific instruments to support its monitoring role. These include a cultural diversity barometer (gives insight into the cultural diversity of their workforce) and a peer analysis (aimed at giving information on SOE’s position relative to their peers).*
Note: *The peer analysis is currently being developed.
Source: Ministry of Finance of the Netherlands, (2025[29]), CSR handbook; OECD (2024[36]) Competitive Neutrality Toolkit: Promoting a Level Playing Field, https://doi.org/10.1787/3247ba44-en; NewEra (2022[37]), Climate Action Plan 2021 Action 55: Framework for the Commercial Semi-State Sector to address climate action objectives.
Ensuring consistency in monitoring is particularly important in a decentralised or dual ownership framework. A common framework or general guidelines can harmonise how different ministries or agencies oversee sustainability. For example, Germany has introduced a unified performance evaluation framework that all federal ownership entities use to review SOE performance, including sustainability criteria. In addition, ownership entities are also specifically requested to ensure that SOEs in their portfolios submit a sustainability report in accordance with the German Sustainability Code or equivalent reporting standard, demonstrating that federal SOEs fulfil commitments such as those in the National Action Plan on Business and Human Rights. This kind of harmonised monitoring framework helps the state aggregate results and ensure that every SOE is meeting baseline expectations on sustainability compliance.
Sustainability performance evaluation
Beyond checking for compliance, state ownership entities may undertake more in-depth evaluations of how well SOEs perform on sustainability metrics and expectations. Performance evaluation looks at outcomes and effectiveness: for example, are SOEs actually reducing their greenhouse gas emissions in line with national targets? Are they improving their workforce diversity and supply chain ethics? Such evaluations can be conducted across the entire SOE portfolio or can be focused on key sectors and priority issues. Some ownership entities carry out regular performance reviews (annually or periodically) to benchmark and compare SOEs’ progress, while others might commission one-off assessments on specific topics. These thorough reviews complement regular compliance monitoring by examining the quality of performance. In practice, this approach can support ownership entities with several purposes, notably by:
Identifying risks and opportunities across the SOE portfolio: reviews can highlight which SOEs or sectors face significant sustainability risks (e.g. climate transition, social compliance) and opportunities for improvement.
Informing adjustments: by examining the empirical evidence, state owners can refine or adjust their ownership policies or SOE expectations. For example, by identifying leaders or laggards, and adjusting any resources that may be directed to the SOEs.
Building knowledge and capacity: evaluating the performance deepens the ownership entity’s understanding of relevant (and material) sustainability issues affecting its SOE portfolio or individual SOEs. Over time, this can enable the state owner to more effectively challenge SOEs and encourage them to lead by example.
A number of countries, such as Austria, France, and Sweden, benchmark sustainability performance of SOEs across the portfolio, against industry peer companies or defined targets. Benchmarking defines the appropriate baselines for reviewing performance in light of industry-specific circumstances, making it easier to evaluate whether an SOE is leading in its industry on issues such as emissions, social impact or governance. The resulting data allow the state to prioritise how to address sustainability-related risks and opportunities within its portfolio, devise or revise expectations on an informed basis, and pinpoint where intervention is needed. SOEs themselves may use the findings to tailor or calibrate their internal objectives and targets. Box 2.11 provides a number of examples illustrating how performance evaluation is applied in practice.
The results of the state’s monitoring and assessment exercises should be put to use. The findings need to be communicated to the SOEs and used to inform ongoing dialogue with their boards. This feedback loop allows the ownership entity to support implementation of sustainability expectations, helping to identify leaders, as well as corrective measures in case individual SOEs fall short of expectations. Public disclosure of progress – for example through the annual aggregate report – not only holds SOEs accountable, but also demonstrates the state’s own commitment to its sustainability-objectives and helps build trust with stakeholders (see Section 2.2.4 “Step 4”).
Austria’s ÖBAG reviews the sustainability performance of its SOE portfolio. The portfolio currently comprises 11 commercially oriented SOEs operating in key sectors of the economy including energy, telecommunications and postal services. To support its assessment, ÖBAG benchmarks the sustainability-related practices of its SOE portfolio with relevant SOE peers in the industry, on a national and international scale.
