Report of the Supervisory Board
This was FMO’s first full year dedicated to implementing its updated Strategy 2030. The organization was able to work steadily towards maximizing FMO’s impact, after some turbulent years marked by the pandemic and organizational challenges.
The necessity to combat climate change, together with the urgently needed action to counter the downward spiral that leads to poverty and migration, clearly underscores that FMO’s mission becomes more important by the day. Meeting some of FMO’s clients in Zambia in June 2023 allowed the Supervisory Board to hear about the challenges and needs of entrepreneurs in emerging markets first-hand. It also showed the insecurities and complexities FMO’s markets face and that, consequently, enabling sustainable impact is no easy task. Rather, it is an art to identify opportunities, create inclusive and sustainable growth and use scarce resources to mobilize other investors.
Looking at the impact FMO made in 2023, we are pleased to see a growth in Green and Reducing Inequality-labelled total new investments, compared to 2022. Although the highly ambitious targets were not reached, these are nonetheless good results. Looking at the critical times we live in, the Supervisory Board supports setting targets to achieve the highest impact possible, even if external circumstances may often moderate final outcomes.
Through the Impact Committee, the external debate on carbon credits is closely followed. We are pleased to see that FMO is conscious of regulation and quality control in its choices. On the topic of implementing the Corporate Sustainability Reporting Directive (CSRD), we anticipate that it may be a challenge for an organization like FMO that already has a well-functioning reporting method to implement these new European guidelines. The Impact Committee also keeps a close eye on investments that did not turn out as foreseen. These cases need attention, diligence and a learning-focused approach.
FMO achieved a modest profit of €65 million. Although the political instability in some of FMO’s markets is still high, it was good to see that the non-performing loan exposure, at 9.8 percent, was lower than last year. As the Supervisory Board, we keep a keen eye on the trend in FMO’s regular income in relation to its organizational expenditures. In 2023, we see the two were well balanced. The impact ambitions towards 2030 do require the regular income to stay aligned with the expected higher operating expenses, largely driven by adapting to regulations and the hiring of more staff. The (delayed) effect of the high-interest rates with FMO’s customers will be an important factor as well. The renewed agreement with the Dutch State underpins FMO’s stable financial base.
In the years to come, market creation will add a new dimension to FMO’s work. The preparations for this new pioneering pillar have been finalized this year. We see great impact potential in aiding the growth of small businesses in emerging markets by making these businesses investment ready, leading to job creation, economic growth and stability. To be successful it will be essential for FMO to establish partnerships with parties that already hold local experience in ecosystem building and business development interventions.
Classification of FMO as a ‘World Class Workplace’ by Effectory and the improved engagement levels and work satisfaction of FMO’s staff are a good indication that organizational development is on the right course. The launch of the updated values and behaviors are an important step as well.
The last few years FMO has heavily invested in its KYC department and the compliance process. We fully support this. Being a gatekeeper to the financial system is a responsible position, required not only by law, but also expected by society at large. FMO has become more robust in this regard and needs to keep investing in its KYC process to remain on the right level.
After completing the Management Board last year - with five members now more in balance with the size of the organization - we are pleased to nominate a candidate for the vacant Supervisory Board position that will be proposed for adoption at the upcoming Annual General Meeting of Shareholders (AGM).
Looking back on 2023, we are proud to see that the FMO team has embraced the Strategy 2030 and is staying the course towards maximizing its impact. This forms a stable and promising base for the years to come.