Commercial mobilization

We scale our impact by mobilizing private capital from commercial investors. Commercial funding, which is especially lacking in countries and markets that are considered high risk, is essential for achieving the SDGs. The OECD reports that the annual SDG financing gap in developing countries increased by 56 percent to US$3.9 trillion in 2020 due to the pandemic. It is estimated that this gap could further increase to US$4.3 trillion between 2020 and 2025.13 To address this financing gap, and scale up impact towards the SDGs, we need to mobilize, among others, private sector investments. As such, mobilization is a key part of FMO’s strategy.

Mobilization occurs through direct and active engagements with our public and private partners, which invest alongside FMO. Mobilization includes loan syndications, participations by several private debt funds that FMO Investment Management (FMO IM) advises for and through unfunded risk participations by commercial parties such as Munich Re. A brief description of these funds is provided below.

ASN Green Projects Fund

FMO IM has been an investment advisor to the ASN Green Projects Fund14 since 2017. The investors are Dutch private individuals. The fund initially solely participated in renewable energy transactions, but in 2021 widened its scope to include investments in green credit lines to financial institutions. By the end of 2023, the fund had participations in 14 FMO loans for a committed portfolio of €39 million (2022: €33 million). All of these loans are fully or partially labelled as Green. Around 83 percent of the committed portfolio aims to contribute to climate mitigation or adaptation, while 10 percent aims to contribute towards reducing inequalities.

Cardano-FMO SME Finance Fund

The ACTIAM entity was acquired by Cardano in 2022 and renamed Cardano-FMO SME Finance Fund14 in 2023. The fund participates in FMO loans to financial institutions to improve access to finance for SMEs in emerging markets.

FMO Privium Impact Fund

By the end of 2023, the committed portfolio of the FMO Privium Impact Fund14 amounted to €128 million (2022: €132 million). Investors in the fund are mainly family offices and private banking customers including those with managed portfolios, based in the Netherlands, UK, Spain and France. Around 42 percent of the committed portfolio aims to contribute towards climate mitigation or adaptation and 36 percent towards reducing inequalities.

Munich Re

The Unfunded Risk Participation Program between Munich Re and FMO, which is managed by FMO, changed into a revolving structure. During its fourth investment year, Munich Re’s participation in terms of committed portfolio slightly decreased from €293 million in 2022 to €286 in million in 2023. By the end of 2023, the program participated in 41 FMO loans provided to financial institutions, renewable energy projects and agribusinesses. Around 28 percent of the committed portfolio aims to contribute towards climate mitigation or adaptation and 37 percent towards reducing inequalities.

The investors are mostly institutional investors based in the Netherlands. The fund’s end of life is drawing closer (2025), meaning the fund has been making cash distributions for a number of years. By the end of 2023, the committed portfolio of the fund decreased to €34 million (2022: €63 million) with investments in 26 financial institutions. Some 27 percent of the committed portfolio aims to contribute towards climate mitigation or adaptation and 60 percent towards reducing inequalities.

FMO Emerging Markets Loans Fund

GSAM acquired NN IP in 2022 and became the manager of this fund. In 2023, the fund was rebranded as FMO Emerging Markets Loans Fund.15 Compartment one has been fully invested, having made over US$400 million in commitments since 2018 and making regular cash distributions to its investors. The second compartment committed an additional US$30 million in 2023, having invested over US$138 million since it was launched. By year end 2023, the fund had 56 combined commitments to loans to financial institutions, renewable energy projects and agribusinesses. Of the committed portfolio, 31 percent aim to contribute towards climate mitigation or adaptation and 35 percent towards reducing inequalities.

SDG Loan Fund

Publicly announced and activated in late 2023, the US$1.1 billion SDG Loan Fund16 is the latest in FMO IM’s portfolio. Commitments to the fund, including those from Allianz and Skandia, are enabled by the first loss investment from FMO and the unfunded guarantee from John D. and Catherine T. MacArthur Foundation. Together, these credit enhancements mobilize institutional investors in emerging and frontier markets. This enables a mobilization ratio of 1:9, where US$1 of catalytic capital from FMO mobilizes US$9 of private sector capital. Allianz Global Investors manages the fund and FMO IM manages the loan portfolio. The capital of the fund will be invested as participations in FMO loans across FMO’s focus sectors. Once fully invested, the fund expects to support close to 60,000 jobs and to avoid approximately 450,000 tCO2 eq per annum. The fund has participated in the first 11 loans at a committed portfolio of €93 million. Around 37 percent of the committed portfolio had a Green label and 48 percent had an RI label.

13 OECD (2023). Global Outlook on Financing for Sustainable Development.

14 The FMO Privium Impact Fund, Cardano–FMO SME Finance Fund and ASN Green Project Fund are subject to the EU Sustainable Finance Disclosure Regulation (SFDR) and have been declared Article 9. While FMO itself is not in scope of the SFDR, it has the obligation to deliver information to the best of its ability. Initial disclosures have been made by the fund managers in 2021 and 2022. Some future requirements may be challenging to fulfil as many of the companies invested in are outside of the EU and thus not subject to EU disclosure directive.

15 The FMO Emerging Markets Loans Fund, due to its legal structure as an unregulated securitization vehicle, does not fall under the SFDR.

16 The SDG Loan Fund is an article 8 fund under the SFDR.