Our strategy
At FMO, we believe in a world in which, by 2050, more than 9 billion people live well and within planetary boundaries. This is the future we are working towards. This is the world we want to help make a reality.
Our work is guided by the three Sustainable Development Goals (SDGs) where our financing of the private sector can have the greatest impact in emerging markets: Decent Work & Economic Growth (SDG 8), Reduced Inequalities (SDG 10), and Climate Action (SDG 13). As progress towards achieving the SDGs lags worldwide, with poverty reduction stalling or reversing in many countries, inequality deepening, and the urgency of the climate crisis intensifying, we deem our work more relevant than ever. By strengthening collaboration with our partners, we aim to maximize our impact to counter these trends. Our contribution to SDG 8 is reflected across our entire portfolio through support for economic development and jobs, while we steer investments toward SDGs 10 and 13 through dedicated investment labels.
To focus our efforts, we have set clear impact ambitions for 2030. We aim to build a portfolio11 of debt and equity investments of at least €10 billion in support of SDG 10 (Reducing Inequalities-labelled investments) and €10 billion in support of SDG 13 (Green-labelled investments) and achieve 10 meaningful innovations by 2030. We also aim to double our public and mobilized portfolios. Acting as a change agent on environmental, social and governance (ESG) issues, we aim to create value with our customers and together, drive impact in the societies and communities where they operate. The 2030 Strategy: ‘Pioneer-Develop-Scale’ depicted on the previous page provides an overview of our key ambitions for 2030.
Pioneer-Develop-Scale
To achieve our 2030 ambitions, we pioneer, develop, and scale across three focus sectors: Agribusiness, Food & Forestry (AFF), Energy (EN), and Financial Institutions (FI). By focusing on these sectors, our portfolio contributes to food security, access to renewable energy, and a healthy financial sector, key enablers of inclusive and sustainable development. In addition to investing debt and equity in our focus sectors, we selectively invest in generalist private equity and venture capital funds because of their demonstrated impact on developing the private sector in low- and middle-income countries (LMICs).
Agribusiness, Food & Forestry12 – accelerating sustainable and resilient agricultural supply chains to increase food security
More than 800 million people worldwide face severe food insecurity, and an even greater number lack access to nutritious foods. In Africa, population growth, rising incomes, and urbanization are driving food imports to unsustainable levels, exceeding US$60 billion per year. This undermines local economies and harms farmers.
Improving access to food is crucial for reducing inequality, and it requires higher economic development in rural areas and greater investments across agricultural supply chains. At the same time, transforming the agricultural sector is critical given its dual role as both a significant contributor to greenhouse gas emissions and one of the sectors most vulnerable to the impacts of climate change.
We address these challenges by supporting sustainable and climate-resilient practices throughout the agricultural and food supply chain. We also work to enable local supply chains to increase production and improve access to local food, while reducing food waste and reliance on imports. Moreover, we aim to increase the number of jobs supported and improve the quality of jobs, focusing on decent work and the inclusion of smallholders and women in supply chains.
These challenges also present local and global opportunities for food and agribusiness companies that can effectively manage rising climate risk and supply chain volatility and develop the know-how to operate in weak enabling environments marked by poor infrastructure, limited access to finance, and social and political instability. Besides meeting increased local food needs, farmers, processors, and exporters in developing economies can also tap into the global demand for commodities such as pulses, cocoa, coffee, cashews, avocados, and tropical fruits.
FMO invests in integrated supply chain managers, input providers (e.g., fertilizers, seeds), and food companies to strengthen sustainable practices along (international) agricultural supply chains. We also continue to expand our integrated landscape approach to sustainable land use and ecosystem protection and restoration. We have strengthened our strategic focus on the forestry sector given its crucial role in climate mitigation (through carbon sequestration and avoided emissions), climate adaptation, and biodiversity conservation. As part of this shift, we have moved from a narrower plantation-centric approach toward a broader range of forestry business models, including conservation and restoration, as well as sustainable forest management.
Forestry, however, remains a complex sector to invest in due to the unique risks associated with long project timelines, exposure to adverse natural events, and political economy challenges, especially in frontier markets. To address these constraints, we use blended finance and public funds programs (e.g., Building Prospects, the Dutch Fund for Climate and Development – DFCD, and Mobilising Finance for Forests – MFF) to gradually scale up our forestry portfolio. Through our work in forestry, alongside climate-smart and regenerative agriculture and soil improvement, we support customers in strengthening their supply chains and aligning their activities with the goals of the Paris Agreement.
Energy – driving and supporting sustainable energy access and transition
Limited access to affordable, clean, and reliable, energy is a key impediment to economic growth and human development. While progress has been made in recent years with 91 percent of the world’s population now having access to energy compared to 78 percent in 2000, we continue to see stark regional disparities.
