As I look back on 2016, I take pride in the fact that we continued to be successful at doing what we do best, being additional to our markets, fostering sustainable development and supporting job creation in developing countries.
We invest in some of the world’s most challenging business environments, encouraging the growth of responsible and profitable businesses in key sectors for development.
The companies and projects we invest in have a significant impact on local communities and society at large.
As a development bank, we are sensitive to the environment in which we are active. The companies and projects we invest in have a significant impact on local communities and society at large. In that respect, 2016 was a challenging year for us. The murder of Honduran environmental activist and indigenous leader Berta Cáceres, especially shocked us. The FMO financed Agua Zarca project was one of the projects she opposed.
We stepped up our efforts to properly address the issues related to this, taking into account the needs of our different stakeholder groups. In doing so, we experienced that stakeholder engagement is an attitude that should be lived and applied in practice. Over the course of the year, we continued to expand our stakeholder management activities and we have been able to reach out effectively to key stakeholder groups.
Firstly, on the project level, we have further intensified our actively engaging local communities wherever there are issues concerning human rights, land rights or the environment. We also have implemented an ex-ante disclosure mechanism, allowing interested parties to provide feedback on the environmental, social and governance aspects of our projects before contracting.
Secondly, on the policy level, we established a comprehensive sustainability policy, taking into account almost 300 comments from various parties from society, government and clients. Furthermore, together with the Dutch government, financial institutions and civil society we were one of the leading parties involved in establishing the Dutch agreement on international responsible business conduct regarding human rights. I am pleased with these steps, as they demonstrate our commitment to implement lessons learned.
At the organizational level, we provided input to the discussion initiated by the Dutch government about setting up a National Financing Institution for Development and Investment (Invest-NL). The aim of Invest-NL is to realize investments in corporates and projects in the Netherlands and internationally that are unable to attract sufficient financing from the market as a result of unsecure risk-return characteristics or long payback time. We will contribute to the alignment and bundling of the export and foreign investment instruments for Dutch corporates by setting up a Joint Venture with Invest-NL for the NL Business activities of FMO.
With all these developments going on, our business still made a strong contribution to a better world while generating solid financial results.
With all these developments going on, our business still made a strong contribution to a better world while generating solid financial results. Our new commitments in 2016 amount to a total of EUR 2.5 billion, of which EUR 0.9 billion was garnered from third parties. Our return on shareholders’ equity exceeded our target return of 6.2%. However, this was driven by a substantial one-off release of our group-specific provision, which compensated for the fact that the results from our private equity investments were lower than expected.
With our new investments we support a total of 812,000 jobs, while avoiding 500,000 tons of greenhouse gas (GHG) emissions. With 21% green investments in 2016, we failed to meet our target of increasing our green investments to 30% of our new commitments. As a result, our GHG avoidance for the year was off the track towards our 2020 ambition. Green investments were lower than expected as we financed fewer and smaller renewable energy projects. In order to get back on track, we will develop new green initiatives and projects that go beyond renewable energy.
Development banks like FMO increasingly have a role in blending – that is, combining government funding and funding by businesses in order to leverage the impact that can be achieved. We broadened that role in 2016 by setting up ElectriFI with our European Development Finance Institutions (EDFI) partners. ElectriFI is an innovative fund targeted at early-stage renewable energy projects, with a focus on rural electrification. To that end we received EUR 75 million in EU funding, reflecting our new partnership with the EU aimed at jointly combating climate change. We also took concrete steps to promote gender equality, financing various projects and organizing a conference with the Global Banking Alliance for Women, during which we engaged with a large number of banks on the importance of supporting women-owned businesses.
Another milestone was the establishment of the investment company Arise. This partnership between Rabobank, Norfund and FMO will combine banking skills and financial capabilities and currently manages minority equity investments in excess of USD 660 million in financial institutions in Africa. Through these means we strengthen and further develop effective, inclusive financial systems in Africa that contribute to economic growth and poverty reduction.
In light of the new market dynamics and the challenges that they bring to a growing organization like FMO, we have started to undertake a strategy review. The results of this review are expected in the first half of 2017. This strategy review covers our role towards other public and private partners going forward. In that context, recommendations about our sectorial and regional positioning and focus may be discussed. We look forward to having these discussions and adjusting our priorities in 2017 if need be.
On the organizational level, we have been working to improve our discipline and focus. Being a more focused organization will enable us to be more effective with respect to implementation, while at the same time creating more room for renewal and innovation. To that end, in the course of 2016 we invested in our project management capabilities.
My predecessor, Nanno Kleiterp, left FMO per October 1, 2016, marking the end of his second term as FMO’s CEO. I would like to thank Nanno sincerely for his outstanding contribution as CEO of FMO during his eight-year tenure and during the past twenty-nine years at FMO. Nanno led our organization through a phase of significant growth and professionalization, during which our focus on impact and sustainability grew markedly.
In my role as CEO, I will do my utmost to continue to develop FMO into an organization that makes a real difference and continues to be a pleasure to work for.