ESRS 2 Basis for preparation

Reporting frameworks

The sustainability statement of FMO is prepared on a consolidated basis. The Commission Delegated Regulation (EU) 2023/2772 comprising the ESRS form the basis of our 2024 sustainability statement preparation. In addition, we have applied the Partnership for Carbon Accounting Financials (PCAF) Standard to report on financed greenhouse gas (GHG) emissions and the EU Taxonomy to report on Taxonomy eligibility and alignment activities that qualify as environmentally sustainable under the first two defined environmental objectives (climate change mitigation and adaptation). No other reporting standards have been used.

Consolidation

The scope of consolidation for the sustainability statement is equal to the scope of consolidation for the financial statements. For additional details on the accounting of FMO’s subsidiaries, joint ventures, associates and programs, please refer to section ‘Group accounting and consolidation’ in the 'Consolidated financial statements' chapter.

FMO also receives funds from the Dutch government for MASSIF, Building Prospects and Access to Energy Fund. Furthermore, FMO receives funding for the Mobilising Finance for Forests (MFF) from the UK government. These public funds are reported from a value chain perspective, as explained in the following section.

Scope

Our 'Sustainability statement' covers FMO’s value chain, including FMO’s own operations as well as specific upstream and downstream activities. An overview of FMO’s value chain has been included in the section 'ESRS 2 - Strategy, business model and value chain'.

The double materiality assessment considered FMO’s own operations, FMO’s upstream value chain, including key suppliers and the attraction of third-party capital, and our downstream value chain with respect to customers we invest in across our three core strategic sectors.

As a development finance institution (DFI), the most material impacts, risks and opportunities occur through our financing and engagement with our customers (i.e. our investment portfolio) in the downstream value chain that operate within FMO’s strategic sectors.

In our sustainability reporting, where relevant, we distinguish between three business lines: FMO’s own balance sheet, funds made available by public entities ('public funds') and funds made available by other third parties ('direct mobilized funds'). The following metrics are disaggregated according to the proportional share of funding provided by each business line: RI-labelled total new investments, Green-labelled total new investments, number of jobs supported, total gross indirect (scope 3, category 15) GHG emissions, and financed avoided GHG emissions.

Where FMO has identified a material impact, risk or opportunity in its value chain, we report on value chain information or data. If there is no value chain data available, we use estimates. The methodology used to calculate metrics, including where estimations or calculations are performed, is noted alongside the disclosure. The table included in the section 'Value chain estimation and sources of estimation (degree of reliability)' summarizes the metrics for which estimates were used.

FMO has not used the option to omit specific information corresponding to, for instance, intellectual property, know-how or the results of innovation.

Time horizons

Short, medium and long-term time horizons are defined in line with the ESRS definitions. When applicable, deviations from these time horizons are clarified within the respective disclosures. Other time horizons were considered in FMO's climate risk assessment as further explained in 'E1 - Impacts, risks and opportunities'.

Value chain estimation and sources of estimation

For reported metrics where (value chain) estimates are used and which are subject to a certain level of measurement uncertainty, please refer to the following table.

This table includes the following guidance for reliability:

High: the reported metric is fully based on primary metric data (e.g. primary metric data for financed emissions is emissions data reported by customers).
Medium: the majority of the reported metric is based on primary metric data. The other part of the metric is estimated, for example using activity data (e.g. revenues, power production).
Low: the majority of the reported metric is estimated, for example using activity data (e.g. revenues, power production).

Table 1. Metrics and data subject to measurement uncertainty

ESRS topic	Metrics	Methodology used including (value chain) estimations	Degree of reliability	Actions to improve data quality
Climate change (E1)	Gross scope 1 and 2 emissions, scope 2, scope 3 category 6 and category 7 GHG emissions	The emissions are calculated based on measured data collected internally, such as information on commuting and flights and heating consumption of the FMO office in The Hague.	High	No further actions needed
	Gross scope 3 category 15 GHG emissions (financed absolute GHG emissions)	Where primary GHG data is not available, financed emissions are estimated using the Joint Impact Model (JIM). The majority of FMO’s financed absolute GHG emissions are estimated with the JIM. The JIM modeling has clear limitations and it depends on 6 simplistic assumptions. Assumptions of the model include: No supply and capacity constraints (model assumes additional output is generated regardless of the availability of resources [e.g. labor, raw materials, production capacity], which may be tied up in other activities), fixed prices (price changes in the local economy are not considered, thus prices do not constrain input availability), and sector averages (all companies in a certain sector have the same production structure). FMO is using the JIM model 3.1.6 (referencing GTAP 11A database) for this statement. For additional details on the assumptions and limitation associated with the JIM, please reference The JIM Methodology on FMO's website.	Low	Continuously increase primary data collection and improving JIM estimations
	Avoided emissions	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 3.2). For avoided emissions in other sections, all figures are based on data reported by our clients.	Low	Further refine estimation and verification methodologies
	Power generation target	Emissions data for fossil fuel customers is based on reported data by customers or estimated based on power production. For renewable energy customers without reported emissions data, the assumption is made that their scope 1 emissions are zero.	Medium/High	For the purpose of the target, no further actions are required
Workers in the value chain (S2)	Number of direct jobs supported	FMO mainly relies on primary data for reporting on direct jobs which are provided by the customers and reviewed by FMO. However, when this data is not available, the JIM model will estimate the number of direct jobs based on the customer’s available financials, sector and country of operations. The JIM modeling has clear limitations and it depends on 6 simplistic assumptions. Assumptions of the model include: No supply and capacity constraints (model assumes additional output is generated regardless of the availability of resources [e.g. labor, raw materials, production capacity], which may be tied up in other activities), fixed prices (price changes in the local economy are not considered, thus prices do not constrain input availability), and sector averages (all companies in a certain sector have the same production structure). FMO is using the JIM model 3.1.6 (referencing GTAP 11A database) for this statement. For additional details on the assumptions and limitation associated with the JIM, please reference The JIM Methodology on FMO's website.	Low	Continuously increase primary data collection and improving JIM estimation
Own workforce (S1)	S1-16 – Remuneration metrics (pay gap and total remuneration)	In order to determine the median total salary of all employees, the median of the total fixed remuneration was utilized and converted into a total annual remuneration amount. This adjustment was necessary because not all required reports were available at the time of calculating the median of the total remuneration of the entire employee population.	High	We aim to align the methodology with the applicable regulatory requirements

Changes in preparation or presentation of information

Until the financial year 2023, FMO prepared its sustainability-related information in accordance with the GRI Standards and by following the principles of the Integrated Reporting Framework. For the financial year 2024 onwards, FMO reports according to the ESRS. As this is the first year of ESRS implementation, changes in the preparation and presentation of sustainability information are not applicable. However, when relevant, changes in preparation or presentation of previously reported metrics are explained alongside the disclosures in which our sustainability-related metrics are presented.

Comparability of information

FMO reports on ESRS-defined and entity-specific metrics that are used to evaluate the performance and effectiveness of material impacts, risks or opportunities. For ESRS-defined metrics which are material, FMO applies the transitional provision related to section ESRS 1 7.1 Presenting comparative information and, as such, excludes comparative information.

FMO acknowledges that comparability of sustainability information between entities and over time may be affected by the lack of historical sustainability information presented in accordance with the ESRS and by the absence of a uniform practice on which to draw, and to evaluate and measure this information. And that this allows for the application of different, but acceptable, measurement techniques, especially in the initial years.