Higher impact portfolio

2019 New commitments FMO

SDG 8 | Decent Work and Economic Growth

Supporting jobs and safeguarding the quality of jobs is important for sustainable development, as decent employment paves the way out of poverty. The private sector is one of the most important employers across emerging and frontier economies. We measure our contribution to SDG 8 by our investment volume and the estimated number of direct and indirect jobs supported. 

Indicator: Total investment volume

In 2019, we invested a total of €2.9 billion in developing and emerging markets of which €1.7 billion on FMO’s own books (2018: €1.9 billion), €297 million of funds managed on behalf of the Dutch government (2018: €135 million) and €868 million of mobilized funds (2018: €629 million). In line with our strategy, 58% of investments on FMO’s own books went towards countries in Africa and Asia (2018: 56%), while 17% of investments were made in countries in the European Neighborhood[1] (2018: 26%). Compared to last year, we made more equity investments, committing €375 million (2018: €210 million) of which 61% related to direct and co-investments in line with our target to shift 60% of our equity portfolio towards these types of investments.

Indicator: Number of jobs supported

In 2019, FMO’s investments supported an estimated 646,000 direct and indirect jobs (2018: 615,000). Direct jobs refer to the number of full-time equivalent employees, as per the local definition, working for the client company or project. The number of indirect jobs supported provides a proxy of the spill-over effect of investing in the private sector. As businesses survive and grow, their outputs require direct employment and intermediary inputs. This in turn leads to activity among existing and new suppliers, thereby supporting and creating jobs. Some products and services – notably electricity, infrastructure and finance – remove constraints for other businesses, enabling them to succeed and hopefully to expand.

FMO’s ambition was to, by the year 2020, double impact by investing in more companies that create jobs, while halving the footprint by investing in more companies that reduce greenhouse gas (GHG) emissions compared to the baseline for the 2010-2012 investment years. This ambition was to support 900,000 jobs in 2020. By now, we expect not to achieve our ambition as a result of obtaining lower portfolio growth than was projected.

Moreover, as part of our ongoing harmonization efforts, the underlying FMO Impact Model to estimate indirect jobs supported will be adjusted leading to lower estimated indirect jobs supported for the same investment. Please refer to How we report for more information about the current methodology and Our commitments for more information on the harmonization initiative.

Quality of jobs

As part of our ESG approach, we monitor the quality of jobs to reflect decent working conditions. These are as important as the number of jobs. In April 2019, FMO and the EDFI launched a report on Decent Work and Development Finance. It is the first study of its kind to set out the best practices of DFIs regarding job quality – what it means in the field, and how it can be supported.

SDG 10 | Reduced Inequalities

FMO defines two sub-categories in social projects aimed at reducing inequalities: investments in the Least Developed Countries (reducing inequality among countries) and investments in inclusive business (reducing inequality within countries). An RI label is assigned ex ante to investments with an expected impact on reducing inequalities.

Indicator: Volume of investments to reduce inequalities

In 2019, we invested a total of €798 million in reducing inequalities (2018: €958 million), exceeding our target of €790 million. Of this total €467 million was invested from FMO’s own books, €150 million from funds managed on behalf of the Dutch government and €181 million from mobilized funds.

€412 million contributed to reducing inequalities within countries, through investments made in microfinance, gender, youth finance, and innovative solutions for the base of the pyramid, as well as in agricultural SMEs, off-grid power, and smallholder finance.

In addition, FMO invested €419 million in Least Developed Countries, which will contribute towards reducing inequalities between low and higher-income countries. Most of these funds flowed to Africa, notably Uganda, Malawi, Tanzania, Djibouti, Zambia, Ethiopia, and Madagascar, as well as to Cambodia and Myanmar.

Indicator: Number of micro loans in clients' loan portfolios

FMO invests in microfinance to increase access to finance and business growth of micro entrepreneurs.  Poor households can use micro loans to raise and smoothen household income, thereby reducing their vulnerability to economic stress. The number of micro loans in outstanding loan portfolios of FMO clients was 22 million (2018: 19 million).

