G1 Business Conduct

G1 Introduction

At FMO, we are committed to sustainable governance and ethical business practices that drive positive economic and social impact. Our approach emphasizes transparency, accountability, and integrity in all our operations. By embedding these principles into our decision-making processes, we aim to foster trust among our stakeholders. Our framework ensures we adhere to ethical practices, comply with legal requirements, and integrate environmental, social, and governance (ESG) in decision making. Through due diligence, stakeholder engagement, and continuous monitoring, we uphold high standards of professionalism and corporate governance.

Governance

FMO’s administrative, management and supervisory structure consists of the Supervisory Board and Management Board of FMO. The Management Board collectively manages FMO and consists of five members. The Management Board independently assesses overall policies and risks. The Supervisory Board, comprising six members, oversees the management conducted by the Management Board. It guides FMO’s general business and risk management policies, always considering the interests of all stakeholders.

Given that FMO is an impact-driven development bank, members of the Management Board and Supervisory Board were selected and appointed because of their already present knowledge and experience regarding sustainability-related matters. The Management Board and Supervisory Board members have appropriate knowledge regarding development impact, human rights, sustainability-related matters. For a more detailed description of FMO’s corporate governance structure please refer to the section 'ESRS 2 - Governance of sustainability matters', the sub-chapter 'Corporate governance', and the chapter 'Report of the Supervisory Board'. 

Together, these bodies ensure effective governance, risk management, and a commitment to sustainable development at FMO.

G1 Impacts, risks and opportunities

We identified the following impacts, risks and opportunities (IROs) for business conduct during our Double Materiality Assessment (DMA). Table 52 gives an overview of how each IRO relates to the policies, actions and targets respectively.

Table 52. IROs and Policies and Actions and Targets

G1-1 Business conduct policies and corporate culture

FMO is actively cultivating a culture that values diversity, quality, integrity, and making a positive impact on society. We have an ambitious strategy towards 2030 and recognize the role of culture in long-term value creation. That is why we have aligned our values and behaviors with our long-term business priorities and sustainability goals. Our four values – Diversity, Integrity, Making the difference, and Quality – continue to represent what we believe in and shape our FMO culture. The behaviors that underpin each value have been developed, driven by employee input, to provide guidance on how we act on that value. We recently launched a multi-year program to focus on embedding behaviors to encourage common understanding and ensure that behaviors are actionable and meaningful for everyone in the organization. Through this initiative, including training programs and leadership development, we aim to create an environment where we work together to make decisions that are in the best interests of the environment, people and the economy and maximize our impact as one FMO.

Development occurs via training programs that promote ethical behavior and a commitment to diversity and inclusion through the FMO academy. FMO encourages open communication and recognizes employees who exemplify their values. Evaluation is conducted through regular feedback mechanisms and performance metrics including evaluation through our bi-annual employee engagement survey to ensure alignment with our cultural goals and overall mission.

Our corporate culture is cultivated by our Code of Conduct and compliance policies, which include safeguarding whistleblowers and steering clear of bribery, corruption, and other unethical behaviors. These key topics are outlined below.

Code of Conduct

FMO’s Code of Conduct reflects our commitment to diversity, integrity, quality and making the difference in all our interactions. It sets shared standards of behavior that guide our decision-making and the exercise of our judgment, outlining how we should conduct our professional activities both individually and as a team. FMO expects its employees to be aware of, and behave according to, the Code of Conduct and speak out when they feel that the business principles are threatened or compromised. Any business conduct issues that are raised are managed effectively, independently and objectively. Our commitment to an effective Code of Conduct is evident through regular trainings, for example our annual integrity awareness e-learning, and transparent reporting mechanisms. Our Speak up policy and process, and our internal grievance and complaint mechanisms help us monitor the effectiveness of the Code of Conduct.

In addition to complying with FMO's Code of Conduct, all employees have also taken the Dutch Bankers' Oath. The obligation to take the bankers' oath is stipulated in the Dutch Financial Supervision Act (Wft, article 3.17 b, section 2). This Bankers’ Oath and the related banking disciplinary regulations were introduced on 1 April 2015. All employees declare - briefly summarized - that they will perform their work at the bank with integrity and care and that they will act openly and verifiably. The latter means that employees also understand and accept that their conduct may be subject to disciplinary review.

