Who Are the Actors in an Investment Chain?


The most visible actor in an investment chain is the business managing the project. This is the actor that is responsible for day-to-day operations of the project, which may include one or several components. For instance, a coal-fired power project might include the plant itself, transmission lines to distribute the electricity to consumers, and a port facility to import the coal.

The business might also interact with a government to secure licences and land leases. It also interacts with local communities. The business will have a physical presence, usually an office, in the country where the project takes place. The business can take different legal shapes or forms but will usually be a company.

Besides the business that manages the project, other actors that make the project possible include:

  • Parent companies that own the business that manages the project;
  • Investors and shareholders that invest money in a company in return for shares;
  • Lenders that make loans to a project or a company;
  • Governments that offer land to the business managing the project and allow a company to be registered and operate in their country or region;
  • Brokers that play a role in helping to secure business deals and communicating between or supporting different actors involved;
  • Contractors that carry out certain jobs on the ground on behalf of the project; and
  • Buyers that purchase the produce grown or processed by the project.

Box 1: What Is a Company?

A company is formed by an individual or group of individuals to conduct business or other activities. Once a company is officially registered, it becomes its own separate legal entity. This means that the company itself, rather than the individuals that form it, is legally responsible for these activities.

A company has shareholders who hold shares in the company, meaning that they partly own it. Shareholders invest in a company when they buy shares, and expect to make money on their investment as the company earns profit.

Both the individuals that form the company and the company’s shareholders are protected from being held personally responsible for the activities and debts of the company. This is called limited liability. Once a company is formed, money can be borrowed and contracts signed in the name of the company, rather than the individuals who established, own or manage it.

A company may take different forms, including a sole ownership (often called a sole proprietorship), a private company or a public company:

  • A sole ownership is a single person who owns the company and operates a business under the name of the company.
  • A private company has a small number of shareholders and sells shares privately, and not to the general public.
  • A public company usually has a large number of shareholders, and its shares are bought and sold on one or more public exchanges, such as stock exchanges. Public stock exchanges allow shares to be bought by anyone, including the general public or another company.

Most companies have the same basic structure. They have shareholders, directors, and a management team to run the company, which usually includes a chief executive officer, a chief operating officer and a chief financial officer. The management team reports to the board of directors.

Directors are usually appointed to the board by a company’s shareholders. The role of a board of directors is to help direct the company’s management. The directors have a duty to act in the interests of the company and for the benefit of the company’s shareholders.

Typical Company Structure


Parent Companies

Parent companies are usually firms that have control over one or more smaller businesses. The business managing the project on the ground will usually either be a subsidiary of the parent company or a local branch of the parent company.

  • If the business is a subsidiary, it is legally a separate company, but the parent company holds more shares in it than anyone else or may even be the only shareholder. This means that the parent company has the power to control how the business is managed. A parent company may be heavily involved in management of a subsidiary, or it may leave the management to the subsidiary company itself.
  • If the business is a local branch of the parent company, this usually means that it is the same legal entity as the parent and, therefore, controlled completely by the parent company.

A parent company might be based in the same country as its subsidiary or in a different country. By being based in a different country, it may also be able to take advantage of lower tax rates.

Parent companies may sometimes be holding companies. These companies do not produce any goods or services themselves, but exist only to control (through ownership of shares) another company. The holding company is not liable (legally or financially responsible) for debts of the companies it owns. For example, if one of the companies it owns goes bankrupt (meaning it does not have enough money or property to pay back what it owes to others) the holding company is not liable for the debt.

Investors and Shareholders

Investors put money into a company by buying shares, usually with the expectation that they will make money on their investment either in the short or long term. Investors own a part of the company, which is also referred to as equity. They may invest directly in the business managing the project or indirectly, by buying shares in the parent company.

If a company is financially successful, investors make money by selling their shares for a value greater than the amount they originally paid for the shares. Shareholders also receive some of the company profits, called dividends.

Some investors are more interested in short-term financial gains and are willing to invest in riskier projects that may not be sustainable in the long term, for example because of potential negative social and environmental impacts. Other types of investors may consider the long-term sustainability of the project, and will invest in less risky projects that will generate financial gains over the long term.

Although long-term investors are usually most concerned with financial risk, they often recognize that when social and environmental risks are not addressed, these can create financial risks. For example, communities may protest against a harmful project or even sue the company in court if their land is taken unlawfully. These actions may delay or prevent the project’s development – leading to higher operational costs and lower profits.

Box 2: Types of Investors:

Investment banks connect companies or individuals looking to invest their money with companies that are seeking investors. Investment banks then facilitate and manage the investment.

Investment funds are pools of money from individuals, companies and governments that are invested on their behalf by a fund manager. The fund manager decides which companies or projects to invest the pool of money in. Examples include:

  • Hedge funds are open to a limited number of people who can contribute large sums of money. These funds are usually more willing to take risks than other funds, in order to achieve large profits. Hedge funds usually aim to make large profits rapidly. Hedge funds are generally less regulated than other types of funds and disclose less information about their activities.
  • Insurance firms can also be investors and lenders. When people or companies buy insurance, the firm agrees to pay them the value of the thing has been insured if that thing is lost, or damaged. This can include property or a person’s health or even their life. Insurance firms invest the money received when people buy insurance. In most countries, insurance firms are heavily regulated by government and are restricted in the type of investments they can make. Because of these regulations, an insurance firm will generally invest in less risky projects and companies.
  • Mutual funds are typically more accessible than hedge funds by being open to investors who have smaller amounts of money to invest. A mutual fund usually has a set of investment objectives, which guides its investment decisions.
  • Pension funds collect a pool of money from workers, usually from their salaries. The fund invests the pooled money on the behalf of workers. The investment plus any earnings are then paid to the workers once they retire, so they continue to have some income once they have stopped working. As millions of workers contribute their money to pension funds, these funds are very important in financial markets. Pension funds must pay out funds to the workers when they retire, so they are generally more heavily regulated by governments than other funds and are likely to make less risky investments.
  • Private equity funds generally invest in private companies that do not make their shares available on a stock exchange. In some cases, private equity funds might buy all of the shares in a public company and turn it into a private company. The money in private equity firms comes from a variety of sources, including pension funds, insurance companies and banks. Generally, private equity firms commit large sums of money to their investments for longer periods of time. This allows for necessary changes to make a company profitable.

