Potential risks and opportunities

FMO has identified several potential risks and opportunities linked to its value creation model, in the context of external developments, as follows: 

Strategic Challenge



Strategic response

How to achieve a growing impact agenda, while facing external pressures during uncertain times.

  • The effects of COVID-19, incl. current travel restrictions and increased credit risk, as well as greater regulatory pressure may result in lower impact results to achieve FMO’s impact ambitions.

  • Step up investments in blended finance capabilities (internally and externally) and mobilized finance to scale up impact.

Explore different ways of sourcing transactions. Focus on new and innovative solutions in energy transition, forestry and fintech and grow mobilized finance to accelerate inclusion and climate action.

  • Temporary slowdown of business development could result in loss of market position in certain sectors crucial to the achievement of the SDGs (e.g. Energy deals contributing to the 1.5° pathway).

  • Introduce and expand different ways of working to source new deals and carry out due diligence (e.g. virtual DD, working with partners on the ground).

How to deal with a growing offer of DFI/blended finance in markets while availability of (bankable) projects are limited.

  • Challenging to source sufficient opportunities to deliver on agreed commitments from public and commercial investors.

  • Innovation and development of niches incl. early stage of development and economic subsectors (e.g. in Energy market).

Invest in blended finance capabilities, increase efforts to attract high risk blending capital and invest in nascent markets and innovation.

  • Crowding out private investors.

  • Matching donor appetite from third parties to investments in high-risk projects. By providing support on regulatory limits such as solvency and capital requirements, FMO can unlock large scale capital from institutional investors.

How to deal with increased regulatory requirements & supervisory scrutiny that puts pressure on organizational capacity and capital allocation.

  • A greater internal focus may result in lower productivity and slower portfolio growth, which in turn could result in lower impact.

  • By being fully compliant and holding itself to applicable KYC, AML and ESG standards, FMO can serve as an example to its peers and customers.

Enhance risk management (incl. ESG and climate). Invest in improving internal processes and productivity, automating and integrating reporting where possible.

  • Increasing requirements, without efficiency gains, will put additional cost pressure on FMO due to increasing FTEs and capital allocations.

  • As other market participants are also severely impacted by regulatory developments, FMO could partner with other DFIs and play a role to further remove barriers to commercial investors.

  • Increased scrutiny and risk of non-compliance may lead to risk-averse project selection which counteracts FMO’s role as a DFI.

  • Optimization of FMO’s balance sheet and capital management.

  • Non-compliance may result in reputational damage.


How to deal with increasing stakeholder expectations to apply home country ambitions and ‘one size fits all’ regulations to host countries despite differences in local legislation, regulations and political context.

  • Reputation risk due to a mismatch between the public perception of the role of FMO and the choices made to invest in certain projects.

  • Maintain a strong relationship with the Dutch government, aligning on ambitions where possible, to continue making high impact investments, enabled by the state guarantee.

Increase transparency on FMO’s investment decisions and continue to strengthen ESG risk management and impact measurement.

  • Misalignment or regulatory non-compliance with home-country ambitions and regulations leading to reputational damage.

  • Increase reporting on dilemmas, contextual differences and considerations made throughout FMO’s investment process.

How to achieve harmonization and collaboration among industry peers with different interests.

  • Seeking alignment in areas where interests differ considerably with respect to risk appetite, risk-return and supervision may be unproductive and lead to too much compromise.

  • Increase harmonization efforts among peers to better serve customers with respect to shared processes, requirements and reporting.

Focus harmonization efforts on FMO’s core SDGs, including further development of the joint impact model and contributing to harmonization of climate reporting.

  • Large-scale harmonization and collaboration could result in over-convergence and compromise FMO’s market position.

  • Combine forces with EDFIs to strengthen FMO’s position vis-a-vis regulators and governments

  • Collaborate with multilaterals, which can work with local governments, to exploit new opportunities to scale up impact.