Letter of the Executive Committee
The year 2020 is a special year for FMO: it marks our 50th anniversary. We are proud to have been entrusted with the mandate to empower entrepreneurs in developing countries for five decades. We are passionate about this mandate and the fact we fulfill it with the many dedicated, experienced and resourceful professionals at FMO.
Let’s first take a moment for a number of highlights from 2019:
In May, the Dutch government entrusted us with the management of the Dutch Fund for Climate Development (DFCD), which, under FMO’s management, consists of a unique consortium with Climate Investor One, SNV and WWF that will develop and enable climate mitigation and adaptation projects;
The first pilot under the NASIRA risk-sharing program has started in Jordan; Tamweelcom will provide Syrian refugees with access to finance;
The F€mpower Your Growth program was completed in the autumn of 2019, in the presence of Her Majesty Queen Máxima in her in her capacity as the UN Secretary-General's Special Advocate for Inclusive Finance for Development; this program aimed to promote gender equality in the Dutch financial sector;
Our clients gave FMO a 9 out of 10 on overall client satisfaction, which translates to a Net Promotor Score of 75.5. Our employee satisfaction remained a solid 7.4;
Our increased focus on un(der)-served markets and fragile states has enabled us to mobilize more funds under our management;
In early 2019, we successfully issued our inaugural green bond (US$500 million, 5 years);
During COP25, the Partnership for Carbon Accounting Financials (PCAF), of which FMO is a founding member, launched its carbon accounting method for the financial sector globally, with a number of FMO clients committing to the methodology. This is an important step forward in how financial institutions measure the emissions associated with their loans and investments;
In November, EC Commissioner Neven Mimica signed FMO's Ventures Program. This is FMO's second guarantee program with the European Fund for Sustainable Development (EFSD). The fund focuses on early-stage investments in innovative, technology-enabled business models with high impact potential for underserviced entrepreneurs;
Finally, we have partnered with Munich RE to form a promising US$500 million financing vehicle that enables the mobilization of commercial capital from institutional investors. This vehicle offers them opportunities to make a difference in developing economies with a healthy risk-return.
As proud as we are on these steps forward, we realize that humanity is yet to solve the world’s challenges, captured in the Sustainable Development Goals (SDGs). The growing political and economic complexity of our time, along with rising environmental pressures, means that no one can afford to be complacent.
Geo-political developments reduce the stability of trade relations and feed growing political unrest. This leads to volatility in economic growth projections, currency rates and therefore an increase in risks in our business model. The effort that is needed to live up to the regulatory and legislative framework has also increased in 2019 for us as FMO as well as for our partners and clients. Both trends we see reflected in our own annual results over 2019 and in changing economic dynamics in our investment countries.
Yet, despite these challenges we also see promising progress. In a number of African countries, governance has significantly improved. And the signing of the African Continental Free Trade Agreement (ACFTA) opens compelling prospects for trade relations. At FMO we are convinced that Africa will become more important for the global economy with every passing year. The continent is as vast as it is diverse, and is most certainly compelling from an investment perspective. We hope that the realization that Europe will need Africa in order to remain relevant on the world stage will slowly but surely take root. This awareness, and an interest in the opportunities Africa’s growth will bring, is most certainly growing among European Development Finance Institutions (EDFIs).
In 2019, EDFIs further intensified their cooperation in a number of fields, including Impact and Environmental, Social & Governance (IESG). An initiative was taken to harmonize standards: a critical topic in our view, because what is measured, gets done. The EDFIs launched a multi-year harmonization project to ensure we all define and measure our impact the same way. FMO has taken the lead in harmonizing the indicators on jobs supported (SDG 8) and GHG avoided (SDG 13), and the first results are shown in the harmonization of the E&S approach of the EDFIs towards local financial institutions.
Also in 2019, seven complex projects of FMO were explicitly in the news. Each one an example of our challenge to do the most difficult investments under the most difficult circumstances with the objective to make a difference. And the truth is we do not always achieve what we want to achieve; it takes longer for the project to fulfill its potential or the project does not get all ESG goals realized or even fails altogether.
It became clear that we will have to explain more - and more often - how our operating environment works, what our mandate is as a development bank and what the dilemmas are that we weigh and consider every day. In this annual report we have scaled up our transparency around these challenges materially.
Within FMO we have to change to be better positioned with the expectations of our stakeholders. Mainly in terms of risk identification in the areas of ESG, impact execution, culture and compliance. The first steps of this transformation process have been taken. We have continued previous initiatives to anchor Impact and ESG (IESG) even more firmly in our organization and our primary investment process to strengthen management and decision-making on these topics. Our Supervisory Board has created an Impact Committee that supervises all related matters within our bank. In addition, a new IESG department combining five different teams in total with around 60 professionals was formed within FMO in July 2019 under the leadership of one director.
In 2019 we also improved FMO’s compliance with the Financial Supervision Act (Wft), followed by the Anti Money-Laundering and Financing Terrorism Act (Wwft). We have recruited a new Compliance Manager, strengthened our KYC capabilities and teams, are setting up a renewed training program and will further expand the Compliance and KYC teams to meet the necessary requirements.
Our wider organization continues to grow and diversify. Today, we can build on the expertise and perspectives of colleagues representing 57 nationalities, a diverse team for which we are both grateful and proud. A value project to rephrase FMO’s corporate values was successfully completed, resulting in four values and twelve new behaviors being introduced. These have been defined in a process in which over 80% of our staff have participated. These Values & Behaviors capture both what we collectively want to nurture in our present culture as well as what is needed to guide our impact work in the world we live in.
We very much realize that these developments demand a lot from our people. External pressures and changing market dynamics require a different way of thinking and operating that need time to take root.
To enable our people to be at their best and to perform to the best of our collective ability we will invest in engagement and development. A new talent model has been defined which we will introduce in the course of 2020. A new management development training is being co-created in which the central model is around how we can improve the connection to oneself, to the organization and to our stakeholders. We will further focus on the engagement between the different layers within the organization to ensure we can keep the right pace of change.
We highly appreciate the commitment and passion of our colleagues and we would like to thank all employees of FMO, for their strong dedication, perseverance and enthusiasm in contributing to our impact goals.
We are grateful and proud to experience the trust of our stakeholders and our clients.
A special word of thanks goes to our Chairman of our Supervisory Board, Mr. Pier Vellinga. At our Annual General Meeting of Shareholders (AGM) on 23 April 2020, Mr. Vellinga will say goodbye to our organization after twelve years of partnership. Mrs. Alexandra Schaapveld will also leave the Board after eight years at the upcoming AGM. We would like to express our great appreciation for all that Mr. Pier Vellinga and Mrs. Alexandra Schaapveld have meant for our organization and the enormous commitment, enthusiasm and knowledge they have brought to FMO.
We have less than ten years to reach the SDGs and as FMO we have a role to play. We want to and will continue to empower entrepreneurs to build a better world and help address the two biggest challenges in the world for the coming decade: inequality and climate change.
In picture | from left
Danny Klappe, Director Human Resources, Huib-Jan de Ruijter,Director Debt, Linda Broekhuizen, Chief Investment Officer, Jorim Schraven, Director Impact & ESG, Chantal Korteweg, Director Stakeholders, Strategy and Knowledge Management, Idsert Boersma, Director Partnerships for Impact, Peter van Mierlo, Chief Executive Officer, Fatoumata Bouaré, Chief Risk & Finance Officer, Femke de Jong, Director ICT