E1-3 Actions and resources in relation to climate change policies

The three main actions to operationalize FMO’s 2030 Strategy in relation to climate are as follows:

1. Aligning our portfolio and investments with the Paris Agreement goals.

2. Increasing climate investments and support to our customers.

3. Active management of our climate action.

Details regarding these actions are described in the following sections.

Aligning our portfolio and investments with the Paris Agreement goals

This action consists of the following sub-actions:

1. Striving to align our financial flows with 1.5°C aligned sectors and activities so that our portfolio is on track to be Net Zero by 2050, taking into account a just and inclusive transition.

2. Reduce power generation portfolio emissions by 50 percent to 2030, while at the same time approximately doubling our sustainable power generation portfolio and overall energy portfolio. We will consider additional targets in other parts of the portfolio.

3. Assess new investments for Paris alignment from a climate mitigation and resilience perspective, by implementing an investment-level Paris alignment assessment for new transactions.

4. Implement our commitment under the EDFI Climate and Energy Statement regarding fossil fuels in our indirect investments, and consider other policies that support our goals.

In 2024, FMO finalized its Paris alignment methodology, based on the MDB Principles for Paris Alignment. This methodology was implemented in 2025 to assess new investments for Paris alignment from a mitigation and resilience perspective. This methodology enables FMO to identify activities that are incompatible with, or need significant efforts to be compatible with, the transition to an economy that is aligned with the climate goals in the Paris Agreement. FMO can proceed with a transaction if it is already aligned with the Paris Agreement or if additional measures can be put in place to achieve alignment. In the latter case, FMO engages with the customer during the investment period to ensure those measures are implemented. New transactions have been assessed for alignment with the Paris Agreement goals from September 1, 2025.

Additionally, FMO did a pilot in 2025 to assess the 1.5°C alignment of the portfolio. This will inform our next steps in our journey to be Net Zero by 2050.

The overall action can be classified as a decarbonization lever, since the sub-actions will reduce emissions in FMO's investment portfolio, thereby mitigating climate change. While FMO does not have an emissions reduction target directly linked to this overall action, FMO has set a target for the power generation portfolio and monitors emissions for the rest of the portfolio. As described in ESRS E1-1, this is due to the many unknowns including how climate change itself will evolve, how our markets and customers will respond, lack of data, and what solutions are needed and effective.

The target of reducing power generation emissions by 50 percent in 2030 is part of this action. This target – together with performance on expected and achieved GHG reductions - is elaborated in section 'E1-4 Targets related to climate change mitigation and adaptation'.

Increasing climate investments and support to our customers

This action is made of by the following sub-actions:

1. Building up a portfolio of at least €10 billion dedicated to SDG 13 goals in climate mitigation, adaptation & resilience (including nature-based solutions), biodiversity, and other footprint reduction. We do this by engaging with customers such as our financial institutions to encourage their further investments in these objectives, through activities that contribute to developing our markets (market creation), and by mobilizing additional capital to closing the financing gap needed in emerging markets.
   
   

2. Increasing our climate mitigating investments and investments that contribute to solutions for adaptation, resilience and biodiversity, thereby strengthening our customers’ resilience to climate change. Examples include:

   • Corporate governance advisory work focused on climate governance and climate risk, building on the work we have done in this area to date.

   • Technical assistance funding, building on platforms like our Green Finance Framework. Engagement with portfolio companies and new customers to influence them to set targets and transition plans to reduce their emissions over time, or at a minimum to consider technical solutions together.

   • Engagement with portfolio companies and new customers to influence them to set targets and transition plans to reduce their emissions over time, or at a minimum to consider technical solutions together.

   • Supporting green finance innovation in our investments.

   • Active shareholdership by ensuring our investees are prepared for both climate risks and opportunities.

   • Creating coalitions with key nature conservation organizations, contributing to the understanding of the landscape approach, and promoting community and stakeholder engagement.
     
     

3. Provide sector-specific solutions for energy, financial institutions, agriculture, and forestry. Regarding energy, FMO will continue financing utility scale clean energy generation projects (solar, wind both on- and offshore, hydro power and geothermal), with an increased attention towards the least developed countries (LDCs) and fragile states. These efforts will be an important driver behind our climate mitigation and resilience goals. Towards 2030, through sector initiatives, partner engagement, and other means, we will work to remove bottlenecks currently slowing down the sustainable energy transition in some of our markets. We will also work toward sustainable energy access and inclusion, while further scaling both already established/proven and innovative technologies and solutions.
   
   For financial institutions, FMO will increasingly aim to have a ‘transformative’ impact on customers through a strategic approach including the development of product propositions, capabilities, and related financing with the goal of having the same effect on end beneficiaries.
   