Based on this activity, relevant sustainability-related KPIs are identified for individual SOEs to monitor their performance and identify areas for improvement. Therefore, ÖBAG’s portfolio monitoring has been designed to take into account not only cross-sector KPIs but also sector-specific KPIs. Environmental indicators are based on the Science Based Targets Initiative and focus on Scope 1, 2 and 3 emissions, although they significantly vary depending on the sector of operation.
In Sweden, performance reviews start with the SOEs’ own double materiality assessment, which is required by the state ownership policy. It should provide information about the SOE’s risks and opportunities as well as its impact on society, and should include both a long-term and short-term perspective. This assessment can be challenged by the state owner. Based on this information, each SOE’s performance is assessed on three aspects:
overall sustainability performance
ability to deliver on sustainability expectations (governance, strategy, materiality assessment, KPIs and targets)
performance on top five material sustainability issues in comparison to sector peers or similar companies.
SOEs’ performance on each of these aspects is assessed using four colours (green = good performance, yellow = under monitoring, red = need action, grey = not assessed), resulting in a heatmap. This assessment is performed up to four times per year, depending on the SOE’s size, priority and performance. The ambition is to increasingly make the performance assessment on sustainability topics more data-driven and automatically generated. In addition, portfolio performance is assessed for each sustainability area identified as top priority for the owner (e.g. climate, biodiversity, own workforce, human rights, business conduct).
Source: OECD, (2022[2]), Climate Change and Low-carbon Transition Policies in State-owned Enterprises, https://doi.org/10.1787/e3f7346c-en; OECD’s secretariat interviews with relevant ownership entities, 2024.
To support effective monitoring and performance assessment of SOEs, state owners may consider the following practices:
Integrate sustainability into reporting. Ensure timely access to accurate, relevant data by including sustainability metrics into (existing) SOE reporting frameworks. Use tools such as questionnaires and interviews, regular reporting cycles or digital dashboards to collect and verify information.
Track compliance. Systematically monitor whether SOEs are complying with the state’s high-level expectations and any legal requirements. This can be facilitated through centralised platforms or databases that flag compliance status and gaps in real time (e.g. digitalised monitoring dashboard).
Evaluate performance and benchmark outcomes. When possible, go beyond compliance checks and undertake deeper evaluations of SOEs’ sustainability performance. Benchmark outcomes against industry peers or targets to identify leaders and laggards, and refine expectations to inform strategic decisions.
Engage and follow-up. Use monitoring results to engage in constructive dialogue with SOE boards. Provide feedback and support where needed, and agree on remedial actions or make adjustments if an enterprise is not meeting expectations. Follow up on these actions to ensure continuous alignment with the state’s sustainability expectations.
2.2.4. Step 4: Reporting on sustainability
The SOE Guidelines recommend that the state ownership entity develops consistent reporting on SOEs and publishes an annual report on the aggregate performance of its SOE portfolio as a tool for transparency and public accountability. These reports aim to disclose SOEs’ overall performance and their alignment with the government’s ownership policy, including sustainability-related expectations. Annual reporting can take the form of a narrative report with financial and non-financial information or an online inventory of financial and non-financial indicators.
The state should disclose sustainability-related expectations and their attainment to the general public, including in annual aggregate report (Guideline VII.A.4).
Aggregate reports serve a range of complementary objectives (OECD, 2022[38]), including:
communicating how SOEs are managed in the public interest
promoting active and informed ownership and accountability
supporting policy coherence at the whole-of-government level
facilitating public and parliamentary engagement
An increasing number of state ownership entities are incorporating material financial and non-financial reporting related to sustainability into their annual reports.8 In some cases, disclosures are a direct result of revised ownership policies that integrate sustainability-related expectations for SOEs, and include information on progress on meeting the sustainability expectations (and objectives where relevant) set in the ownership policy and other relevant legislative or regulatory requirements (e.g. Austria, Finland).
Current country practices vary greatly in terms of scope and depth of annual reporting. Sustainability information most commonly reported focuses on GHG emissions and board and executive diversity outcomes (e.g. gender diversity on boards and in senior management positions) (Table 2.7). In some cases, sustainability-related information is also provided for individual enterprises if central to their mandate and/or objectives (e.g. Austria), or to inform about relevant sustainability-related developments in selected enterprises or sectors, such as in Brazil, Chile and Colombia.
