Joint Impact Model

The Joint Impact Model (JIM) is the successor of FMO’s impact model which was introduced in 2015. Since early 2019, FMO and Steward Redqueen, together with other strategic partners, have worked on the harmonization of the underlying methodology and the inputs required. A full methodological description is available on FMO’s website. We use the Joint Impact Model to estimate the number of jobs supported through our investment portfolio and the financed absolute GHG emissions.

Limitations of the model

The impact model allows quantifying the wider impact of investing in various economic regions and sectors, both directly and through financial institutions and funds. The model makes use of data from international statistical sources and investment-specific information which we obtain from our customers’ annual accounts. The impact model is an economic input-output model, which enables the model to trace product and money flows through an economy. However, it is also important to point out the limitations of this methodology:

1. Estimates of indirect impact are based on industry averages (via input/output tables). In reality indirect effects will be different at the individual company level due to differences in individual company characteristics. As a result, model outcomes become less accurate for smaller numbers of investments.

2. Estimates are based on historical relations, while the methodology is based on the most recent (macro) economic data available.

3. FMO’s investments are treated as investments from any other lender and it has been assumed that FMO’s financial support does not affect the relations of sectors within an economy.

4. Given that the analysis is conducted for a specific moment in time, it does not take into account any structural changes in the economy (e.g. increased productivity).

Taking the limitations of the model into account, we use the results only on the portfolio (and sub portfolio) level. In addition, we perform activities to provide insight in ex-post development effects, such as monitoring of direct effects, sector evaluations, effectiveness studies and impact evaluations. Find more information on how we measure impact and the Joint Impact Model Methodology on our website: How we measure impact - FMO.

JIM attribution rules

FMO provides part of the capital a company needs, and hence other investors likely contribute to a company’s business as well (either by providing capital or advice). Furthermore, external circumstances such as changing market conditions, climate change and technological developments may also influence the business. This raises the question of attribution: ‘which portion of results of an invested company or portfolio of companies is due to the activities of an investor, taking into account other investors and additional factors that may have influenced the achievement of the results’? The JIM takes a pragmatic approach to this attribution question and applies prorating to attribute part of the impact to the investor’s intervention: attribution is based on the share of FMO’s net carrying value (loan or equity) in a customer’s assets.