Environmental, social and governance management

FMO’s commitments on environmental and social issues are anchored in our sustainability policy. Following extensive consultation with a wide range of NGOs and other stakeholders, the current policy was approved for implementation by FMO’s Management Board in December 2016. We also published a series of position statements on specific issues such as human rights and land governance (2017). These statements embed environmental and social requirements into our investment criteria and processes together with the IFC Performance Standards on Environmental & Social Sustainability and World Bank Group Environmental, Health & Safety Guidelines.

To help implement and live its sustainability policy, FMO has set up a team of more than 35 environmental and social (E&S) specialists and governance specialists. These are embedded in our commercial deal teams. Together with the commercial staff these experts have day-to-day responsibility for screening, assessing, structuring and monitoring FMO’s investments with respect to environmental and social issues.

The directors of FMO’s investment departments have overall responsibility for ensuring that proposals submitted to FMO’s Investment Committee have undergone appropriate due diligence and include sufficient information on environmental and social risks, impacts and any required mitigation measures.

Independent scrutiny, challenge and advice is provided by FMO’s Credit Department, which includes additional E&S specialists.

Human rights – an integral part of our ESG approach

Respecting human rights is an integral part of our overall ESG approach and is systematically addressed throughout our investment process. E&S specialists on our investment teams work with our clients to manage human rights throughout our projects. In 2018 we developed a human rights toolkit that enhances our human rights risk analysis as part of the E&S due diligence. This includes a desk based contextual risk analysis, including an early warning system for risks to human rights defenders, (continuously) assessing community support for our projects and how our projects would change (or have changed) the acquisition, tenure and usage of land.

In 2018 we started piloting Human Rights Risk Assessment (HRRA) as part of our regular environmental and social due diligence. The objective of this pilot was to better understand the additional value that an explicit human rights risk assessment by a dedicated human right specialist can bring in terms of: (i) identifying risks to workers, local communities and other rights holders, and (ii) informing the management of such risks.

During the year we have carried out HRRA pilots on five investments: two in the Agriculture, Food & Water sector and three in the Energy sector. Four of these were new investments, and we used HRRA as part of our detailed assessment to inform our final decision to invest. One pilot was carried out in collaboration with an existing client as part of our monitoring.

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