   Finally, regarding agriculture and forestry, our focus will remain on strengthening local agricultural and food supply chains for both local or regional markets to increase local production and reduce reliance on imports, to improve local access to nutritious food, and to reduce food waste (e.g. through more and improved storage and distribution). We continue our focus on decent work and economic inclusion of the bottom 40 percent of income distribution, including smallholder farmers and women. Towards 2030, emphasis will be on engagement and investing more in global merchants, input providers and food companies with leverage to increase sustainable practices, along the (international) agricultural supply chains. We will continue expanding our integral/ landscape approach to supporting and investing in sustainable land-use and ecosystem protection and restoration, among others, through our work on forestry (carbon sequestration), climate smart and regenerative agriculture, soil improvements and livelihoods.
   
   

4. Continue to invest in carbon removals, specifically forestry, and help build these markets. More details on this are provided in the section 'E1-7 GHG Removals and GHG mitigation projects financed through carbon credits'.
   
   

5. Contribute to our impact portfolio growth objectives through our market creation efforts and scale our activities through our mobilization efforts. In order to advance our impact contributions (including for climate action), through ‘market creation’ we aim to develop unbankable opportunities into bankable projects, as well as drive topics and business models of the future. We aim to accelerate impact by upscaling mobilization of private and public capital by aiming to double this portfolio by 2030 through:

   • Developing climate fund propositions for large scale mobilization, following a just and inclusive transition approach, targeting both climate impact and social impact.

   • Blending public and commercial funding for high-impact propositions in LDCs. Exploring possibilities for equity mobilization.

   • Strengthening syndication efforts by increasing sourcing capacity of transactions, and by expanding and diversifying our investor base.
     
     

6. Engaging with our customers to increase their Paris alignment and provide them with technical assistance and other support. This will include helping to develop climate governance and climate risk frameworks and tools to work with their clients. We will specifically start with pan-regional customers as agents of change, gradually expanding to all customers over time.

FMO’s Green Label Methodology was updated in 2025 following the 2023 update in Common Principles for Climate Change Adaptation Finance Tracking methodology.  The update did not change the eligibility criteria but rather clarified the finance tracking attribution methodology. This methodology will then be used to support investment teams with Green deal origination and labelling.

On advancing sector-specific solutions for energy, financial institutions, and agriculture and forestry, in 2025, FMO, through its climate framework, was able to offer customers in the Private Equity and Agribusiness and Food sectors Technical Assistance on climate adaptation and mitigation. The framework offers services such as climate awareness training, climate risk assessments, GHG measurement and reporting, climate action planning and implementation, climate opportunity origination, and compliance with sustainability standards.

As part of our ambition to continue to invest in carbon removals, specifically forestry, and help build these markets, FMO has investment officers specialized in forestry in various investment teams.

Under market creation, FMO has defined four focus themes: financial inclusion and resilience for entrepreneurs, responsible energy transition, forestry and sustainable land-use, and food system transformation. In 2025, we started fundraising efforts on the energy transition and food systems transformation theme and continued deploying funds under the financial inclusion theme. We also launched the Market Creation Platform, FMO's multi-donor, multi-program vehicle to deliver its market creation activities.

The overall action can be classified as a decarbonization lever, since the sub-actions will reduce emissions in FMO's investment portfolio, thereby mitigating climate change. While FMO does not have an emissions reduction target directly linked to this overall action, FMO has set a target for the power generation portfolio and monitors emissions for the rest of the portfolio. As described in ESRS E1-1, this is due to the many unknowns including how climate change itself will evolve, how our markets and customers will respond, lack of data, and what solutions are needed and effective.

Active management of our climate action

This action is comprised of a set of sub-actions:

1. Monitor our work at a portfolio level, including absolute and relative emission levels. In order to achieve the impact we aim for, having the right data and additional information needed for measuring and steering our work will be key.
   
   

2. Continue to improve data quality and collection, including at the level of our customers. Data collection in our markets and for our specific customer types is not always readily available, especially for investments in smaller companies and for financial institutions and funds, which need to obtain data from their clients. To tackle this challenge, together with our development finance institution partners, we launched the Joint Impact Model (JIM) in 2021. The JIM allows us to model the emissions in the absence of emission data, to have an indication of our portfolio emissions.
   
   

3. Adopt an adaptive management approach and adjust our actions based on data and information. The intent of our data/information collection drive is to not only use the information we gather to report and for compliance purposes, but to also better actively manage our portfolio and tailor our climate actions to what is most effective. Moving forward, we will continue to work on improving our systems.
   
   

4. Implement a climate risk framework to manage the portfolio for both physical and transition climate risk. Integrating climate risk at FMO is about ensuring that risks to our portfolio due to climate change (physical and transition risks) are structurally identified, assessed, and managed. It is also about bringing this knowledge to our customers and structuring our transactions with the same considerations. Ultimately managing climate risk is another way to drive the change we want to see in our markets.

The climate risk framework has been further operationalized in 2025. Physical climate risk assessments are being implemented for all new transactions and as part of clients’ annual review processes. Next to that, FMO has now automated the aggregation of all physical climate risk assessments into a dashboard with a full portfolio overview.