Source: Annual reports of cited countries, 2024.
As sustainability expectations and reporting requirements evolve, it is expected that the content of aggregate reports will expand accordingly. This may include broader coverage of social and environmental risks and other specific target-based reporting to help better measure outcomes of the state’s commitment and leadership in the area of sustainability.
To enhance sustainability-related reporting, state owners may consider the following practices:
Include sustainability data into aggregate reporting. Material financial and non-financial information related to sustainability should be disclosed in the state’s annual aggregate report on SOEs, including relevant indicators (e.g. GHG emissions, board diversity).
Report on individual SOEs when relevant. Provide information on the sustainability performance of individual SOEs if central to their mandate and/or objective or to inform about relevant sustainability-related developments.
Track progress against state expectations. Monitor alignment with sustainability-related goals and expectations set in the ownership policy – for both SOEs and the state ownership entity.
Disclose ownership entity performance. Report on their own sustainability performance and/or alignment with national sustainability goals.
Ensure public access to annual aggregate reports. Make reports available and easily accessible (e.g. by publishing them online, for free and in a user-friendly format).
References
[22] APE (2021), La responsabilité sociale et environnementale des entreprises, Ministère de l’Économie des Finances et de la Souveraineté industrielle et numérique, https://www.economie.gouv.fr/agence-participations-etat/charte-sous-traitance (accessed on 11 March 2025).
[7] Benoit, P. (2020), Engaging State-Owned Enterprises in Climate Action: Workshop Report, Center on Global Energy Policy, https://www.energypolicy.columbia.edu/publications/engaging-state-owned-enterprises-climate-action (accessed on 20 September 2023).
[8] Benoit, P. et al. (2022), “Decarbonization in state-owned power companies: Lessons from a comparative analysis”, Journal of Cleaner Production, Vol. 355, p. 131796, https://doi.org/10.1016/J.JCLEPRO.2022.131796.
[5] Blanchard, O., C. Gollier and J. Tirole (2023), The Portfolio of Economic Policies Needed to Fight Climate Change, Annual Review of Economics, https://www.annualreviews.org/doi/pdf/10.1146/annurev-economics-051520-015113 (accessed on 20 September 2023).
[26] ClimateWorks (2023), BPKP launches ESG assessment guidelines for Indonesian State-owned enterprises, https://www.climateworkscentre.org/news/bpkp-launches-esg-assessment-guidelines-for-indonesian-state-owned-enterprises/.
[39] EBRD (n.d.), What is a just transition?, European Bank for Reconstruction and Development, https://www.ebrd.com/what-we-do/just-transition (accessed on 1 March 2023).
[21] EDF (n.d.), La raison d’être du groupe EDF, https://www.edf.fr/groupe-edf/raison-d-etre (accessed on 11 March 2025).
[4] European Commission (2025), Questions and answers on simplification omnibus I and II, https://ec.europa.eu/commission/presscorner/detail/bg/qanda_25_615.
[41] European Commission (2022), Guidelines on State aid for climate, environmental protection and energy 2022, https://ec.europa.eu/commission/presscorner/detail/en/qanda_22_566 (accessed on 20 September 2023).
[3] European Commission (n.d.), EU taxonomy for sustainable activities, https://finance.ec.europa.eu/sustainable-finance/tools-and-standards/eu-taxonomy-sustainable-activities_en.
[16] Finnish Government (2024), Sustainable growth through State Ownership, https://julkaisut.valtioneuvosto.fi/bitstream/handle/10024/165680/VN_2024_30.pdf?sequence=1&isAllowed=y.
[25] Government of Finland (2024), State-owned sustainable growth : Government Resolution on Ownership Policy 2024, https://julkaisut.valtioneuvosto.fi/handle/10024/165658.
[19] Government of Ireland (2021), Climate Action Plan 2021, https://assets.gov.ie/static/documents/climate-action-plan-2021-833aad8a-2afa-4894-9c6e-f2ff1f076c98.pdf.
