Reporting definitions

In this section, we provide an overview of the definitions of the key indicators reported in the Management Board report. Where possible, these have been aligned with internationally harmonized definitions.

2X Challenge

Eligibility for the 2X Challenge is assessed using evidence-based criteria pertaining to entrepreneurship, leadership, employment, consumption, and investments through financial intermediaries. These criteria have been translated into a set of indicators and harmonized with the Global Impact Investing Network’s IRIS+ system. Each of the metrics has relevant thresholds that companies or financial intermediaries need to cross or commit to crossing for an investment to qualify. 

A/B Loan

An A/B loan is a commonly used loan structure including an A-Facility, and a B-Facility. An A-Facility is provided by the A-Lender, who retains whole or portion of the loan commitment in their books (the A-Facility). A B-Facility is provided by the B-Lender, who sells whole or portions of the loan commitment to B-Participants. FMO can assume the role of B-Participant in an A/B Loan structure of other DFI's. 

Attribution

The allocation of impact to an investor based on its capital invested compared to the total value of the company, aligning to the PCAF Global GHG Accounting and Reporting Standard for the Financial Industry.

Bottom 40 percent

The population in the bottom 40 percent of the income distribution.

Development contribution

A development contribution is a product used to reduce risk, create value and/or catalyze impact for customers and prospects as well as support business and/or ecosystem development in low- or middle-income markets. A development contribution can be in the form of a development contribution grant, convertible development contribution, partnership development contribution, repayable development contribution, and technical assistance.

Energy production and equivalent number of people served

FMO tracks the amount of energy produced per year per project, based on customer reports. This is done both for direct customers such as corporates and operational projects, as well as for indirect customers, which are investees under funds. The reported energy production concerns grid production only. The off-grid energy production, for example from solar home systems provided by our customers, is excluded.

The number of people served via on-grid power generation projects is estimated by dividing the annual amount of electric energy delivered to customers by the power consumption per connected capita. The power consumption per connected capita is calculated as the electric power consumption per capita divided by the electrification rate.

Employee statistics

Employee developments

Employee developments included in the management report include the following:  

• Total number of internal employees: the total number of employees with a definite or indefinite employment contract with FMO N.V. at the last day of the reporting period. Interns are not included. 

• Number of permanent internal employees: the total number of employees with indefinite employment contracts with FMO N.V. at the last day of the reporting period. Interns are not included. 

• Number of temporary internal employees: the total number of employees with definite term employment contracts with FMO N.V. at the last day of the reporting period. Interns are not included. 

• Number of full-time internal employees: the total number of employees with full-time (40 hours) employment contracts with FMO N.V. at the last day of the reporting period. Interns are not included. 

• Number of part-time internal employees: the total number of employees with part-time (less than 40 hours) employment contracts with FMO N.V. at the last day of the reporting period. Interns are not included. 

• Number of internal FTEs: sum of the related full-time equivalents (FTE, as contractually agreed) of all internal employees at the reference date. 

• Percentage non-Dutch employees: total number of employees with a nationality other than Dutch divided by the total number of employees at the reference date. 

• Number of nationalities: total number of different nationalities of employees in service of FMO based on employees' passports when joining FMO. Note: if an employee has other nationalities in addition to the Dutch one, this will count as Dutch nationality. 

• Absenteeism: percentage of total sick leave (short, medium and long-term sick leave) calculated as total number of sick leave days divided by the sum of working days during the indicated reporting period. 

Diversity and inclusion

• Total number of employees; male and female, with percentage female by headcount. 

• Employees in senior and middle management: number of employees in a management position including members of the Management Board, directors, and managers at the end of the reporting period. Ad interim directors and managers with employment contracts with FMO are not included. 

• Number of new joiners: number of new joiners during the reporting period, being between the last day of the previous reporting period and the last day of the actual reporting period. Employees joining and leaving in the same reporting period are included as new joiners and as leavers.  

• Net growth percentage: number of new joiners minus number of leavers divided by the total head count at the start of the reporting period. 

