| Paris alignment | Reasoning |
|---|---|
| TBC | Discussions with FMO have suggested that whilst the Bank does have sector strategies, these are not publicly available or considered directly relevant to climate and Paris alignment. Having reviewed a sample of the pre-existing internal sector strategy documents for FMO’s three focus sectors, it is clear that these translate the strategic objectives of the overall strategy to the sectoral level. This includes reference to climate mitigation and adaptation efforts, although these are not necessarily foregrounded and/or demarcated clearly. FMO is currently undertaking the process of translating its recently published overarching “Strategy 2030” into updated sector-specific strategies, as well as climate specific approaches to sectors as part its Paris alignment workstream. Once these and other relevant documents are finalised, E3G will update the assessment of this metric accordingly. |
| Mitigation | Resilience | |
|---|---|---|
| Energy | TBC | TBC |
| Transport | N/A | N/A |
| Water | TBC | TBC |
| Cities | N/A | N/A |
| Agriculture | TBC | TBC |
Explanation
FMO’s operations are focused in three sectors. Namely (1) Energy; (2) Agribusiness, Food and Water (AFW); and (3) Financial Institutions (FIs). Although it may indirectly finance operations falling under other sectors through its FI customers, it does not strategically pursue operations in any other areas beyond these three.
FMO is currently undertaking the process of translating its recently published overarching “Strategy 2030” into updated sector-specific strategies. Moreover, the investment-level Paris alignment methodology currently in development will include climate-specific coverage of each of the Bank’s focus sectors.
As these strategies are finalised, E3G will update this section accordingly. In the interim, E3G has reviewed the pre-existing sector strategy documents for FMO’s three focus sectors, to gauge the extent to which the Bank’s overall and climate strategies (both rated Paris aligned under the relevant metric) are translated to the sector level.[1] Across each of sectors, climate change does feature clearly, although a focus on both adaptation and mitigation is not necessarily clearly foregrounded and/or demarcated.
Pending the finalisation of the ongoing processes FMO is in the midst of undertaking and subsequent analysis by E3G of its sector strategies, this metric has been left unrated as ‘TBC’.
Recommendations:
- Despite defining three focus sectors for FMO’s operations, the Bank indirectly finances operations (including those tagged as green investments) which fall outside the scope of any of these sectors, such as in other emission-intensive sectors including the transport and urban development sectors. As a result, it is recommended that FMO establishes sector-specific safeguard requirements and investment guidance for FIs tailored for these sectors. This will ensure that indirect investment channelled outside of sectors covered by core FMO sectoral strategy documents remains compatible with its climate commitments and overall strategy.
- Further to the above recommendation, FMO should undertake a counterparty assessment approach (in the context of its Paris alignment approach) when working with Fis. This will verify that regardless of whether FIs utilise FMO resources to finance sectors outside of FMO’s focus-areas (and therefore without established guidelines and policies), the safeguards and policies of a FI are sufficient to ensure compliance with FMO’s strategic objectives and commitments.
- Once it has finalised the process of translating its “Strategy 2030” into updated sector-specific strategies, FMO should consider developing public-facing versions of these internal documents. These could be abbreviated if and where it is (strictly) necessary to remove or reconfigure commercially sensitive information before publishing. This would enable the Bank to clearly indicate how its ambitious climate and overarching strategies are expected to orient sector-level priorities and strategic foci.
[1] See ‘Climate and overarching strategy’ metric for full details.