In 2019, we financed several financial institutions with microfinance loan portfolios. For instance, FMO concluded a debt transaction of INR1,250 million (€15.6 million) with new client Aye Finance, a non-deposit taking NBFI (non-banking financial institution) in India. Aye provides innovative financial services to underbanked micro and small businesses dedicated to working capital finance and capacity expansion. Half of the money will be dedicated to female entrepreneurs. FMO will also work closely with Aye to expand its services to female entrepreneurs in the country, through a Capacity Development Gender Finance program.

Indicator: Number of SME loans in clients’ loan portfolios

The intended impact of increasing access to finance of SMEs is job creation, inclusive development and economic growth. FMO targets SMEs because they are financially underserved and typically provide more jobs than corporates relative to capital invested.[2] FMO specifically targets women-owned and youth-owned SMEs as part of the Reducing Inequalities label. The number of SME loans in outstanding loan portfolios of FMO clients was 1.4 million (2018: 1.3 million).

In 2019, we financed several financial institutions with SME loan portfolios. For instance, Togo-based Ecobank Transnational Incorporated (ETI), with 19 million customers in 36 countries, received a US$50 million anchor investment. This helped to support a large bond offering by ETI, thereby mobilizing institutional investment into Africa. This is beneficial to small and medium-sized enterprises in Africa and promotes access to international capital markets for African issuers.

SDG 13 | Climate action

FMO’s ambition is to grow its Green portfolio to reduce greenhouse gas emissions, increase resource efficiency, preserve and grow natural capital, and support climate adaptation. A Green label is assigned ex ante to investments with an expected impact on climate.

Indicator: Volume of Green investments

In 2019, we made a total of €961 million Green investments (2018: €940 million), exceeding our target of €930 million. Out of these investments, €541 million were invested from FMO’s own books, €110 million from funds managed on behalf of the Dutch government and €310 million from mobilized funds.[4] Approximately half of all Green investments were made in the energy sector, mainly in renewable energy sources such as wind and solar. A further €172 million in loans were provided to financial institutions for Green products and €173 million in agribusiness, for example to avoid flaring emissions, introduce energy efficient design and climate smart agriculture, reduce greenhouse gas emission and generate electricity from agricultural waste.

In the area of forestry, we focused on equity and mezzanine deals. Forestry is a challenging industry as it requires considerable time to generate a good cash flow, but we are exploring opportunities in Agroforestry. This could see us finance initiatives to grow crops inside a forest or to have cattle graze among the trees. Combining agriculture and forestry has varied benefits, including increased biodiversity and reduced erosion. In 2019, FMO began setting up a dedicated Agroforestry-team that will do both equity and debt deals in this field. 

FMO also welcomed Netafim as a new client. This Israeli firm is a world-leader in irrigation that drives mass adoption of smart irrigation solutions to fight scarcity of food, water and land. FMO financed Netafim’s activities in Africa and other emerging markets. 

In 2019 the volume of Green lines provided to financial institutions was lower than expected. We witnessed a slowdown in Turkey, one of our main green recipients. Green investments in other key markets are gaining in popularity, where subsidized pricing is creating a race to the bottom. FMO tries to set itself apart by adding value through our network and expertise and by taking a tailored approach to clients’ needs. This, however, could conflict with FMO’s goal to increase productivity.

In conjunction with the annual report, FMO has published detailed information about our Green definition on our website. Furthermore, FMO is pleased to announce that it has obtained reasonable assurance on Green investments. The reasonable assurance on Green Investments is an integrated part of the overall assurance engagement on the sustainability information in the FMO annual report and therefore no specific assurance is provided on the Green Investments standalone. Please refer to the combined independent auditor’s and assurance report.

Indicator: Avoided greenhouse gas emissions through FMO investments

Avoided emissions are the emissions that are avoided as a result of a project when compared to a baseline scenario established in accordance with the GHG Protocol. For example, this can be emissions avoided by additional renewable energy capacity that is assumed to replace future fossil fuel-based power plants, or emissions avoided through the protection of forests against illegal logging. In 2019, FMO’s new Green investments resulted in an estimated 868,000 tCO2eq avoided greenhouse gas emissions (2018: 988,000 tCO2eq).