• Number of leavers: number of employees leaving FMO between the first day of the reporting period and the last day of the reporting period. Employees joining and leaving in the same reporting period are included as new joiners and as leavers. 

• Staff turnover percentage: number of departures during the reporting period divided by the total head count at the start of the reporting period. 

• Share of bonus amount paid in the period: percentage of total bonus amount paid out to female and male employees related to the performance review over the previous year. 

• Promotion ratio in the period: the percentage (of a category) of employees progressing to a higher salary scale during the reporting period divided by the total number (of a category) of employees at the start of the reporting period. 

• Employee engagement score: engagement score based on latest employee engagement sent to
  all employees at least three months in service of FMO. FMO uses an external partner to process
  and report on the results.

• The gender pay-gap refers to the adjusted gender pay-gap, which is the difference in pay between women and men taking into account other factors that determine the pay such as type of work, working hours, job level, seniority, education, experience and performance.

ESG reporting

ESG risk categorization

During the early stages of the investment process, FMO screens all transactions on environmental and social (E&S) and corporate governance (CG) risk and categorizes them in accordance with our Sustainability Policy. This E&S classification is based on inherent risk, irrespective of how it is managed by the customer. It allows us to determine the relevant E&S requirements and the (initial) resources needed. We have the following categories available: A & B+ (high risk), B (medium risk) and C (low risk). The E&S risk category of most customers is relatively stable, but if the risk profile of a customer changes following, for example, a significant shift in a fund’s portfolio or pipeline, we adjust the categorization. The corporate governance (CG) risk categorization is assigned to our customers during early stages of the investment process. Customers can be categorized carrying low, medium or high CG risk and their score determines whether a specialist needs to be involved in the transaction. 

ESG performance target

To monitor the E&S performance of our high-risk customers, we use predefined tracking sheets structured around the IFC Performance Standards and international best practices. Our E&S specialists assess customers’ exposure to applicable risks (low, medium, high). Depending on how well they mitigate such risks, their efforts are rated as exemplary, good, satisfactory, caution and unacceptable. Our E&S specialists update the scoring after due diligence. The assessment is included in the financing proposal to support the investment decision. The rating gets evaluated again during annual review and when significant changes occur. In addition, before contracting, an independent validation of the information is carried out by an E&S specialist in the Credit department. 

To monitor performance on CG, the maturity of the corporate governance of a customer is assessed based on five CG attributes structured around a harmonized DFI approach based on the OECD Principles and international best practices. The officer assesses whether the maturity level (basic, emerging, or developed) is adequate for the company. The conclusion on the adequacy of the corporate governance considers the size, risks, and complexity of the company, country context and (absence of) strong CG regulations, as well as the track-record with FMO. If the CG maturity is considered inadequate, FMO agrees on a CG action plan with the customer. The assessment is included in the financing proposal to support investment decisions. The CG adequacy assessment gets evaluated again during annual review and when significant changes occur. The Credit department reviews and approves the CG tracking sheet as part of the transaction approval. 

E&S performance gaps

The overview of the ESG performance gaps in our portfolio was prepared in two steps. First, as part of our ESG performance tracking, we identified activities with a potential for (serious) adverse impact on people and/or environment that are not adequately managed. Second, we summarized the performance gaps by theme and prepared a table which illustrates the high priority issues that still require attention. 

The information was anonymized to respect customer confidentiality. 

Greenhouse gas (GHG) emissions

Absolute GHG emissions from FMO’s own operations

The absolute GHG emissions from FMO’s own operations are reported in line with the GHG Protocol. The emissions are calculated based on measured data collected internally, such as diesel/petrol consumption by leased cars, heating consumption of the FMO office in The Hague as well as information on commuting and flights.

Financed absolute GHG emissions

The financed absolute GHG emissions are reported in line with the Global GHG Accounting and Reporting Standard for the Financial Industry published by the Partnership for Carbon Accounting Financials (PCAF). We use the Joint Impact Model (JIM) to calculate our absolute emissions in line with the PCAF Global Standard. A full overview of the JIM application by FMO can be found on our website.

