External environment

The global landscape is evolving through a series of complex and interconnected challenges, including disruptive technologies, the climate crisis, geopolitical fragmentation and an increase in violent conflicts, particularly in FMO's geographies, with worsening impacts on our customers. These factors are testing the resilience of an international system that was established in the wake of World War II. Yet, while uncertainties persist, they also present opportunities for innovation and stronger global cooperation. In a year where tension among countries has increased, we have made strides in deepening our collaboration with peers. True to the proverb, ‘If you want to go fast, go alone; if you want to go far, go together’, we boosted our mobilizing efforts, deepened our partnerships with the EU and joined forces with other institutions to drive economic development. This chapter outlines the key global and regional trends and developments in 2024 that impacted our work and influenced our strategic decisions.

Global trends affecting our markets  

Persistent geopolitical tensions and instability…

Geopolitical risks remained high throughout 2024. In the Middle East alone, the war in Gaza further escalated and spread into Lebanon, tensions between Israel and Iran increased, sparking fears of further violence, and we witnessed a sudden regime change in Syria at the end of the year. All of this has left the region in a state of deep turmoil. Meanwhile, the ongoing war in Ukraine and continuing tensions between Taiwan and China remain unresolved hotspots with (potentially) far-reaching geopolitical implications.

Elsewhere in the world, including several countries in which FMO operates, localized conflicts pose a threat to economic development. In Africa, for example, these include the escalating violence in Sudan; an increase in attacks by Al-Shabaab, especially in Kenya; Islamic insurgents wreaking havoc in countries such as Chad, Mali, Niger and Burkina Faso; and persistent tensions between Egypt and Ethiopia; and ongoing conflict in the DRC, particularly in the Goma and Kivu areas, as well as rising tensions between the DRC and Rwanda. There is also an increasing likelihood of proxy-wars that could destabilize entire regions.5 In addition, we have witnessed the eruption of violence following elections in several countries, including Georgia and Mozambique.

FMO remains vigilant in monitoring these developments closely and providing the support our customers need in these challenging circumstances.

…with direct implications for economic prospects

Conflicts, civil unrest, institutional instability and political volatility have all contributed to dampening economic prospects across the globe. Eroding social structures, contested democracies and changing global power dynamics are exposing systemic vulnerabilities that threaten economic stability and wellbeing. As a result, growth in 2024 in most parts of the world remained stable but slow. As an example, supply chain disruptions, with causes ranging from adverse climate events to the Houthi attacks on commercial shipping vessels in the Red Sea, have driven price instability and reduced productivity.6

On the upside, 2024 saw the further gradual easing of inflation and a shift to looser monetary policies, with better-than-expected employment and private consumption figures having a positive impact on the global economy. We continued to see technological innovations, for instance in the renewable energy space, artificial intelligence (AI), and biotechnology and health.7

As a result, global GDP growth is expected to have reached about 3 percent in 2024, but with notable regional differences. In South Asia, for example, projected growth is 6.4 percent, largely driven by India (6.7 percent).8 In Latin America, growth remained slow at a predicted 1.9 percent but is expected to pick up in the coming years.9

In Sub-Saharan Africa growth averaged around 3 percent in 2024, but that figure disguises a wide range of national performances. From a country in turmoil like Sudan whose economic activity collapsed causing its GDP to contract (-15 percent) to countries such as Côte d’Ivoire (6.5 percent), Uganda (6 percent) and Tanzania (5 percent), that are all outperforming that regional average, with growth mainly driven by the service sector, increased public spending and higher investments10. Overall, however, Sub-Saharan Africa’s recovery from the pandemic remains sluggish compared to other regions. Depreciating currencies and lower investor risk appetite have increased the cost of funding and debt-service costs. Policies are needed that will stimulate investments and economic activity while simultaneously tackling poverty and inequality.11

Election results will put sustainable development financing under pressure

About half the world’s population went to vote in 2024, with 70 countries holding national elections. In many, the incumbent parties were voted out of office or performed worse than in the previous election.12

In the United States, the new administration has announced changes to global trade policies, its geopolitical agenda and development cooperation. In many European countries (e.g. Germany, Austria, Romania), as well as in the European Parliament, national and regional elections have seen a shift towards populist parties. These parties have taken a more critical stance towards the international climate agenda and globalization, and highlighted national security and migration as key concerns in their campaigns. Additionally, in the Netherlands, a new coalition government took office in July 2024, with plans to sharpen and simplify development policy and reduce the development budget.

As official development budgets might shrink in many of these countries, private sector approaches have started to gain more attention. To close the SDG financing gap and continue supporting developing and emerging countries in their efforts to achieve sustainable development, it will therefore be more important than ever that FMO and its partners continue to blend financial instruments and mobilize private capital to get maximum leverage out of the scarcer official development resources available.

It is estimated that the financing gap to achieving the SDGs has grown from around US$2.5 trillion before the pandemic to some US$4 trillion now.13 In addition, only 17 percent of SDG targets are on track to be met by 2030, making it even more worrying that new funding for the SDGs dropped in 2023 by over 10 percent.14

Poverty, inequality and climate: intersecting challenges needing urgent attention

The aftermath of the global pandemic, a rise in conflicts and violence across the globe, and recent inflationary shocks have combined to derail progress made over the past 30 years to alleviate poverty and reduce inequalities. Moreover, adverse climate events tend to disproportionately affect the poorest, disrupting their livelihoods, depleting their savings and forcing them to flee their homes.15 It is estimated that 69 percent of climate-related deaths occur in the 46 LDCs, and yet LDCs have contributed only minimally to the continued acceleration of climate change. In its 2024 Development Cooperation Report, the OECD warns that without appropriate action, the disruptive localized impacts of climate change will further entrench poverty and inequality between now and 2030.