G1-3 Anti-bribery and corruption

FMO is subject to the Dutch Criminal Code, which prohibits any form of active or passive bribery involving (foreign) government officials as well as private parties. Furthermore, FMO is subject to the anti-bribery and corruption laws of the countries where it operates in, or other anti-corruption laws that may apply, such as the U.S. Foreign Corrupt Practices Act (FCPA). FMO is guided by the OECD Convention on Combating Bribery and the UN convention against corruption (UNCAC).

Functions that are most at risk in respect to corruption and bribery are staff from the investment departments, and other colleagues that travel often and have in-person contacts. To mitigate corruption risks, FMO has established a comprehensive Anti-bribery and Corruption policy that applies to both the organization and its third-party representatives. This policy includes measures for reporting and training on anti-bribery and corruption practices. Any actual or suspected violations of the Anti-bribery and Corruption policy will be reviewed and investigated by the Compliance department. Compliance, as second line function, operates independently from any commercial, administrative or other control function and has direct access to the Management Board and the Supervisory Board. The Management Board is informed of violations through Compliance reporting.

Table 53. Minimum Disclosure Requirements for Anti-bribery & Corruption policy

Anti-Money Laundering and Countering the Financing of Terrorism

FMO is committed to implementing robust measures against money laundering and the financing of terrorism, in line with the Wet ter voorkoming van witwassen en financiering van terrorisme (Wwft) and the European AML/CFT Directives, which mandate a risk-based approach to combat money laundering and terrorism financing. Our Customer Due Diligence (CDD) and Anti-Money Laundering (AML) Policy establishes rigorous standards for customer acceptance and ongoing monitoring to prevent misuse of the financial system. By ensuring that we engage only with reputable customers, FMO aims to safeguard its integrity and mitigate potential regulatory and reputational risks including the risk of becoming involved in bribery or corruption. This policy is further detailed in the CDD/AML Manual, which guides our employees in recognizing and addressing financial crime risks effectively.

Table 54. Minimum Disclosure Requirements for Customer Due Diligence (CDD) and Anti-Money laundering (AML) policy

Protection of whistleblowers

FMO aims to establish a transparent process for reporting and investigating any suspected wrongdoings and/or any breach of law or regulation that may adversely impact FMO. Both employees and third parties can report any wrongdoings or suspicions anonymously. This allows FMO to be informed, address issues, and prevent future occurrences, while also learning from these situations to enhance business practices. Each report is carefully reviewed in a timely manner, ensuring that the investigation is conducted fairly for all parties involved. For further information regarding the rights and obligations please refer to the Speak up policy on the FMO website.

Table 55. Minimum Disclosure Requirements for Speak Up policy  

Mechanisms and procedures related to unlawful behavior

FMO runs the risk that employees or key partners may fail to comply with the FMO Code of Conduct. They may not meet legislative requirements related to anti-bribery, anti-money laundering, countering the financing of terrorism, and sanctions. This can be due to ignorance of FMO policies, lack of awareness of legal obligations, or inadequate consideration of societal and regulatory expectations, potentially leading to reputational, financial, and legal harm.

FMO is committed to mitigating this risk and address any concerns related to unlawful behavior or actions that contradict our Code of Conduct. Disciplinary action will be taken if employees do not act according to the Code of Conduct. Depending on the offence this can lead to a warning, suspension, or dismissal. FMO has a procedure in place to allow employees and externals and third parties to (anonymously) report suspicions of wrongdoings through our Speak-Up policy. A wrongdoing is a suspicion of an act or behavior (or the suspicion thereof) in relation to FMO that violates integrity standards, for example, unethical behavior, or bribery, fraud, or other criminal offences.

FMO has a Customer Due Diligence and Anti-Money laundering (CDD/AML) policy and a sanctions policy in place to combat unlawful practices such as money laundering and terrorism financing. Employees who do not comply with the CDD/AML policy and ensuing procedures and/or local laws and regulations must realize that they jeopardize FMO’s reputation and will be held accountable. This may lead to disciplinary actions including dismissal.

If an employee deliberately avoids or ignores information that could have led to the discovery of an unlawful activity, so-called ‘willful blindness’, FMO’s management will strive to enforce the appropriate measures. Depending on the offence this can lead to a warning, suspension, or dismissal.