The financed emissions reported contain a large margin of error due to data quality and methodological uncertainties. First, for the majority of our customers we do not yet have direct emissions data, which means the emissions have to be modelled by the JIM. In addition, the PCAF Global Standard does not yet factor in investments in funds or loans to FI. FMO has made assumptions how to classify and calculate emissions for the investees of funds and the borrowers of FI customers in its portfolio. Data improvements and methodological refinements will be made in the future, which will affect our emissions estimations. In this context, we will also explore the possibility of reporting the PCAF data quality score to quantify progress.

Financed avoided GHG emissions

Avoided emissions are the emissions 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. GHG avoidance for renewable energy projects is calculated as the annual electricity production during the latest available reporting year, multiplied by the country emission factors in accordance with the International Financial Institution (IFI) harmonized list of emission factors (version 2.4).

The financed avoided GHG emissions are reported in line with the PCAF Global Standard, except we report avoided emissions for all our investments and use a slightly different emission factor for renewable energy.

Green-labelled investments

Definition

We steer towards SDG 13 by labelling our investments Green and setting an annual target on the volume of Green-labelled total new investments and total committed portfolio. This influences our customer selection, project preparation and investment decisions.

Green-labelled investments contribute to climate mitigation, climate adaptation or other footprint reduction (in terms of water, waste, biodiversity). Green labels are applied ex-ante for the new commitments in the reporting year. Please note that we apply the labels to new commitments, but that these are referred to as new investments throughout the report.

Whether an investment can be labelled Green is determined based on FMO’s Green criteria. For climate change mitigation and climate change adaptation, FMO’s Green criteria are in line with the IDFC-MDB list of Green investments. FMO’s Green definition also recognizes activities that do not directly target climate change mitigation or adaptation yet have a positive impact on the environment, including water efficiencies, water treatment, waste management and biodiversity conservation (other footprint reduction). 

Green investments need to honor two principles. First, they should contribute to a genuine improvement beyond the local regulatory requirements. Second, they should not contribute to a long-term lock-in of high-carbon infrastructure. Based on this, FMO has defined a non-exhaustive list of pre-approved eligible activities such as making, installing, distributing or financing renewable energy projects/products and agriculture in line with certain certification schemes. Improvements that are not included on this list may still be eligible if they honor the Green principles. In these cases, a minimum threshold of 20 percent improvement against a baseline needs to be substantiated. For example:

• Upgrade: if the investment is going towards an activity/equipment that is 20 percent more efficient than what it is replacing, FMO’s investment will be labelled Green based on the amount of FMO's investment going towards that specific upgrade.  

• Expansion: if the investment is going towards an activity that is 20 percent more resource efficient than the company's current practice, FMO’s investment will be labelled Green based on the amount of FMO's investment going towards that specific expansion.  

• Greenfield: if the investment is going towards an activity that is 20 percent more resource efficient than the norm in that region, FMO’s investment will be labelled as Green based on the amount of FMO's investment going towards that specific greenfield.

Approval process

Investments are labelled following a robust approval process. The deal team is responsible for assessing its investments based on FMO’s Green principles and Green definition. The deal team applies for a Green label through FMO’s Sustainability Information System (SIS), providing adequate substantiation for the Green eligibility of the financed activities. A credit specialist, independent of the investment teams, assesses the label request and determines the Green percentage to be applied pro-rata to the investment amount. For example, if FMO finances an agricultural holding that has 30 percent of its operations certified under a pre-approved FMO certification while the rest are not certified and don’t have other underlying Green elements, then the Green percentage for that investment will only be 30 percent. The approval process is traced and documented in SIS.

Scope

Ex-ante labelling is applied to the volume of Green-labelled new investments as well as the Green-labelled total committed portfolio. The volume of Green-labelled total new investments includes any increase in an existing commitment for an existing customer, a new commitment for an existing customer, or a new commitment for a new customer. 

Our criteria, the labelling process and documentation are enforced prior to providing a credit facility or making an equity investment. A detailed description of FMO’s Green methodology is available on our website.   