Indicator: Carbon emissions from FMO’s own operations

The carbon footprint of FMO's own operations amounted to 5,865 tonnes CO2eq (2018: 6,808 tCO2eq). Because we serve clients around the world, 92% of this is generated by air travel. Where possible we try to make use of modern communication technology and we revised our travel policy which now requires staff to travel by train to destinations up to 500 km in continental Europe. We purchase electricity from renewable sources to limit the emissions of FMO's office building. Our efforts have contributed to a reduction of the GHG emissions per FTE from 14 tCO2eq in 2018 to 11 tCO2eq in 2019. We invest in a VCS and REDD+ certified forest conservation project in Brazil for the equivalent of our own emissions.

SDG 2 | Zero Hunger

By financing businesses across the entire agri-food chain we contribute to SDG 2, Zero Hunger. FMO targets smallholder farmers because in spite of meeting more than 70% of the world's need for food they have a weak market position and limited resources to invest in business improvements. FMO finances agricultural companies that help smallholder farmers to improve their production practices, thereby increasing their income and yield. Companies financed by FMO supported 1.7 million smallholder farmers in 2019 (2018: 1.6 million).

FMO completed a €15 million deal with Sahyadri, an Indian farmer-owned company that procures, processes and markets fruits and vegetables from its network of 8,000 small and marginal farmers. In 2019, we signed a memorandum of understanding (MoU) with the FAO to improve access to finance for all stakeholders across the agricultural value chain and enable them to operate to higher ESG standards. FMO and FAO will work to improve agri-business management skills, sustainable agro-ecological and processing practices and food loss-reduction techniques. A pilot project will be undertaken in Kenya.

SDG 5 | Gender Equality

We contribute to SDG 5 Gender Equality by making investments that promote access to energy or finance for women. We currently invest in inclusive business - as defined under our RI label - with a focus among others on on-lending to women. In 2019, we invested €109 million in gender line financing for women-owned SMEs. This included US$5 million in financing to Kashf, a women-led microfinance institution in Pakistan that provides loans to female entrepreneurs. We also provided US$5 million to Banco de la Produccion and US$10 million to Grofin for on lending to women entrepreneurs. A further US$10 million was provided to Banco Solidario’s financing of women-owned micro enterprises in Ecuador. 

In 2019, FMO further committed to the 2x Challenge, an initiative started by several DFIs that aims to increase financing for gender equality and to establish harmonized measurement of the results. We are currently implementing a process that will enable us to steer and report on our results against the criteria defined by the 2x Challenge.

Beyond financing, we also offer Capacity Development to support clients’ efforts to improve gender equality. For example, in 2019 we supported a training for women entrepreneurs in Bangladesh in association with BRAC Bank and the development of Banco Improsa’s gender finance approach. We also hosted the annual meeting of the Gender Finance Collaborative and the annual EDFI meeting, where gender was a topic. 

SDG 7 | Affordable and Clean Energy

Access to energy is not a given in many developing countries. In low-income countries 41% of the population has access to electricity against 28% of the rural population[5]. FMO invests in building (sustainable) power generation capacity in developing countries that, combined with investments in power distribution, improves access to energy. By financing off-grid power solutions, FMO invests in access to energy for rural populations.

In 2019, companies in FMO’s energy portfolio produced 61,000 GWh (2018: 60,000 GWh), of which 83% was generated from renewable sources. This amount of on-grid power production served an equivalent of 52 million people (2018: 43 million).

In 2019, we launched the US$120 million Energy Entrepreneurs Growth Fund together with the Shell Foundation. This will provide catalytic financing to early-growth stage companies in Sub-Saharan Africa, where 600 million people lack energy and more than 125 million households lack access to modern energy services. The fund, which has a 12-year lifespan, aims to finance more than 25 companies, through mezzanine structures and equity and debt investments.

ESG performance

FMO monitors all clients with a high or medium ESG risk category against our ESG standards according to contractual agreements. We support our clients in managing environmental, social and corporate governance impacts. We step up our engagement in cases where ESG issues arise or when a client’s ESG performance is below standard.

ESG target performance

We launched a new ESG performance tracking system in 2018 to document and track the performance of all our high ESG risk clients on the relevant risk items. Over the past two years we focused on building out the system and collecting and optimizing the required data. In 2018, with limited baseline data, we set an ESG performance target on a subset of clients, focusing on new clients with an A or B+ E&S risk category[6] or those supported by a corporate governance specialist that were contracted in 2017 where FMO was in the lead. In 2019, the target population followed the same criteria, but we expanded the number of clients by also including new A and B+ clients that were contracted in 2018 where FMO was in the lead. For these 40 clients, we set a target on the percentage of high and medium ESG risk items that, after one year from contracting, were managed in line with our standards or managed evidently towards meeting our standards. In 2019, FMO assessed that these clients effectively managed 98% of these risks, exceeding our target of 90%.