FMO will further work on transition risk assessment and improving data quality and management. FMO will also aim to refine emissions data to better take into account known use-of-proceeds instruments, i.e., when the investment is allocated to specific assets of a customer.

While this action aims to enhance FMO’s management of climate actions, such as creating more awareness via enhanced data and methodologies, this overall action cannot be classified as a decarbonization lever since it does not directly contribute to GHG reduction.

Table 17. Minimum Disclosure Requirement applicable for all presented actions

E1-4 Targets related to climate change mitigation and adaptation

FMO has two targets related to the Policies and Actions described in the sections 'E1-2 Policies related to climate change mitigation and adaptation' and 'E1-3 Actions and resources in relation to climate change policies' respectively. Table 15 presented in the 'E1 Impacts, risks and opportunities' section shows which target relates to which IRO, policy and/or action. The table, therefore, indicates for each action whether there is a related target, thereby specifying whether and how the effectiveness of these actions are quantitatively tracked.

Firstly, a GHG emission reduction target has been set in the form of the Power Generation Emission Reduction target. The target is to reduce the financed scope 1 emissions in the power generation portfolio by 50 percent in 2030. Given the baseline value of 624 ktCO₂e, this would imply an absolute reduction of 312 ktCO₂e. This target will specifically contribute to reducing the financed absolute GHG emissions, i.e. the GHG emissions in scope 3 category 15 (Investments). The target has the same reporting boundary as the financed absolute GHG emissions. In 2025, the power generation portfolio emissions are 318 ktCO₂e, which is 38 percent of the financed scope 1 emissions and 5 percent of total financed absolute GHG emissions. In line with the ‘Financial Sector Climate Commitment Guideline on relevant financing, investments and action plans’ FMO has prioritized target setting for its power generation portfolio, being an emission-intensive sector.

Secondly, a strategic target has been set in the form of the €10 billion SDG 13 target. FMO aims to have developed a portfolio of at least €10 billion in investments dedicated to SDG 13 goals by 2030. An ex-ante assessment is made to assess an investment’s potential impact and its related contribution to SDG 13, determining eligibility to receive the Green Label. The Green Label includes positive impact contributions to for instance climate change mitigation and adaptation and biodiversity. While it is no direct emission reduction target, the Green Label as a tool to steer towards FMO’s €10 billion SDG 13 target will contribute to reduced emissions in FMO’s investments portfolio and overall positive impact to SDG 13. Detailed information on this target is provided in 'ESRS 2 – IRO management'.

Since the Power Emission Reduction Target is the only target related to GHG emission reduction, disclosures requirements focusing on emission reductions are only applicable to this target.

Table 15 in the 'E1 Impact, risks and opportunities' section indicates to which IRO the Power Generation Emission Reduction Target and the €10 billion SDG 13 target relates to.

Table 18 provides information on the Power Generation Emission Reduction target, whereas the relevant details for the €10 billion SDG 13 target are presented in 'ESRS 2 - IRO management'.

Table 18. Minimum Disclosure Requirements for Power Generation Emission Reduction Target

FMO has set a GHG emission reduction target for financed scope 1 emissions in the power generation portfolio, as described in E1-4. FMO has not yet set other reduction targets for financed scope 1, 2 and 3, therefore no information and data can be provided regarding such targets. This is due to the many unknowns ahead including how climate change itself will evolve, how our markets and customers will respond, lack of data and what solutions are needed and effective. We seek to carefully balance our climate objectives with customer- or location-specific social and environmental considerations, including the need for a just and inclusive transition. FMO strives to align financial flows with 1.5ºC aligned activities and has piloted a qualitative approach to measure this in 2025. FMO will consider the outcomes of this pilot in determining the approach to further 1.5°C alignment. We will continue to improve our data collection, including at the level of our customers, and use it to assess and monitor our progress, as a component of our climate action project workstream.

The progress made regarding the Power Generation Reduction Emission Target has been disclosed in table 18. The baseline value is considered representative as there are no indications that for the power generation portfolio the activities covered and influences from external factors in the base year were significantly different to other years. Table 18 provides information on the scientific base used to define the Power Generation Emission Reduction Target.

Since no other targets for GHG emission reduction exist, no other progress can be disclosed, nor can information be provided on how it has been ensured that the baseline value of such targets is representative in terms of activities covered and influences from external factors.

The decarbonization levers of FMO are defined in the section ' E1-1 Transition plan for climate change mitigation'. The Power Generation Emission Reduction target is part of the lever ‘Aligning our portfolio and investments with the Paris Agreement goals’. Refer to table 18 for information on the quantitative contribution to GHG emission reduction and the definition of the target, for which one scenario has been used.

The €10 billion SDG 13 target is part of the decarbonization lever ‘Increasing climate investments and support to our customers’, supporting mitigation of and adaptation to climate change. Because of the nature of this target, no quantitative contribution to GHG emission reduction can be provided for this target. More details on how the decarbonization levers and targets relate is provided in table 15 in the 'E1 Impacts, risks and opportunities' section.