Human rights due diligence indicator

The total number of investment agreements in FMO’s portfolio for which E&S due diligence including human rights was performed or human rights clauses were included in the contract. This includes high E&S risk customers in our portfolio per 31 December 2023 with an approved E&S tracker.  

Jobs supported

Direct jobs are a common indicator for corporates and DFIs. It enables us to report on how our investments impact employment. Direct jobs are defined following the HIPSO definition as the “number of full-time equivalent employees as per local definition working for the customer company or project”. This includes directly hired individuals and individuals hired through agencies as long as those individuals provide on-site services related to the operations of the customer company. Also, this includes full-time equivalent work by seasonal, contractual and part-time employees.

Part-time jobs are converted to full-time equivalent jobs on a pro rata basis, based on local definition (e.g. if working week equals 40 hours, a 24 hour a week job would be equal to 0.6 FTE job). Seasonal or short-term jobs are prorated on the basis of the portion of the reporting period that was worked (e.g. a full-time position for three months would be equal to 0.25 FTE if the reporting period is one year). If the information is not available, the rule of thumb is two part-time jobs equal one full-time job.  

By using the JIM, we model the estimated indirect jobs supported by our portfolio. The modelled data by the JIM is expressed in headcount due to the unavailability of country employment data sources in FTE. Indirect jobs encompass supported jobs through supply chains, through the spending of wages, and economy-wide employment enabled by bank lending and the supply of electricity. The additional output requires more direct employment and intermediary inputs. This, in turn, leads to expansion among existing and new suppliers, thereby supporting and/or creating jobs. Some products and services – notably electricity and finance – remove constraints for other businesses, enabling them to expand and support and/or create jobs. In emerging markets, firm expansion is assumed not to displace employment in competing businesses to a significant extent.

All supported jobs indicators are reported using a PCAF aligned attribution factor to only report the supported jobs based on the proportional share of lending or investment in the borrower or investee.

Net Promoter Score

Net Promoter Score (NPS) shows the extent to which customers would recommend FMO to others, on a scale of 1-10. The customer is regarded as a 'promoter' (rating 9-10), 'passive' (rating 7-8) or as 'detractor' (rating 1-6), based on the score she gives. The NPS is calculated by subtracting the percentage of detractors from the percentage of promoters. The score is expressed as an absolute number between -100 and +100. FMO has reverted to sending the Customer Survey every second year, hence no results are available for 2023. The next survey will be conducted in 2024.

New admissible complaints received

Number of complaints filed with the Independent Complaints Mechanism (ICM) that were declared admissible by the Independent Expert Panel (IEP) are defined as 'New admissible complaints received'. When the IEP groups several complaints pertaining to the same project as one case, this is treated as one complaint. An admissible complaint is a complaint for which the IEP has decided that it meets the admissibility criteria. These are specified in the ICM policy, which can be accessed on our website.

Number of micro and SME loans

In line with the IFC definition, microloans are those that have an original value up to US$10,000 remaining on the customer’s balance sheet at the end of the reporting period, whereas SME loans have an original value between US$10,000 and US$1 million remaining on the balance sheet at the end of the reporting period. Both the number and volume of micro and SME loans are requested from our customers. 

Number of smallholder farmers supported

Smallholder farmers are defined as marginal and sub-marginal farm households that own and/or cultivate relatively small plots of land, have low access to technology, have limited capital, skills, and risk management, depend on family labor for most activities, and have limited storage, marketing, and processing. Smallholders are supported through our agribusiness customers who both source from the smallholders and provide technical and/or financial support, for example to improve production practices that have beneficial effects on yields, and/or reduce environmental degradation, and/or improve social practices during the reporting period. There is still limited data on smallholders economics, therefore counting the number of smallholder farmers supported can be used as a proxy. Information is collected directly from our customers via our impact questionnaires.  

Power generation target 

The power generation emissions include active investments that have production of electricity (NACE code 35.11) as their main economic activity. They are calculated based on customers’ Scope 1 emissions attributed in line with the PCAF Global Standard. For renewable energy customers without reported emissions data, the assumption is made that their Scope 1 emissions are zero. The outstanding amounts include FMO-A, public funds, and direct mobilized capital.

