Dutch Entrepreneurial Development Bank

FMO’s mission is to enable entrepreneurs to increase inclusive and sustainable prosperity. Development impact is created by being additional in financing the private sector in low- and middle-income countries.
Total assets:
€10.3 billion
The Hague, Netherlands
Top five shareholders:
Dutch Government (51%), Large Dutch Banks (42%), Dutch Employer’s Association, Dutch Trade Unions, Dutch companies and individual investors (7%).
Summary of Paris alignment assessment:
The Dutch Entrepreneurial Development Bank (FMO) is a regulated bank (with 51% ownership by the Dutch Government) that has a specific mandate to exclusively support the private sector in low- and middle- income countries. As such, FMO’s progress on Paris alignment must be put in the context of its specific mandate, and these differences should be taken into account when comparing FMO to other institutions covered by the E3G Matrix. Against this backdrop, FMO is making strong headway on the path to 100% alignment with the goals of the Paris Agreement. As of 2023, FMO is undertaking a dedicated workstream on Paris alignment, including developing methodologies and internal capacity to implement an investment-level Paris alignment review for new transactions. Whilst this workstream is expected to be finalised in 2024, the Bank is already well advanced in aligning with the Paris Agreement in several key areas. For example, climate change is effectively mainstreamed throughout FMO’s core strategic documents and the Bank has strong procedures in place for GHG accounting and reduction. Particularly noteworthy is FMO’s commitment to complete fossil fuel phase-out for direct investments by 2026, with comprehensive “Transition Criteria” guiding investment in the interim. This represents trail-blazing best practice across the PDB ecosystem. Despite its noteworthy progress, there are some specific areas with room for improvement. Key recommendations from E3G’s assessment include that FMO should consider extending its leading fossil fuel phase-out commitment to indirect operations. Moreover, the Bank should develop country level strategies (in a manner that reflects their capacity) to guide their engagement with customers and ensure projects align with national climate and development a priorities. Sufficiently strict commitments to zero net deforestation are absent, and more could be done to screen biodiversity co-benefits and build a robust pipeline of biodiversity positive investments. Transparency could also be strengthened in certain respects (such as in accessibility of project-level climate finance and in utilisation of funds channelled through intermediaries) to ensure confidence that FMO funds remain Paris aligned at end-use. As FMO finalises it internal Paris alignment workstream, E3G will continue to review the Bank’s policies and progress, and update this assessment where relevant.

This page is part of the E3G Public Bank Climate Tracker Matrix, our tool to help you assess the Paris alignment of public banks, MDBs and DFIs.


Leadership areas

  1. Climate change is effectively mainstreamed throughout FMO’s core strategic documents. FMO’s core strategies are among the most clearly committed to climate change of any assessed in the E3G Matrix. Both FMO’s Strategy 2030 and Climate Action Plan explicitly refer to the Paris Agreement and extensively integrate climate considerations for both mitigation and adaptation. The Bank’s ‘three-SDG’ focus includes SDG 13 on climate action as a core area. As part of this, FMO has pledged to expand its SDG 13 investment portfolio to €10 billion by 2030, align new transactions and its portfolio with a 1.5° C pathway, and ultimately achieve a net-zero portfolio by 2050.
  2. FMO has strong procedures in place for GHG accounting and reduction. At the portfolio level, the Bank reports on financed absolute emissions and financed avoided emissions ex post for the entirety of the portfolio. Impressively, this includes emission scopes 1 to 3. This is complemented by the portfolio wide net-zero target and a dedicated power sector emissions reduction target. At the project level, the Bank’s accounting inclusion threshold ex ante and ex post for all direct investments is comparable with best practice.
  3. FMO’s has also notably committed to complete fossil fuel phase-out by 2026, having developed comprehensive ‘Transition Criteria’ for the interim. FMO’s exclusion list already prohibits financing coal and associated infrastructure, as well as upstream oil and gas. Until complete fossil fuel exclusion by 2026, midstream operations and downstream gas are governed by extensive ‘Transition Criteria’ designed to support a managed phase-out.

