Providing access to energy in low-income countries was a major priority of our 2009-2012 Moving Frontiers strategy. We are satisfied with what was achieved on this front last year, which included a record number of transactions in LICs and strong volumes, despite challenging circumstances in many of the countries where we are active.
Under FMO’s new 2013-2016 strategy, a priority for sustainable energy will intensify as the department’s focus on renewables continues and activities in climate business will begin to play an increasingly important role. As before, we will continue to finance some fossil fuel projects, but only in lower-income countries where access to energy takes precedence. In more developed countries, a preference will remain for financing renewable energy.
As FMO’s portfolio grows, so too has the attention we receive from non-governmental organizations (NGOs), particularly for transactions where environmental and social impacts can be considerable. During 2012, the Energy department in particular was targeted for two of its financings. The first was a hydroelectric plant in Panama, where sufficient consultation with local indigenous people had been disputed and the second, a biofuel project in Sierra Leone, where critique has centered on the conflict between land use for food and for fuel. In both cases, FMO discussed these projects on several occasions with government, media and NGOs, explaining our ‘ESG’ approach and our confidence in our decision to finance such transactions. Investigations into the Panama project are still being conducted, and no further detail on the outcome is presently available.
Prior to all its investments, FMO implements the use of strict ESG criteria, used both for evaluating the risks and potential mitigants, as well as for seeking opportunities and benefits for those in the project area. Where red flags exist without appropriate mitigants, FMO will not step into the transaction. FMO remains committed to continuing proactive discussion on our activities as well as on any sensitive issues that may surround them.