[17] Government Offices of Sweden (2025), State Ownership Policy 2025, https://www.government.se/contentassets/9c0ce65139ce4255b3a8f8bcd720113d/state-ownership_policy_2025_webb.pdf.
[27] Government Offices of Sweden (2021), Annual report for state-owned enterprises 2021, Ministry of Enterprise and Innovation, Stockholm, https://www.government.se/4a8226/contentassets/b31448c8f5154a3eae7489cfee1d8b8f/annual-report-for-state-owned-enterprises-2021-complete.pdf (accessed on 6 February 2023).
[23] Growthfund (2022), Environmental Social & Governance (ESG) Policy, https://growthfund.gr/wp-content/uploads/2023/08/D13_ESG-Policy_en.pdf.
[31] IFC (2023), Challenges of Green Finance: Private Sector Perspectives from Emerging Markets, https://www.ifc.org/content/dam/ifc/doc/2023/challenges-of-green-finance.pdf.
[11] IISD (2018), Stories From G20 Countries: Shifting Public Money Out of Fossil Fuels, International Institute for Sustainable Development, Geneva, https://www.iisd.org/publications/report/stories-g20-countries-shifting-public-money-out-fossil-fuels (accessed on 2 February 2023).
[14] ILO (2015), Guidelines for a just transition towards environmentally sustainable economies and societies for all, International Labour Organization, https://www.ilo.org/sites/default/files/wcmsp5/groups/public/%40ed_emp/%40emp_ent/documents/publication/wcms_432859.pdf.
[6] Lin, J. (2022), China’s State-Owned Enterprises Hold Keys to Carbon Neutrality, https://www.alliancebernstein.com/corporate/en/insights/esg-in-action/esg-in-action-chinas-state-owned-enterprises-hold-keys-to-carbon-neutrality.html (accessed on 20 September 2023).
[9] Loughborough University (2024), State-owned energy companies are among the world’s most polluting – putting a price on carbon could help, https://www.lboro.ac.uk/news-events/news/2024/february/worst-polluting-energy-companies/.
[42] Mayer, B. and M. Rajavuori (n.d.), State ownership and climate change mitigation: Overcoming the carbon curse?, https://benoitmayer.com/wp-content/uploads/2016/07/NFCC-CCLR-revised.pdf.
[29] Ministry of Finance of the Netherlands (2025), CSR handbook.
[30] Ministry of SOEs of the Republic of Indonia (2022), Climate Change and Low-Carbon Transition Policies in SOE.
[36] National Treasury Management Agency (2024), Climate Action Framework Q3-2024, Implementation Update October 2024, https://www.ntma.ie/publications/archive/2024.
[37] NewEra (2022), Climate Action Plan 2021 Action 55: Framework for the Commercial Semi-State Sector to address climate action objectives, https://www.ntma.ie/uploads/publication-articles/Climate-Action-Framework-for-CSS-Sector.pdf.
[24] ÖBAG (2024), Priorisierung von Nachhaltigkeitsthemen mit Impact, https://oebag.gv.at/perspektive/priorisierung-von-nachhaltigkeitsthemen-mit-echtem-impact/.
[35] OECD (2024), Competitive Neutrality Toolkit: Promoting a Level Playing Field, OECD Publishing, Paris, https://doi.org/10.1787/3247ba44-en.
[15] OECD (2024), OECD Guidelines on Corporate Governance of State-Owned Enterprises 2024, OECD Publishing, Paris, https://doi.org/10.1787/18a24f43-en.
[20] OECD (2024), Ownership and Governance of State-Owned Enterprises: 2024, https://doi.org/10.1787/395c9956-en.
[33] OECD (2024), Quantifying the role of state enterprises in industrial subsidies, https://doi.org/10.1787/49f39be1-en.
[32] OECD (2023), Measuring distortions in international markets: The rolling-stock value chain“, OECD Trade Policy Papers, No. 267,, https://doi.org/10.1787/fa0ad480-en.
[38] OECD (2022), Monitoring the Performance of State-Owned Enterprises. Good Practice Guide for Annual Aggregate Reporting, OECD Publishing, Paris, https://doi.org/10.1787/7f0b1554-en.