In order to compare performance year-on-year, data is aligned according to reporting year to the extent possible. Given that this annual report is published in early 2024, not all 2023 customer data (e.g. emissions data) was available. As a result, the reported 2023 power generation emissions combines 2022 customer emissions data with 2023 portfolio data from FMO (e.g. outstanding amounts). The 2023 number will be finalized in next year’s annual report. The 2022 power generation emissions are, in principle, finalized in this annual report based on 2022 portfolio data and 2022 customer data.

Reduced Inequalities-labelled investments

Definition

We steer towards SDG 10 – Reduced Inequalities - by labelling our investments according to pre-defined criteria and setting an annual target on the volume of RI-labelled total new investments and total committed portfolio. This influences our customer selection, project preparation and investment decisions.

FMO has defined two sub-categories of social projects through which we may contribute towards reducing inequalities: 1) investments in least developed countries (reducing inequality among countries) and 2) investments in inclusive business (reducing inequality within countries by growing the incomes of the bottom 40 percent of the population, empowering social, economic and political inclusion of all, and ensuring equal opportunity).

RI labels are applied ex-ante for the new commitments in the reporting year. Please note that we apply the labels to new commitments, but that these are referred to as new investments throughout the report.

Whether an investment can be labelled RI is determined based on FMO’s label guidance. For LDCs, FMO currently uses the United Nations (UN) list of least developed countries. The UN defines LDCs as low-income countries confronting severe structural impediments to sustainable development. Although the list is updated by the UN every three years, FMO uses the June 2017 list to keep target setting and steering manageable. However, from 2024 onwards, FMO has decided it will update the list used annually on January 1 if changes are made by the UN in the previous year. Since 2017, only two countries were removed from this list: Bhutan and Vanuatu. FMO currently does not have any exposures in these countries.

Investments in inclusive businesses expand access to goods, services and livelihood opportunities on a commercially viable basis, either at scale or scalable, to people at the Base of the Pyramid. This is done by making them part of companies' value chain of suppliers, distributors, retailers or customers. Deals are eligible for inclusive business in cases where they relate to investment in inclusive business: Microfinancial services; Financial services to underserved SMEs Agriculture SMEs; Rural SMEs; Women-owned or women-led SMEs; Youth-owned or youth-led SMEs; Irregular migrant (including refugee) owned or led SMEs; SMEs owned or led by other marginalized groups; Smallholder farmers as part of the value chain; Last-mile delivery of power; Basic goods and services to low-income and marginalized populations.

Approval process

Similar to Green labels, requests for RI labels are made through SIS. For the LDC sub-label, a request is not needed if the investment is single-country and the country of impact is the same as the country of risk exposure. A request for the LDC sub-label is only needed if the investment is multi-country with at least 50 percent of the investment expected to benefit LDC countries, or in the case the country of impact is an LDC and is different from the country of risk exposure. For the inclusive business sub-label, a request through SIS is always required. A deal team submits a request via SIS and substantiates the RI eligibility of the financed activities. For both LDC and inclusive business sub-labels requests, a credit specialist independent of the investment teams assesses the request and determines the RI percentage.

If the (sub)label is likely to be granted but more evidence is needed at contracting stage (e.g. evidence of a use of funds clause in the contract), the label request is conditionally approved. The final decision on granting the label is provided by the Credit Manager in a four-eyes principle. The approval process is traced and documented in SIS.

Scope

The scope as mentioned for the Green-labelled investments also applies to the RI-labelled investments.

Serious incidents

A serious incident is an occurrence/event that interrupts normal procedures related to an investment, customer, project, affected people, process and system. It can be of an environmental or social nature, occur on or near any site, plant, equipment or facility of a customer. It can result in the loss of life, have or be likely to have a material negative impact on the environment, health, safety and security situation, or the social and cultural context of a customer.

Taxonomy eligible activities

The EU Taxonomy is a regulatory classification system encompassing a standard set of definitions for sustainable economic activities centered around six environmental objectives. The tool aims to standardize reporting, provide clarity on what is sustainable and encourage investment flows towards sustainable projects and activities.