Of the people in the world without access to energy, 75 percent live in Africa.13 Enabling energy access in emerging and developing economies is therefore crucial for sustainable development, with a primary focus on clean energy to reduce global CO₂ emissions and achieve internationally agreed climate targets. Investments in renewable energy solutions must therefore increase in these markets to meet their growing energy demand and decouple economic growth from rising emissions.14
FMO supports a low-emissions future in emerging and developing markets by investing in utility-scale clean energy generation projects, including solar, on- and offshore wind, hydropower and geothermal installations. We aim to phase out fossil fuels from our portfolio in line with our Combined Position Statement on Fossil Fuels.15 Separately, for our power generation portfolio, we aim to reduce absolute financed greenhouse gas (GHG) emissions by 50 percent by 2030.
To ensure power grids can accommodate the growth of clean energy, we invest in transmission and distribution infrastructure, as well as storage solutions. We are also exploring the potential of new technologies, including green hydrogen. Additionally, we finance distributed energy solutions, including commercial and industrial (C&I) solar projects and decentralized grids that provide clean, reliable electricity to businesses and communities, bringing energy supply closer to end-users.
We are expanding cautiously into new energy-related sectors. For example, we are investing in e-mobility to accelerate the decarbonization of road transport. In addition, we are pursuing opportunities in water desalination (a highly energy-intensive process) by investing in desalination plants that use more energy-efficient technologies and are largely powered by renewable energy.
With renewable energy investments heavily skewed to the more advanced economies, we aim to reduce disparities in access to clean energy by expanding our portfolio in least developed countries (LDCs). We do so not only through our investments in renewable energy projects but also through our market creation activities. Finally, we aim to reach underserved rural areas and the bottom 40 percent of income distribution by investing in mini-grids and rooftop solar installations, mainly through the public funds under our management.
Financial Institutions – creating inclusive, resilient, and sustainable financial sectors
A healthy financial sector and access to finance are cornerstones of a strong economy and a private sector that fosters entrepreneurship, stimulates economic growth, and creates jobs. Micro, small, and medium enterprises (MSMEs) play a critical role in the economic development of emerging markets through their contributions to employment and GDP; however they face a significant lack of access to finance. The International Finance Corporation (IFC) estimated that the MSME financing gap across 119 emerging and developing economies is estimated at approximately US$5.7 trillion, equivalent to 19 percent of GDP across these economies and 20 percent of total private sector credit.16
Through FMO’s investments in financial intermediaries, we help MSMEs gain access to capital, support business growth, and channel finance to businesses and end-beneficiaries that we cannot efficiently reach directly. At the same time, by strengthening the capacity and ESG practices of the financial institutions in these markets, we contribute to improving the broader financial system and the ESG performance of the businesses that these financial institutions serve.
Through our work with financial institutions, including increasingly sharing in our customers’ credit risk exposure, we help reduce inequalities within countries. We achieve this by increasing access to finance for inclusive businesses and individuals within the bottom 40 percent of the income distribution, as well as previously underserved groups. This includes MSMEs, women, young people, and rural entrepreneurs. In addition, we invest in the nascent financial markets of LDCs and fragile states.
We also provide finance to financial institutions targeting climate mitigation, climate adaptation and resilience, biodiversity, and other environmental footprint reductions. We are increasingly engaging with the customers of these financial institutions to help build their climate strategies and capacity, thereby supporting the decarbonization of the financial institutions’ portfolios.
Our focus extends to supporting fintechs (technology-based financial services companies), enabling customer digitalization, and helping (SME) banks and non-bank financial institutions in developing green propositions. We also aim to serve larger financial institutions by buying and advising on the issuing of green bond financing, expanding investable assets, and helping our customers strengthen their climate governance and climate risk frameworks.
Private Equity – providing much needed venture and growth capital, and driving value creation
Access to early stage (venture) capital and growth capital remains a major constraint for businesses in the markets we serve, particularly for those seeking to scale operations, innovate, and create jobs. Through our private equity (PE) investments, both directly in our three focus sectors and indirectly via private equity funds, we provide this scarce capital to companies that often face limited access to traditional financing. By doing so, we often mobilize other investors and enable companies to expand, professionalize, and strengthen their resilience, contributing significantly to our focus SDGs. As part of managing a balanced and sustainable private equity portfolio, we continuously explore opportunities for exits and other liquidity from the portfolio.
Beyond financing, we actively engage in value creation, both through FMO’s team of investment, sustainable finance and ESG experts, and through our network of technical assistance partners. Our approach includes providing support on sustainable environmental and social practices, governance improvements, and other technical and operational assistance programs. This way, we aim to amplify our reach and help build sustainable businesses that drive inclusive economic development in the markets where we operate.