Table 56. Minimum Disclosure Requirements for Sanctions policy  

Training in relation to business conduct

FMO provides training on policy requirements and corruption to internal and external employees as needed, aiming to ensure that employees are knowledgeable with respect to integrity-related topics concerning FMO’s customers, the organization itself, and their personal conduct obligations. The trainings are targeted at all levels of the organization, and specified to internal and external employees, high risk functions and management and supervisory boards. The nature of the training includes introduction and integrity training for new joiners, annual integrity refreshers and content specific presentations focused on key topics, e.g. data privacy, sanctions, risk management, and FIU notifications. In addition, the Supervisory Board and Management Board are supported to meet their compliance related obligations. The depth of the training is evident in the coverage of topics. As outlined in the following table, FMO employees are trained annually on the definition of bribery and corruption, the application legislations and the policy requirements in the context of FMO, the incident reporting procedure and the Speak up policy. High risk functions and the administrative management and supervisory bodies also receive classroom training in addition to computer-based training. This structure reinforces our Code of Conduct as well as the value of ‘Integrity’ as a fundamental principle engrained within the organization.

The following table shows the training coverage on the topic of bribery and corruption for the reporting period. FMO provided training to all employees, including those in high-risk roles (high risk roles include staff from the investment departments and other colleagues that travel often and have in-person contacts), managers, administrative staff, and members of the management and supervisory bodies. The training covers the definition of bribery and corruption, relevant policies and procedures, incident reporting, and the Speak-up policy.

Table 57. Training coverage on the topic of bribery and corruption 

Governance and compliance

Governance

FMO’s corporate governance structure is based on the premise that FMO has established a long-term partnership with various stakeholders who, directly or indirectly, influence or are influenced by the achievement of our objectives. Stakeholders include customers, the Dutch Government, shareholders and other providers of capital, employees, NGOs and local communities in the countries where we work, as well as partners.

FMO’s Management Board and Supervisory Board have set up a sound governance structure, which complies, with all relevant laws and regulations, including Dutch and European law, as well as the Dutch Corporate Governance Code and the Dutch Banking Code. FMO complies with the Dutch Banking Code or will otherwise explain where and how we diverge from this code in this report. A document titled ‘FMO and the Dutch Banking Code’ can be found on our website. For a more detailed description of FMO’s corporate governance structure please refer to the section 'ESRS 2 - Governance of sustainability matters', the sub-chapter 'Corporate governance’, and the chapter 'Report of the Supervisory Board'.

Compliance

As a licensed bank, FMO is subject to regulations across a wide range of regulatory topics. FMO runs the risk of not operating in accordance with the applicable rules and regulations. To mitigate this risk, FMO has a regulatory monitoring process that involves the identification, assessment and implementation of applicable regulatory changes. This process is set out in FMO’s Regulatory monitoring policy. FMO recognizes the risk that it may struggle to fulfill its mandate due to the necessity of balancing profitability, impact additionality, and compliance with Dutch and EU regulations.

Table 58. Minimum Disclosure Requirements for Regulatory Monitoring Policy

Potential positive impact on the corporate governance of customers

Through our engagement with customers on corporate governance (CG) we intend to create opportunities for positive impact while mitigating potential negative impacts of our investments. We identify dilemmas or issues, establish collaborations and partnerships, utilize technical assistance, provide trainings, and engage with customers or sectors aiming to shift mindsets or approaches. These efforts enable us to influence customer practices or potentially entire industries. Customers that elevate their corporate governance practices and demonstrate positive outcomes can transform business operations and may improve access to funding. Continuous monitoring and improvement of the corporate governance performance of our customers is crucial to creating value.

The risk that our Sustainability Policy Universe does not address the ESG impacts of our downstream portfolio

FMO has adopted the IFC Performance Standards (2012) as its operating standard. In 2016, we launched the Sustainability Policy Universe, a framework of documents and tools that guides us around environmental and social (E&S) impact management and in improving the corporate governance of our customers. Our Sustainability Policy was approved by FMO’s Management Board in 2016. The policy is complemented by position statements on human rights, land governance, fossil fuels and coal and on Impact and ESG for Financial Intermediaries. We are further guided by the United Nations Guiding Principles on Business and Human Rights, the OECD Guidelines for Multinational Enterprises and the Client Protection Principles. Our policies and position statements are available on our website, undergo targeted and public consultation with various stakeholder groups during the development process, and are formally approved by the Management Board. In addition, FMO conducts and commissions evaluations (e.g., thematic studies, investment studies, etc.) to reflect on its strategy, its business model, the effectiveness of its policies and processes, and the impact of its investments.

The risk that our Sustainability Policy is not implemented

The responsibility for implementing the sustainability policy lies with the investment departments, which are supported by the respective Impact and ESG+ departments. These departments are responsible for identifying the areas in which FMO can work with customers to minimize our negative impacts and optimize our development impacts, building customer capabilities and work for the integration of sustainable standards in our investment processes. The Credit department is responsible for performing an independent review of FMO’s impact assessments at an investment level.