Currently, we have sufficient ESG information in our system to expand our ESG performance target for 2020 to focus on all A and B+ E&S risk clients, and all clients supported by a corporate governance specialist, including those clients where another financial institution is in the lead (e.g. IFC, DEG, Proparco, etc.). We are continuously improving system functionality to manage and track ESG performance.

E&S issues in our portfolio

We monitor all medium and high E&S risks in our entire portfolio, not just the medium and high E&S risks in our target. Out of a total of approximately 800 clients, there are 308 clients with a high E&S risk category (A or B+). FMO accepts that when we first start working with a client the ESG performance may be below standard but we expect performance to improve over time in line with agreed action plans.

Most clients show progress towards these action plans and meeting our standards. FMO has, however, identified 35 A and B+ clients that are not managing their E&S risks in line with expectations or that are materially behind schedule. For FMO it is important to work with these clients to address such issues, as their activities are also expected to have a positive impact. The total committed portfolio for these 35 clients amounts to €741 million, which contributes to economic growth (SDG 8) in developing countries. Furthermore, more than half of this portfolio also contributes to climate action (SDG 13) and/or reducing inequalities (SDG 10). An overview of the issues for these clients are listed in Annex 1. An explanation of the criteria used to compile this table are included in the chapter ‘How we report’. The table has been anonymized to respect client confidentiality. Below is a summary of the key issues we have identified and how we engage with our clients to help them get (back) on track. We continue to prioritize these issues until they have been addressed.

Type of issue

Description of the issue

FMO engagement with the client

Community and wider stakeholder issues

Our clients' activities often impact local communities and/or attract wider stakeholder attention. The issues we face are diverse, ranging from obstacles to achieve standards to project opposition with root causes that are not yet clear and legacy issues resulting in an impasse in community relations.

FMO assesses community engagement practices and effectiveness. We support the client where possible, for instance by connecting them to experts in this field.

Environmental and social management systems

FMO requires clients to develop and implement an environmental and social management system demonstrating how they identify and manage (key) environmental and social impacts and risks. This includes: an environmental and social management policy; a process for the identification of environmental and social risks and impact; organizational capacity and competency; emergency preparedness and response plan; monitoring and review; stakeholder engagement; and an external communication and grievance mechanism. These systems are not always adequate as clients may have limited experience or have not prioritized the implementation of such systems.

Once a system shortcoming has been identified, FMO discusses this with the client and agrees on an improvement plan. This may involve an expert, sometimes funded by our capacity development program. As part of our overall client monitoring, we monitor and support the implementation of the improvement plan through client visits by our ESOs and/or specialized consultants as well as regular phone and email contact.

Environmental management

Environmental management issues in our portfolio are primarily related to the control of carbon emissions, storm, waste water management and dust management. In some cases, this leads to serious consequences for community relations.

We engage with our clients on such topics in a variety of ways. Once we identify and clarify the issue, we agree corrective actions with the client. We may request or follow up on root cause analyses, and support the client by conducting further studies to come to possible solutions. We may also support strategic engagement with key stakeholders to get operations restarted and negotiating solutions for local communities.


FMO assesses risks related to the health and safety of our clients' workers and surrounding communities. We also look at a client’s commitment to manage these risks and to create a safe working environment. In case we identify gaps, we support our clients in addressing them. Despite these efforts, fatalities do occur, regrettably.

FMO contractually requires all clients to report the details of fatalities related to their operation. This needs to include a specification of the nature of the incident, any on and off-site effects, details of actions that the client proposes to take in order to remedy these effects, and provide the right after care. We support our clients in this process as needed to properly address effects and root causes of such an event, and monitor the implementation of client actions closely. In 2019 we started to track fatalities in our portfolio manually and have decided to implement a reporting process and system. This will enable the disclosure of detailed information and to further improve portfolio performance on what is perhaps our most salient human rights issue (violation of the right to life).