Starting in January 2022, financial undertakings in scope of the Non-Financial Reporting Directive (NFRD) were required to disclose Taxonomy eligibility on the two first climate objectives of the EU Taxonomy: climate change mitigation and climate change adaptation.  From January 2024, the requirement to disclose Taxonomy eligibility is extended to all six environmental objectives, namely climate change mitigation and climate change adaptation as well as the sustainable use and protection of water and marine resources; the transition to a circular economy; pollution prevention and control; and the protection and restoration of biodiversity and ecosystems.

An economic activity is a Taxonomy eligible activity when its definition corresponds to the economic activities described in the Climate Delegated Act of June 2021, the Complementary Climate Delegated Act of July 2022, the Delegated Regulation of November 2023 amending the Climate Delegated Act and the Environmental Delegated Act of November 2023. More specifically, an economic activity is eligible irrespective of whether it meets any or all the Taxonomy technical screening criteria laid down in the abovementioned delegated acts. Therefore, the fact that an economic activity is Taxonomy-eligible does not give any indication of the environmental performance and sustainability of that activity.

Taxonomy aligned activities

In addition to Taxonomy eligibility, starting in January 2024 financial undertakings in scope of the Non-Financial Reporting Directive (NFRD) are required to disclose Taxonomy alignment on the two first climate objectives of the EU Taxonomy: climate change mitigation and climate change adaptation.

An economic activity qualifies as Taxonomy aligned where that economic activity meets all the criteria below:

• Contributes substantially to one or more of the environmental objectives of the EU Taxonomy;

• Does not significantly harm any of the environmental objectives;

• Is carried out in compliance with the minimum safeguards laid down in Article 18 of the EU Taxonomy; and

• Complies with technical screening criteria that have been established by the Commission in accordance with Article 10(3), 11(3), 12(2), 13(2), 14(2) or 15(2) of the EU Taxonomy and are included in the abovementioned Delegated Acts.

New investments

Please refer to the section on alternative performance measures for the definition and scope of new investments.

Committed portfolio

Please refer to the section on alternative performance measures for the definition and scope of committed portfolio.  

Alternative performance measures 

An alternative performance measure (APM) is a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. In disclosing our performance, FMO uses specific APMs that are not defined by IFRS and are different to what is included in the financial statements. APMs should not be considered as alternatives to the equivalent IFRS measures but rather supplementary to the most directly comparable IFRS measures. Alternative performance measures do not have a standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other companies. FMO distinguishes between Impact and ESG APMs and Financial Accounting APMs.

Impact and ESG APMs 

Committed portfolio

Committed portfolio is an impact measure that is used for steering purposes. It measures FMO’s contribution and expected impact towards SDG 8 Decent Work and Economic Growth, a key strategic objective of FMO, and reflects the risk exposure taken by different risk parties. We distinguish between three business lines: FMO, funds made available by public entities ('public funds') and funds made available by other third parties ('direct mobilized funds').

The measure committed portfolio is not reconcilable with information included in the financial statements as it consists of a unique set of business rules. These business rules combine a mix of financial and non-financial information and data. The non-financial information is not required by IFRS and, as such, is not reflected in the financial statements.

The following table includes a breakdown of committed portfolio per business line and financial product.

Committed portfolio is the sum of outstanding amounts and remaining commitment amounts of the active debt, guarantee and equity investment transactions. Debt includes commercial loans, mezzanine loans and debt funds. Equity includes direct and fund investments, as well as investments made in associates. Guarantees include guarantees issued.

The outstanding amount for debt is equal to the principal outstanding amount reduced to the amount of the used Unfunded Risk Participation (guarantees received), if any; for the equity investments this is equal to the sum of fair value of the underlying assets. For guarantees, this is equal to the effective guarantees issued. The remaining commitment consists of the committed not disbursed amounts for all financial products mentioned, or in other words the principal amount available for disbursement to the customer by the funding party.