Additionally, the risk management and internal control system in relation to the sustainability reporting process is partially integrated into FMO’s overall risk governance and risk management approach. Detailed information is provided in the 'Risk Management' chapter, in the section 'Risk governance' and sub-chapter 'Non-financial risk'. 

Control Monitoring and Testing is facilitated by Operational Risk Management (ORM) twice per year – in November and in June. ORM provides guidance, training and sampling instructions, and reports the results of control monitoring and testing, and the progress of control remediation to the Non-Financial Risk Committee (NFRC). Internal Control activities follow a yearly cycle and are aligned with the financial reporting process, because the results are used to substantiate the Management Board’s In Control Statement in the annual report. 

G1 Key actions

Systematic Integrity risk analysis

In 2024, FMO finalized the Systematic Integrity Risk Analysis (SIRA). The scope of the 2023/2024 SIRA involved the company wide integrity risks relevant for FMO. This included, amongst others, financial economic crime risks (including bribery and corruption risks) and market conduct related risks (such as market abuse and conflict of interest risks). The outcomes of the SIRA were discussed in the Management Board and Supervisory Board of FMO.

Quality of interaction (Values in action)

In relation to promoting an effective and healthy corporate culture, FMO has set up a program to integrate FMO’s core values into employee behavior through a structured implementation program (Values in action), covering four values and 12 behaviors, aimed at both employees and non-employees. The ultimate goal is to positively impact working conditions by embedding these core values into daily interactions, thereby enhancing the quality of interactions within the workforce. This initiative will contribute to our overall positive impact on the working conditions of our workforce.

Table 59. Minimum Disclosure Requirements for Actions

G1 Targets

FMO has not set any specific targets. Performance on business conduct related IROs is monitored through various internal procedures (see 'S1 - FMO entity specific metrics'; 'ESRS 2 - IRO management').  

G1-4 Incidents of corruption or bribery​

No incidents of corruption or bribery were reported during the reporting period; therefore, the number of convictions and number of fines for breaches is zero and no actions were required to be taken to address breaches.

G1-5 Political influence and lobbying activities​

Political influence and lobbying activities are represented by FMO’s internal compliance unit. FMO is a member of the EDFI. The EDFI is registered in the EU Transparency Register (REG 410540760-32) and as a member of the EDFI, FMO needs to comply with the transparency and disclosure requirements set forth by the EU to ensure accountability and integrity in its operations.

FMO is regularly in contact with the Dutch Government and the European Commission. The large majority of these contacts follow from (i) the role of the Dutch State as majority shareholder of FMO, for which the Ministry of Finance and the Minister for Foreign Trade and Development Aid are responsible, and (ii) the high impact funds for which FMO receives financial support from the Ministry for Foreign Trade and Development Aid, the European Commission and the UK Government. These contacts fall outside the scope of ‘the exercise of political influence’.

Annually, there are a few meetings in which FMO participates that could be considered part of a ‘lobby’. In 2024, the topics that have been discussed with the Dutch government and the EC that can be perceived as a lobby:

• Conversations on EU regulations to reflect realities of emerging markets. FMO participated in EDFI’s Sustainable Finance seminar, attended meetings at the relevant European Commission Director General (DGs) together with other Development Finance Institutions (DFIs), and gave an interview on the topic to the Financial Times.

• In 2024, discussions were held to explore opportunities for new, adjusted, or extended mandates for government programs relating to private sector development. Topics for discussion in 2024 were (i) the conversations about a new European Commission (EC) guarantee Dutch Fund for Climate and Development (DFCD) Aya, (ii) the Ukraine Investment Facility of the EU, and (iii) the start of Ventures 2.0. and (iv) upscale Mobilising Finance for Forests (MFF). 

Furthermore, following up on the general elections in the Netherlands, FMO had introduction meetings with five Dutch parliamentarians, all members of the Foreign Trade and Development Aid (FTD) parliamentary committee, and the newly installed Minister for FTD. In July 2024 our CEO made a public statement in support of international cooperation in an interview he gave to Dutch national newspaper the Telegraaf.

During the reporting period no financial contributions or contributions in kind were made. 

In 2024, a new Director (reporting to a Management Board member) was appointed who is also a member of the Dutch Senate. Before his appointment, a thorough assessment was made by FMO's Management Board together with Compliance. Based on this assessment mitigating measures were agreed upon and put in place. FMO is transparent about this potential 'conflict of interest' and has brought it to an acceptable level.