Private equity funds and venture capital

Next to the equity investments we make within FMO’s three strategic sectors, we see it as an important part of our mandate to make equity capital available on as wide a basis as possible by supporting private equity funds in our markets. These PE funds can have a deeper and wider reach than FMO can have directly. By having invested in growth equity funds for over two decades, and with our FMO Ventures Program since 2019, we have significantly contributed to job creation in our markets (SDG 8), and increasingly to SDGs 10 and 13.

Private equity funds

In 2024, the private equity sector faced several challenges, including reduced liquidity in our markets due to macroeconomic pressures, political instability and higher interest rates. These factors created a more challenging environment for exits and fundraising. Additionally, the volatility of fluctuating, and sometimes sharply depreciating, currencies put pressure on returns in our markets.

Despite these challenges, the private equity sector in our regions has seen substantial growth and development over the past decade. Our fund managers have demonstrated resilience and adaptability in navigating these changing conditions. As ESG practices rapidly evolve, we have noticed an increasing trend toward climate-themed funds, with many fund managers integrating these elements into their core business strategies.

Venture capital

Following the boom years of 2020-2022, the venture capital (VC) market continued to experience a ‘funding winter’ in 2024. While conditions are slowly improving, there remains a heightened focus on profitability, rather than growth at any cost. As our VC portfolio matures, we are seeing a clearer distinction in performance across our investments.

In 2024, we saw the end of the first investment period of the FMO Ventures Program, which marked the realization of our first partial exit. Additionally, we were proud to launch the FMO Ventures Program 2, which aims to continue supporting high-potential startups. The majority of the portfolio within the program holds a RI and/or Green label, reflecting our commitment to positive impact and sustainability.

Customer value creation: advancing impact through customer centricity

Customer value creation (CVC) is integral to FMO's Mission, Theory of Change and Strategy 2030. Our mission is to enable entrepreneurs to increase inclusive and sustainable prosperity. By directly supporting our customers' business objectives we promote development, innovative solutions and long-term impact towards the SDGs. CVC reflects our commitment to delivering value that aligns with our customers' (strategic) goals, prioritizing their aspirations and success, and strengthening our role as a trusted partner in an evolving market.

What is customer value creation?

At FMO, CVC is defined as our contribution to improving financial and non-financial customer value through our activities, including investment, financial and non-financial advisory services, development contributions and/or inherent contributions. This includes improvements in customer profitability, strategic goals, ESG advancements, impact and risk management. Importantly, CVC is evaluated from the customer’s perspective—customer value is recognized when it is perceived and experienced by the customer.

This customer-centric approach ensures alignment of FMO’s offerings with our customers' needs. While our goals often converge, CVC is explicitly about helping customers achieve their ambitions, deepening trust and strengthening partnerships.

CVC permeates the entire organization. Whether through financial investments, in-house financial and non-financial advisory services, or technical assistance, CVC spans all relevant departments and activities, reinforcing its role as a guiding principle rather than a standalone function.

Spotlight on the 2024 Customer Satisfaction Survey

In 2024, FMO conducted another extensive Customer Satisfaction Survey among our debt customers, soliciting feedback on our team, processes, expertise and products. Our Net Promoter Score improved to 73.5, exceeding our target of 70 and surpassing the 2022 score of 71.4. This increase reflects strong customer loyalty, with 76 percent of respondents giving FMO a 9 or 10 (out of 10). The survey has also identified areas for improvement, which are being actively shared and picked up by the respective teams.

Spotlight on CVC in action through Private Equity and ESG

At FMO, we strive to create tangible and lasting value for our customers by aligning our expertise and resources with their specific goals. In the following section, we will present examples from our Private Equity and ESG activities that illustrate how we deliver value through these areas.

Private Equity - Ventures Program

The FMO Ventures Program empowers innovative business models by applying disruptive technology to enable or improve affordable access to goods and services for un(der)served communities in Africa and Asia. Building on FMO’s CVC approach, we provide not only capital but also services, knowledge and networks to be a partner who helps scale-up businesses sustainably. Through a dedicated Technical Assistance Facility, we have been able to link experts to investees on crucial topics such as ESG, human resources (HR) and fundraising. We have built networks in which companies are able to meet similar ventures from other countries, or that bring together CEOs and entrepreneurs at conferences and meetings. Our ‘Impact Review and Outlook of the FMO Ventures Program’ report, published in November 2024, captures learnings and case studies from this approach.

ESG

In an effort to address the challenges faced by daily wage earners, Al Husainiyah, a power generation company in Jordan, and Lakeside Energy, a wind power plant in Pakistan, have implemented an innovative employment initiative enabled by FMO’s ESG advisory services. The companies have established a system that provides daily wage workers with three-month contracts, offering improved financial and social security. The initiative not only reduces income uncertainty but also improves the job quality of daily wage earners. This shows how FMO, as an ESG change agent, can help customers move the needle in terms of job quality beyond a minimum level of job decency, as required by FMO’s Sustainability Policy.

ESG Impact Risk Management

FMO believes that sound and well-planned Environmental, Social and Corporate Governance (ESG) management can materially enhance the quality and success of businesses, benefiting people, the planet and profit. Our ESG impact risk management approach is a core part of our investment strategy and essential to creating value. Therefore, we actively support our customers in achieving good international industry practices to manage ESG impact risks while optimizing positive impacts.

FMO employs various tools to assess and monitor the ESG performance of our portfolio. We identify potential ESG impacts associated with our investments and evaluate our customers' ability to manage them. We set annual ESG performance target, agree on multi-year Environmental and Social Action Plans (ESAPs) or Corporate Governance Action Plans (CGAPs) with customers, monitor ESG performance gaps in our portfolio, and maintain a serious incident register. 

For more detailed information on our approach to ESG impact risk management and how we assess our performance, please refer to the ESRS 2, Impact Management Framework section in the Sustainability Statement chapter of this annual report.