Governance and Risk Management

At AES, we believe that corporate governance is an essential element of maintaining sustainable local operations, and it is a key element of our business model. We empower our operating businesses with the corporate governance guidance and resources to routinely operate in a sustainable manner.

At the core of our corporate governance and oversight structure is the AES Board of Directors. Every year, the Board reviews and approves AES’ Corporate Governance Guidelines, which outline policies and procedures for various activities, including:

  • Establishing the role and goals for Directors
  • Selecting a Chairman of the Board
  • Electing new Directors and setting Board membership criteria
  • Providing Board member access to management, people and advisors
  • Developing corporate leadership
  • Determining the strategic direction of the company

Board Responsibilities

The AES’ Nominating, Governance and Corporate Responsibility Committee regularly reviews corporate governance principles adopted by the Board, examines governance issues and provides recommendations when necessary. In addition, the Committee is also responsible for:

  • Advising the Board with regard to corporate governance principles that are consistent with laws, regulations and stock exchange listing standards
  • Reviewing AES’ commitment to, and implementation of, the principle of acting in a socially responsible way at all times
  • Monitoring the environmental and safety compliance of the company and its subsidiaries
  • Reviewing and approving the scope of AES’ internal environmental and safety compliance audit programs

For more information, please refer to the Corporate Governance Guidelines.


Anticipating, identifying and mitigating risk is an essential element of AES’ governance and financial management functions. We believe that risk management and sustainability work together: Managing risk properly enhances sustainability, and improving sustainability helps reduce and avoid risks across the entire company.

The first line of risk management takes place at each of AES’ businesses. AES manages risk at both the business unit and corporate levels, first by minimizing unwanted exposure and debt in its initial contracts, and then by aggregating all existing risk under a corporate Risk Management Team, which reviews, balances and manages risks across the entire AES system.

Our Chief Risk Officer (CRO), who reports to the Chief Financial Officer and President of Global Business Services, oversees our risk management programs and processes. As head of the Risk Management Team, the CRO is responsible for integrating and aligning risk management principles and activities; communicating risk intelligence to the Board and executive leadership; establishing and maintaining adherence to risk thresholds; monitoring emerging risks across the enterprise; and driving a culture of risk awareness and discipline throughout the company.

The Risk Management Team independently develops customized risk management programs across AES’ business and corporate functions. Businesses regularly report to a Risk Oversight Committee (ROC) and provide data on current risk factors, progress on benchmarks and updates on implementation of ongoing risk strategies. The ROC serves as an advisor to the Executive Leadership Team and other AES senior management. This advisory role focuses on the development of Enterprise Risk Management Strategies and risk monitoring.

Financial Metrics and Tools

To ensure continuous improvement, specific tools used to measure risk include:

  • Risk Diagnostic Survey: Consistent surveys of risk exposures that rate identified risks and compile them into business-specific and aggregate “heat maps.” This visual tool focuses attention on risks needing active mitigation strategies, as well as on potential emerging risks.
  • Risk Ownership Matrix: Provides clear lines of ownership, monitoring and reporting for risk factors.

AES Key Risk Metrics:

  • EBITDA At Risk: EBITDA measures earnings before interest, taxes, depreciation and amortization. This measurement quantifies the potential risk due to market factors, as well as foreign exchange rates, interest rates and commodities. It serves as an early warning system for a changing risk situation.
  • Market Sensitivities: By measuring market sensitivities, AES can monitor market indicators such as oil, natural gas and coal pricing for commodities, as well as foreign currency and interest rates, for potential increases in risk.
  • Scenario Analysis: AES uses quantitative analysis to evaluate ad hoc cases and their impact to the company under potential macro economic scenarios.
  • Sovereign Risk: AES measures the risk that central banks might alter their foreign-exchange regulations, potentially reducing the value. This serves as an early warning instrument for making portfolio management decisions.
  • Portfolio Exposure Guidelines: By monitoring the amount of risk that it possesses in each part of its business, AES can adjust its overall portfolio to manage exposure to market risk. Portfolio management, investment strategy and mitigation actions are key levers for managing in-market risk exposure.

Environmental Management System

AES has established a series of environmental standards, based on industry best practices, which set the minimum environmental performance requirements at each AES business over which the company has management control.

The Environmental Management System (EMS) framework requires continuous environmental performance monitoring; environmental risk assessment; and periodic integrated environmental, health and safety EMS audit performance.

Our EMS framework helps ensure that our businesses achieve environmental compliance, address significant environmental impacts and strive for continuous environmental performance improvement.

Key Environmental Assessment Programs

Internal Integrated Environmental Health and Safety Audits

  • Conducted globally every three years at the operating business level and annually at the major construction project level.
  • More than 50 audits conducted annually, focused on compliance and EMS improvement issues.

EMS Risk Assessment and Action Plans

  • Each business location uses risk assessment to set action plans that address significant environmental risks.
  • Since 2008, AES operating businesses and construction projects have proactively created and implemented more than 1500 EMS action plans to reduce environmental risk and/or improve environmental management.

The EMS framework is consistent with the ISO 14001 international Environmental Management System standard, and many of our businesses have adopted these standards even where not required to do so.

Environment Metrics

Key environmental metrics including air pollutant emissions, environmental non conformance events and EMS performance parameters are reported on a set schedule for review by senior management. Material information on environmental performance is reported to AES executive leadership and to the AES Nominating, Governance and Corporate Responsibility Committee of the AES Board of Directors prior to each regularly scheduled Board Meeting.


The AES Ethics and Compliance Program is an integral part of our business and culture, helping to define our business practices and corporate expectations worldwide.

As a leader in the global power industry, AES operates under a broad range of economic, political, social and cultural customs and traditions, and an equivalent variety of local, regional and international laws and regulations. Regardless of these challenges, we believe it is our duty and responsibility to conduct business with the highest level of integrity, ethics and compliance in all situations.

As evidence of this commitment, AES has a Code of Conduct and a well-defined process that encourages internal and external stakeholders to bring matters of concern to the company’s attention for prompt resolution. Our people and stakeholders are empowered with a strong sense of ownership and accountability for their work, and we fully expect each person to adhere to our corporate values as described in the Code of Conduct.

AES Helpline


AES has established a global helpline phone and online tool that serves as a confidential channel for expressing concerns.

AES employees are encouraged to use the helpline for guidance regarding legal or regulatory requirements, clarification of AES policies or procedures and for counsel on appropriate behavior.

Our Chief Ethics and Compliance Officer, who reports directly to the Financial Audit Committee of the Board of Directors, manages the AES Ethics and Compliance Program and provides regular updates on ethics and compliance issues. Representatives of the Ethics and Compliance Program are located in corporate headquarters and throughout AES business locations globally.


The Ethics and Compliance Program conducts regular training on a variety of ethics and compliance issues including AES corporate values, the Foreign Corrupt Practices Act and conflicts of interest. In addition, the AES Ethics Champions Program conducts employee training sessions using actual AES business issues and problems, so that participants can discuss how AES values and policies are applied in real-world situations.

Business Partner Due Diligence

AES also holds its business partners and contractors to high ethical standards. Each partner undergoes a thorough due diligence process, and strict compliance language is included in contacts, where appropriate. Compliance language may address such issues as corruption, influence peddling, legal and regulatory compliance and reporting requirements. Compliance Officers work closely with business partners, contractors and project development teams to identify potential ethical concerns and resolve issues before agreements or contracts are signed.

Institutional Shareholder Services on AES

In 2011, the Institutional Shareholder Services gave AES its best rating of "Low Concern" across key governance categories including Board Structure, Compensation, Shareholder Rights, and Audit.