Individuals invest in companies, usually as shareholders. Individuals might invest in a company directly, for instance by buying a number of shares on a public stock market. Individuals might also invest in a company through one of the pooled funds discussed above, such as a mutual fund or hedge fund.


If individual investors are prominent public figures, they might be vulnerable to reputational harm. This might present an advocacy opportunity. For instance, the American actor and politician Arnold Schwarzenegger invested in Dimensional Fund Advisors, a U.S. investment firm that in turn holds shares in a range of companies around the world, including some that are causing environmental damage.


Lenders make money available to a business with an expectation that it will be repaid. On top of the repayment of the amount of money loaned, the lender will usually add interest (a percentage of the amount borrowed) and fees. Loans are also referred to as debt financing.

Commercial banks provide financial services, including loans, to the general public and to companies under certain conditions, including the payment of interest and fees.

Multilateral development banks, sometimes referred to as international financial institutions, are owned by more than one government. The World Bank, with 188 member countries, is perhaps the best known. The Asian Development Bank, the African Development Bank and the Inter-American Development Bank are multilateral development banks that invest in a particular region.

These banks offer loans to developing country governments or private companies for projects in developing countries. Unlike private investors, the mission of multilateral development banks is to reduce poverty. They are supposed to make investing and lending decisions on the basis of their development and poverty alleviation impacts.

Bilateral development banks are owned or controlled by one government. For instance, FMO is the Dutch government’s bank for investing in the private sector in developing countries. The mission of bilateral development banks is to reduce poverty. They are supposed to make investing and lending decisions on the basis of their development and poverty alleviation impacts.

Other bilateral financial institutions, such as policy banks, import-export credit agencies, and trade banks, are not explicitly tasked with reducing poverty, although they sometimes invest in projects in developing countries that do so. These banks have a range of goals, including promoting trade, facilitating overseas investment, and implementing the foreign policy of their government. For instance, the Japan Bank for International Cooperation is a Japanese government-owned policy bank that promotes economic cooperation between Japan and other countries.


Sometimes the lines separating the different types of government-owned financial institutions can be blurry. For instance, the U.S. government-owned Overseas Private Investment Corporation acts simultaneously as a development, trade and policy bank. It’s stated goals are to promote development, help U.S. businesses gain footholds in overseas markets, and advance U.S. foreign policy interests.


The nation where the project is based is called the host country. The host country’s government might negotiate deals and investments and establish the legal framework for the project. Host-country governments play a central role in determining:

  • Whether an investment should take place,
  • What the conditions of any investment should be,
  • How a business should be legally registered,
  • What taxes a business should pay, and
  • If the government owns or manages the land, what the terms of a land lease or sale should be.

These roles may be carried out by national, regional or local-level governments, depending on the governance structure of the country. There may also be different ministries and agencies involved, including ministries of mining or agriculture, investment promotion agencies, ministries of planning, and ministries of the environment or environmental protection agencies.

For example, a ministry of environment or environmental protection agency is usually responsible for ensuring compliance with environmental legislation, for overseeing environmental impact assessments, and monitoring the on-going environmental impacts of a project. A ministry of commerce helps to facilitate trade and investment in a country, and may be responsible for approving the registration of new businesses. The names of various ministries and their specific roles in investments vary from country to country. The degree of integration and coordination among different levels of government and various ministries will also vary greatly.

The business itself, its parent company, investors, lenders and buyers may be based in a country other than the host country. Governments of these home countries – where the investor, lender or buyer is located – can also play a significant role in regulating companies and holding them accountable.

Other Actors: Brokers, Contractors and Buyers

Most projects have a range of third-party actors that enable or benefit from it. These actors are generally found at the midstream and downstream levels:

Brokers: In some cases, an individual may be involved in making an investment project possible. For example, he or she might facilitate communication between the business managing the project and the government or local communities. They might facilitate the investment by liaising with different ministries to obtain land leases or relevant business licenses and permits.

Contractors: In many land-based projects such as dams and plantations, contractors carry out important activities. They might conduct assessment studies, clear the land, or construct buildings or facilities.

Buyers: These are the companies that purchase products from the business running the project – or products manufactured from the raw materials created by the project. They might be:

  • Trading companies, which buy and sell large amounts of a product, for instance an agricultural commodity such as sugar, on the global market;
  • Distributors, such as electricity companies, which transmit power to consumers through an electrical grid;
  • Processors or manufacturers, which buy raw products to include as a component or ingredient in another product; or
  • Retailers, which sell a product, such as sweets or soft drinks, to the end user or consumer.

These buyers might be local or international and can be large or small. A number of buyers might buy products from the business, or there may be just one buyer. A government can also be a buyer.

Buyers might be very close or very distant geographically from the project. For example, a mill, which processes palm oil, sugar or another raw material, is likely to be physically close to the plantation, while a retailer, which is selling the end product to consumers, might be anywhere in the world.

The general public – people like you and I – are likely to be the ultimate buyers and consumers of finished products. For example, we might use the electricity generated by a hydropower dam to power our houses or buy a bar of soap from a market or store that contains palm oil.