Top recommendations

  1. Building on its leading commitment to phase-out fossil fuels from direct investments by 2026, as a next step FMO should extend coverage of this pledge to indirect operations through a phased approach. Given the low- and middle-income countries in which FMO operates, this should take the form of a phased approach, tied to a concrete timeline and with targeted support for intermediaries. The comprehensive ‘Transition Criteria’ that have been developed for direct investments should be utilised in the interim to safeguard investments from carbon lock-in.
  2. FMO should implement a zero net deforestation target and a screening process for biodiversity positive co-benefits across the board. Given the FMO’s It should also build on current measures to conserve biodiversity by actively pursuing biodiversity positive investments. This should include screening for co-benefits to ensure a robust, biodiversity-positive, pipeline.
  3. FMO should enhance its climate finance transparency. As a first step, FMO should consider publicly disclosing project-level climate finance data in a machine-readable format. Moreover, the Bank should intensify efforts concerning intermediary clients’ utilisation of FMO funds and seek to ensure data availability. Considering the extensive policy framework FMO has developed for its direct investments, it is critical that it can ensure funds channelled through intermediaries remains Paris aligned at end-use.  
  4. FMO should develop country level strategies (in a manner that reflects their capacity) to guide their engagement with customers. FMO is currently developing strategic frameworks for customer engagement that will consider country contexts. E3G encourages the Bank to expand these efforts and create country-level strategies/guidance that will ensure projects align with national development priorities. Collaborating with Public Development Banks operating in overlapping territories could be a viable solution to address capacity challenges faced by private-finance Development Financial Institutions (DFIs) without parent public DFI support.
Metric Summary
Promotion of green finance Paris aligned: FMO is focused on financing the private sector in low- and middle-income countries and committed to growing its green portfolio to transition to a greener economy. It aims to transform “unbankable projects” to “bankable opportunities” and to support its customers with their green finance journeys. To achieve this, the Bank offers several instruments such as green credit lines, green bonds and loans in local currency to leverage funding for green projects. Furthermore, the bank provides technical assistance to support the creation of a green pipeline of projects in the countries in which it operates.
Fossil to non-fossil energy finance ratio and scaling up climate finance Some progress: For every €1 FMO provided to fossil fuels, €5.3 went to renewables in the period 2018 – 2022. FMO aims to have an investment portfolio of at least €10 billion in SDG13-related investments by 2030. Furthermore, the proportion of new green-labelled investments in relation to total new investments has been steadily increasing from 36% in 2018 to 41% in 2022.
Nature based solutions Some progress: FMO’s Climate Action Plan sets out the incorporation of nature-based solutions into mitigation, adaptation, and resilience projects. The Bank has made a significant commitment to developing a forestry portfolio worth €1 billion by 2030, primarily utilizing blended finance for mainstreaming biodiversity and agri-business funding. Beyond this, FMO actively engages with various platforms related to the Agriculture, Forestry, and Other Land Use (AFOLU) sector, including DFCD and MFFP. Whilst recognising FMO’s efforts in this space, specific quantitative targets on reducing agricultural commodity-driven deforestation, overarching zero net deforestation commitments, and peatlands protection measures are all currently absent, preventing the Bank from being considered Paris aligned.
Climate risk, resilience, and adaptation Some progress: The Bank is making progress in embedding climate risks into its overall Risk Management Framework. In particular, FMO is currently piloting a new process to screen its portfolio for climate risks.  FMO’s adaptation finance levels are comparable to other DFIs, and the Bank has been providing technical assistance and developing thought leadership on adaptation finance within the private sector.
Overarching climate strategy Paris aligned: FMO’s core strategic documents extensively integrate climate considerations (both mitigation and adaptation), with explicit reference to the Paris Agreement. The Bank has also committed to striving to align its portfolio and all new transactions with a 1.5°C pathway, and to achieve a net-zero portfolio by 2050. Despite this, the absence of any clear commitment to “do no harm” remains a noticeable omission from FMO’s overarching and climate strategies. Truly transformational strategic documents would include an even stronger clear commitment such as to “do good beyond do no harm”. 
Integration of climate mitigation and resilience in key sectoral strategies N/A: 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.
Institutional leadership Paris aligned: FMO has extensive institutional cooperation and partnerships with other development finance institutions as part of the Association of European bilateral Development Finance Institutions (EDFI) and has created programmes under the European und for Sustainable Finance Plus (ESFD+).
Energy access and fuel poverty Some progress: Although not a key strategic focus, FMO contributes to Energy Access throughout its energy portfolio and specifically through its Reducing Inequalities (RI) sub-label “last mile delivery of power”. Financing dedicated to the last mile delivery of power sub-label remains a relatively small part of FMO´s energy portfolio (8.8% in 2022), but the Bank is encouraging more investment in this area. Central to the Bank’s energy access work are its contributions through the Access to Energy Fund (AEF) and Building Prospects Fund. FMO considers additional renewable energy production (mainly on-grid) contributed under its SGD 7 (access to sustainable energy) work as having a direct positive impact on energy access, with other energy financing for transmission, distribution, and storage also having both direct and indirect positive impacts. In order to accurately determine to what extent such activities contribute to improving energy access in practice, it is recommended that FMO use the Multi-Tier Framework when defining and/or tracking its investments in energy access.
Energy efficiency strategy, standards and investment

Some progress: FMO includes a variety of energy efficiency improving activities as eligible for financing under its Green Methodology. Eligible activities generally adhere to best practice across sectors, and financial intermediaries receiving Green Credit Lines are required to apply these requirements. However, this guidance lacks concrete detail in some sectors (such as transport), and guidance for operations not covered by the Green Label (whether financed directly or through intermediaries) is less extensive. 

Fossil fuel exclusion policies Paris aligned: FMO excludes all coal and associated infrastructure, as well as upstream oil and gas finance. FMO generally does not finance midstream or downstream oil and gas infrastructure, aiming for complete fossil fuel financing phase-out by 2026. However, until then, the Bank has exceptions in place for midstream operations or downstream gas based on “Transition Criteria”. 
Greenhouse gas accounting and reduction

Paris aligned: FMO has strong portfolio-level procedures in place for GHG accounting, reporting financed absolute emissions and financed avoided emissions ex post for its entire portfolio (covering scopes 1 – 3) using the Joint Impact Model (JIM). Despite not having annual or multi-year targets in place for either of these metrics, it does have a portfolio wide net-zero target and a dedicated power sector emissions reduction target. At the project-level, the IFC Performance Standards ensure an inclusion threshold comparable with best practice for ex ante and ex post accounting is applied across direct investments.  

Shadow carbon pricing N/A: FMO is in the process of considering the application of a shadow carbon price but does not currently apply it to any operations. Once the Bank finalizes its Paris Alignment and climate risk approaches, this metric will be updated accordingly to reflect the outcome of this process. 
Country level work N/A: FMO is in the process of establishing a framework for strategic customer engagement that considers country contexts through the Investment-level Paris alignment and Just & Inclusive Transition workstreams, although it presently lacks specific country strategies. Once these and other relevant documents are published, E3G will update the assessment of this metric accordingly.
Technical assistance for implementing Paris goals 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. 
Transparency of climate finance data

Some progress: FMO discloses aggregate, green-labelled finance in its annual report.  However, there is no climate finance data available at project-level, nor for sub-projects financed through financial intermediaries. The Bank also conducts TCFD reporting, although some aspects of this would benefit from more granular disclosure.


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