A non-material portion (less than 0.1%) of our total committed portfolio is double counted as a result of FMO’s equity investment in the SDG loan fund, which was launched in 2023 and participates solely in FMO loans. FMO’s equity stake in this structure is accounted for on FMO’s own books. Along with the equity provided by other investors, this is then used by the fund to participate in FMO loans that – once commitments are made – are accounted for as direct mobilized portfolio. Direct mobilized portfolio consists of funds provided by third parties that are not on FMO’s own books. In 2023, the fund participated in several FMO loans. As such, a small portion of FMO’s equity investment counts towards both FMO committed portfolio as well as direct mobilized committed portfolio. The impact on the 2023 results is not material and, therefore, is not corrected.

New investments

New investments is a strategic business measure used for steering purposes to ensure funds maximize impact on SDGs 8, 10 and 13. New investment refers to the volume of new commitments made to customers at the end of the reporting year (based on signed contracts), reported per party bearing the risk (i.e. FMO, public entities, other third-parties considered as direct mobilization). Volume is reported for all debt, equity and guarantee products and includes new facility agreements, limit increases, renewals of contracts and interest capitalization. It excludes transfers from one party to another or conversions from e.g. equity to debt. Grants provided through, for instance, the Capacity Development program and sub-delegated funds under management of third parties are excluded from the results.

The measure new investments is not reconcilable with information included in the financial statements as it consists of a unique set of business rules. These business rules combine a mix of financial and non- financial information and data. The non-financial information is not required by IFRS and, as such, is not reflected in the financial statements.

The following table includes a breakdown of new investments per business line and financial product. For a description of each financial product, refer to the section on committed portfolio.

A non-material portion (less than 0.1 percent) of our total new investments is double counted as a result of FMO’s equity investment in the SDG loan fund. In 2023, the fund participated in several FMO loans that counted towards total new investments. As such, a small portion of FMO’s equity investment counts towards both FMO new investments as well as direct mobilized new investments. The impact on the 2023 results is not material and, therefore, is not corrected.

Financial Accounting APMs

Regular income

FMO’s regular income relates to income following from financing activities and administrative services. Regular income excludes income related to value adjustments of financial instruments. Regular income includes net interest income, net fee and commission income, dividend income and remuneration from services rendered. These elements are visible on the FMO's consolidated statement of profit or loss.

Loan impairments and revaluations 

Loan impairments and revaluations relate to gains/losses following from value adjustments of FMO’s loan portfolio. Impairments can be reconciled to the consolidated profit or loss account. Revaluations include fair value gains/losses (presented under line item ‘results from financial transactions') arising from the loan portfolio measured at fair value through profit or loss (FVPL) and gains/losses due to derecognition.

Revaluation of equity investments

Revaluation on equity investments relate to the gains/losses following from valuation adjustments of FMO’s equity portfolio. These elements are visible on FMO’s consolidated statement of profit or loss.

Results on derivatives

Results on derivatives relate to gains/losses following from valuation adjustments of FMO’s treasury portfolio and foreign exchange gains/losses. These are included under the line item ‘results from financial transactions’ in the consolidated statement of profit or loss.

Return on average shareholders' equity 

A measure that indicates how the profitability is in relation to the average shareholders' equity. This metric is expressed in the form of a percentage that is equal to net profit/(loss) divided by the average shareholders' equity for the prior and current reporting year.

Return on assets 

A measure that indicates profitability in relation to total assets. The metric is expressed in the form of a percentage that is equal to net profit/(loss) divided by the total assets for a specific reporting year.

Non-performing exposure ratio

A measure expressed as the percentage of non-performing exposures. The ratio is calculated as gross exposure of the non-performing exposures (on balance) divided by the gross exposure of the total loan portfolio. For further details on this measure, refer to the sub-section on 'Non-performing exposures' included within the credit risk disclosures.

CET-1 ratio 

CET-1 ratio compares a bank’s capital against its risk-weighted assets to determine its ability to withstand financial distress. For calculation of the CET-1 ratio refer to the 'Capital Adequacy' section in the 'Risk management' chapter.