All of this underscores just how critical it is that, together with the private sector and partners, FMO continues to seize opportunities to ensure financing is there to help develop economies, reduce inequalities, enhance food security and address climate change. In short, FMO remains committed to making a difference during these challenging times.

Expanding regulations that impact FMO

Financial institutions are required to responsibly manage the impact of their operations and value chains on the environment and local communities. Regulators and supervisors are continuously updating standards and setting new ones for companies to adhere to. In this section, we highlight the most important changes and updates to some of the regulations that (are most likely to) impact FMO.

Basel IV

The final texts of the Capital Requirements Regulation 3 (CRR3) and Capital Requirements Directive 6 (CRD6) were published on 19 June 2024. With this new banking package, the final Basel 3 reforms have been implemented in the European Union (EU). CRR3 entered into force on 9 July 2024 and applies directly in all EU Member States as of 1 January 2025, with the exception of specific amendments. The CRD6 entered into force on 9 July 2024, but as a Directive the changes will need to be transposed into national law in each Member State before they become applicable. The Dutch Ministry of Finance has 18 months to implement the new CRD6 into Dutch legislation. The provisions of CRD6 must largely be applied from January 2026. The final text of CRR3 contains a higher risk weight for equity investments. FMO will also be required to apply a higher capital charge for other types of credit risk exposures (e.g. debt funds) and for market risk. FMO expects to file its first COREP templates according to the new standards to DNB in June 2025. Further information is provided in the 'Risk management' chapter.

Climate and environmental related impacts and risks

The new CRR3 and CRD6 package includes several amendments in relation to ESG risks as drivers of traditional financial risks. ESG risks are considered (external) factors affecting existing risk categories, and banks are required to systematically identify, disclose and manage ESG risks as part of their risk management, including regular climate stress testing. Furthermore, CRR3/CRD6 introduces amendments regarding possible capitalization for ESG risks, and adjusted risk weights for assets with high levels of climate risk. Most notably, FMO is required on an annual basis starting in 2026 to disclose ESG risks as part of its Pillar 3 disclosures.

In 2020, the European Central Bank (ECB) published guidance on the safe and prudent management of climate-related and environmental (C&E) risks. The ECB also published a collection of good practices. In line with the DNB expectations, in 2024 FMO continued to align internal processes, disclosures, business strategy and risk management with the ECB guidance on managing C&E risks. Further information is provided in the chapters 'Risk management' and in the 'Sustainability statement'.

EU Taxonomy

In 2020, the European Commission introduced a taxonomy for sustainable activities for financial and non-financial companies. This classification system defines criteria for economic activities that are aligned with a Net Zero trajectory by 2050 and broader environmental goals than climate alone. The regulation is still in development. Since 2023, banks have been required to report their level of taxonomy alignment with the first two environmental objectives, as well as taxonomy eligibility on all six environmental objectives. Refer to the 'EU Taxonomy' section for further details on likely impacts for FMO.

Corporate Sustainability Reporting Directive

The CSRD was adopted by the European Commission in 2023, but has not yet been transposed into Dutch law. The CSRD revises and extends the requirements of the current EU Non-Financial Reporting Directive (NFRD). As a large public interest entity, FMO is in scope of the NFRD and is, therefore, among the first group of companies in scope to implement the CSRD. FMO adheres to the requirements of the CSRD in anticipation of its upcoming transposition into Dutch law. By implementing the CSRD, FMO covers all aspects required by the NFRD that is still applicable to FMO under the current situation. Companies subject to the CSRD have to report according to the European Sustainability Reporting Standards (ESRS). This is the first year that FMO is publishing a report that is in accordance with the ESRS.

The regulation, however, may change in the near future following the recent Omnibus packages that were submitted to the European Parliament on 26 February 2025, aimed at reducing the complexity of EU requirements for all businesses. We will closely monitor these developments and determine what the implications are for FMO in the future. 

Corporate Sustainability Due Diligence Directive

The Corporate Sustainability Due Diligence Directive (CSDDD), effective from 25 July 2024, will be transposed into national law by 26 July 2026 and fully applied by 26 July 2029, requiring large companies to conduct due diligence across their value chains to address human rights and environmental impacts. While FMO is currently outside its scope—given its size and the exclusion of financial institutions' downstream value chains—the directive may affect FMO's due diligence if it falls within the scope in 2029 and the value chain exception is removed. FMO has assessed the limited immediate impact and plans to reassess in 2026.

The Digital Operational Resilience Act

The Digital Operational Resilience Act (DORA) is a European regulation aimed at establishing a uniform and comprehensive framework for digital operational resilience across the EU financial sector. DORA provides a single set of rules for the use of ICT systems by financial institutions, focusing on governance and board responsibilities, ICT risk management, security and business continuity, resilience testing, and third-party risk management. DORA applies from 17 January 2025. While FMO has progressed significantly on DORA implementation, FMO is currently in the process of outsourcing its data center. This is envisaged in April 2025, for which related key controls will be updated in accordance with DORA as of then.

5 ACLED, 2024: Regional Updates
6 World Economic Outlook, October 2024: Policy Pivot, Rising Threats
7 MIT, 2024: 10 Breakthrough Technologies 2024 | MIT Technology Review
8 World Bank, October 2024: South Asia Development Update
9 World Bank, October 2024: LAC Economic Review
10 WB 2025: Global Economic Prospects, January 2025
11 World Bank, October 2024: Africa’s Pulse
12 Global elections in 2024 - Statistics & Facts | Statista
13 UN DESA (2024) Financing for Sustainable Development Report 2024 | DESA Publications
14 UN STATS (2024) — SDG Indicators
15 OECD (2024). Development Co-operation Report 2024 | OECD

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