| Paris alignment | Reasoning |
|---|---|
| Paris aligned | As part of its Climate Action Plan, FMO has committed to actively help to raise the climate ambition level of its customers and strive to support their alignment with a 1.5°C pathway. FMO has several extensive ongoing technical assistance initiatives which include dedicated support for climate-related capacity-building among its customers. FMO provides technical assistance alongside financing for projects which can contribute to the implementation of country NDCs and NAPs indirectly. However, it does not engage with countries directly on these policies as it only works with private customers. For transformational impact, FMO should anchor its support for the alignment of its customers to clear timelines in order to establish an accountability mechanism for impact in this regard. |
| Climate-related technical assistance at policy-level | NDC ambition increase goal? | Non-NDC technical assistance |
| FMO has committed to raise the ambition level of its customers on climate, including striving towards 1.5°C alignment. This is to be integrated as part of the upcoming Paris alignment methodology and associated implementation strategies. Clients will be supported through both in-house and technical assistance capacity. | FMO only works with private customers and so does not engage with countries on the evolution of NDCs. | FMO has several ongoing technical assistance initiatives with sustainability and/or climate components. These include its Capacity Development Programme, technical assistance facilities, and work through the Joint Impact Model (JIM) Foundation. |
Sector-level, climate-related technical assistance
FMO commits to “advance the institutional capacity” of its customers to do “sustainable business”, be it through grant funding, advisory support, and or other technical assistance. Consequently, FMO has several ongoing technical assistance initiatives. The following are particularly prevalent examples:
- FMO’s Capacity Development Programme involves grant-based co-financing (of up to 50% of project costs) for the hiring of “external consultants, trainers, and experts to facilitate the knowledge transfer and provision of technical expertise” that is required. The programme has four focus areas: (1) Gender equality; (2) Governance and risk management; (3) Green and sustainability credentials; and (4) Environmental & social risk management.[1]
- FMO manages several technical assistance facilities related to climate: DCFD, MFF, and Ventures. The Ventures Technical Assistance Facility is grounded in three pillars: (1) Investee strengthening; (2) Entrepreneurial ecosystems building; and (3) Community engagement. Investee strengthening involves advisory on ESG to meet any relevant standards, improving and monitoring impact, and designing and implementing inclusive business models. Entrepreneurial ecosystems building involves improving early-stage support for venture capital in a given market, through empowering existing actors to deliver the necessary support and services. Community engagement involves bringing together stakeholders and industry professionals to share lessons learned.
- FMO has established the Joint Impact Model (JIM) Foundation as an affiliated FMO entity tasked with managing the JIM and improving data and information collection. The JIM Foundation (in partnership with PCAF) has in turn launched a technical assistance programme for financial institutions. This programme aims to “help financial institutions increase transparency for stakeholders, manage climate-related transition risks, develop climate-friendly financial products, and develop emissions target-setting”. Beginning in 2023, the initial onboarding phase involves 25 financial institutions across different regions. Having identified areas for improvement and updated the JIM on this basis, the target is to extend its use to 500 financial institutions in emerging economies by 2030.
Other technical assistance
FMO’s Climate Action Plan (CAP) explicitly recognises Nationally Determined Contributions (NDCs) and National Adaptation Plans (NAPs) as the “starting point for Paris alignment”. Whilst the Bank works only with private customers, and so does not engage with countries on the evolution of these, it does provide technical assistance alongside financing for projects contributing to their implementation.
Beyond supporting individual investments to be aligned in this way, FMO also commits to “seek to raise the ambition level of our customers and strive toward 1.5°C alignment”. Although this is yet to be operationalised, FMO plans to integrate this commitment as part of its upcoming Paris alignment methodology and associated implementation strategies. Clients will be supported through both in-house and technical assistance capacity, with the potential for additional/mobilised funding if deemed necessary. This can also include support in developing their climate governance and climate risk frameworks and tools.
Financial intermediaries
For financial intermediaries, the Bank engages on a structural level to improve institutional capacities through ESG requirements, while also monitoring performance to intervene in case of need. As part of its upcoming Paris alignment methodology and implementation workstream (noted above), FMO will in turn aim to support financial institutions in their own Paris alignment, including data collection requirements (such as for emissions).
Recommendations:
- For transformational impact, FMO should ensure the operationalisation of its commitment to raise the ambition level of its customers and strive towards 1.5°C alignment is anchored in clear time horizons for clients to work towards. Doing so would provide an accountability mechanism to better guarantee impact and would elevate the Bank to a clearly transformational level in terms of technical assistance provision.
[1] “Capacity development” in this context is increasingly being explicitly referred to as “technical assistance” by FMO.