[34] OECD (2021), Recommendation of the Council on Competitive Neutrality, https://legalinstruments.oecd.org/en/instruments/OECD-LEGAL-0462.
[28] OECD (2020), OECD Business and Finance Outlook 2020: Sustainable and Resilient Finance, OECD, Paris, https://doi.org/10.1787/eb61fd29-en (accessed on 3 February 2023).
[10] OECD (2020), The COVID-19 crisis and state ownership in the economy: Issues and policy considerations, OECD Publishing, https://doi.org/10.1787/ce417c46-en.
[2] Papers, O. (ed.) (2022), Climate Change and Low-carbon Transition Policies in State-owned Enterprises, OECD Publishing, https://doi.org/10.1787/e3f7346c-en.
[13] SEI et al. (2021), The Production Gap Report 2021, https://www.sei.org/publications/the-production-gap-report-2021/.
[1] Swiss Confederation (2024), Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour, https://www.fedlex.admin.ch/eli/cc/2021/847/en.
[18] The Royal Ministry of Trade, I. (2022), Meld. St. 6 (2022 – 2023) Report to the Storting (white paper), https://www.regjeringen.no/contentassets/b45b4a63e301435293bd1b10d1ede45b/en-gb/pdfs/stm202220230006000engpdfs.pdf.
[40] WEF (2023), How state-owned companies can accelerate sustainability in the Middle East and North Africa, https://www.weforum.org/agenda/2023/01/state-owned-companies-accelerating-sustainability-in-the-middle-east-and-north-africa-davos2023/ (accessed on 2 February 2023).
[12] World Bank (2022), Management and Disclosure of Climate-Related Financial Impacts for State-Owned Enterprises : Toolkit for Shareholders and Regulators, World Bank Group, Washington, https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099005009022229052/p17256906b9e5b0dd093c30a1ba830d7bc8 (accessed on 2 February 2023).
← 1. For example, in Norway, as of 2024, climate and environmental aspects should, as a rule, have a minimum weight of 30 % in public procurement processes. In Finland, the central public procurement unit, Hansel Ltd, has developed a structured tool assessing sustainability around four key dimensions: environmental, financial, social and innovation. In parallel, Hansel Ltd also monitors the carbon footprint of its procurement activities using data from a model developed by the Finish Environment Institute (WEF, 2023[40]).
← 2. Other elements may play against the implementation of complex market-based instruments such as weak administrative and jurisdictional institutions or rampant corruption, most common in developing and emerging economies (Mayer and Rajavuori, n.d.[42]).
← 3. State ownership entities generally refer to the entity or entities responsible for the exercise or co-ordination of state ownership in SOEs (i.e. line ministries and/or centralised ownership agencies, or other entities depending on ownership arrangements).
← 4. This includes the G20/OECD Principles on Corporate Governance, including the chapter on sustainability, the OECD Guidelines on Corporate Governance of State-Owned Enterprises, the OECD Guidelines for Multinational Enterprises on Responsible Business Conduct and the OECD Guidelines on Anti-Corruption and Integrity in State-Owned Enterprises.
← 5. The expectation for SOEs to develop sustainability-related KPIs derives from the Federal Council’s “Sustainable Development Strategy 2030” and related Action Plan for 2021-2023. There is a new Action Plan 2024-2027, which complements existing instruments with measures aimed at facilitating greater co-ordination between policy areas.
← 6. Recent studies show that the threat of stranded assets, in the case of SOEs, is generally more relevant for state owners as for SOEs for whom the probability of a government bailout is relatively high (Benoit et al., 2022[8]).
← 7. In January 2022, the European Commission launched new Guidelines on state aid for climate, environmental protection and energy which provide the framework for public authorities to support the European Green Deal objectives efficiently and with minimum distortions of competition. They cover areas such as providing support for new technologies (such as hydrogen), closure of coal, peat and shale activities, and large airports that qualify for green investment projects (European Commission, 2022[41]).
← 8. Among countries previously surveyed, close to half reported that they include sustainability-related information in annual reports (or other reporting forms, as applicable), though specific practices and the level of detail can vary (OECD, 2022[2]).