Labor and working conditions

The issues in our portfolio related to labor and working conditions consist of the quality of worker accommodation, low wages, long working hours, substandard occupational health and safety practices or suspicion thereof. These problems often occur as a result of relatively low country or sector standards or due to financial distress.

Such risks are typically identified prior to investment. Issues are picked up on during monitoring, for example because the implementation of agreed actions was slower than anticipated. We discuss these issues with the client and use our leverage to improve the situation, for example by making our disbursements conditional to an agreed improvement. We also help in prioritizing issues, facilitating engagement with external experts if needed, and preparing an improvement plan. Sometimes we support a client with capacity development funding if available.

Land acquisition and resettlement

A significant number of projects that we invest in involve land acquisition and the resettlement of local communities. We ask our clients to avoid or in some cases to minimize resettlement. And in doing so to apply international standards and best practice. Many of our clients, however, are new to this and underestimate the skills and other resources required to carry out a process and achieve outcomes in line with international standards. The situation becomes even more complex when it involves legacy issues related to land acquisition.

We clarify to our client what is required by our standards during each phase of the project. We help find solutions to avoid, minimize and plan for resettlement, as appropriate. And introduce the client to resettlement experts and suggest which stakeholders to engage with and how. We closely monitor the implementation of a client's action plan through client visits by our ESOs and/or specialized consultant (two to four times a year during project construction). During these visits, we ensure to spend ample time with senior project management, staff involved with resettlement (including grievance management), community rights holders and other key stakeholders. This allows FMO to develop a good view of the process itself and the outcomes that have been achieved for all involved.


In the area of governance, FMO delivered a day-long training on conducting (Supervisory) Board evaluations for FMO colleagues and several Directors that sit on the boards of our investee companies. This enables us to perform such evaluations ourselves, instead of hiring costly external parties. We also organized a day-and-a-half long roundtable for FMO’s Nominee Directors and conducted the annual Directorship Training.

In addition, FMO and the Center for Financial Inclusion (CFI) published a corporate governance guide for early-stage innovative companies. It is based on testimonials from entrepreneurs, investors and industry practitioner and is available on FMO’s website.

Setting common ESG standards

Following the success of ESG sector initiatives in Nigeria, Kenya, Mongolia, Bangladesh and Paraguay, FMO progressed with a similar initiative in Honduras. Beginning in 2017, FMO partnered with local banks, the Honduran bankers association (AHIBA), the IFC and Norfund to incorporate international ESG standards and best practices into the financial sector. The Honduran regulating agency (CNBS) is revising these standards to possibly be formalized into national regulations. This will create a level-playing field for all financial institutions in the country. FMO has fully committed to supporting this initiative by actively engaging with all stakeholders and by providing technical assistance, funded by its Capacity Development program to ensure a successful outcome. In the coming years, FMO aims to replicate this approach in other countries.

Independent Complaints Mechanism

FMO has implemented an Independent Complaints Mechanism for project-related complaints together with Deutsche Investitions- und Entwicklungsgesellschaft and the French DFI Proparco. This mechanism ensures the right to be heard for complainants who feel affected by an FMO-financed operation. This can lead to a resolution of the dispute and enables FMO to apply the lessons learnt to future investments. In 2019, no new admissible complaint was filed. We received one complaint but is was declared inadmissible by the independent panel. For information about the status of complaints filed in earlier years, please refer to FMO's website.

  • 1 The European Neighborhood is a category assigned by FMO to countries neighboring the EU based on EU's European Neighborhood Policy and FMO's strategic markets.
  • 2 IFC (2010). Scaling-Up SME Access to Financial Services in the Developing World.
  • 3 Mobilized funds are funds committed by third parties that are demonstrably mobilized by FMO. This includes: participations that were on FMO’s own books in earlier years and sold on to other investors (€25 million). Excluding this category, the volume of mobilized funds with an RI label in 2019 amounted to €157 million.
  • 4 Mobilized funds are funds committed by third parties that are demonstrably mobilized by FMO. This includes: participations that were on FMO’s own books in earlier years and sold on to other investors (€38 million) and guarantees provided by third parties on investments on FMO’s existing portfolio (€54 million). Excluding these categories, the volume of mobilized funds with a Green label in 2019 amounted to €218 million.
  • 5 World Development Indicators, latest data available from 2017
  • 6 As defined in FMO's Sustainability Policy.