The starting point for our 2013-2016 strategy is an audacious goal: by 2020, FMO will be the leading impact investor by doubling impact and halving footprint.
In the next four years, we will deepen our focus on our Financial Institutions, Energy and Agribusiness, Food & Water focus sectors, which are integral to economic development and a more sustainable world as the global population moves towards nine billion by 2050. A newly created team will also begin the operations of FMO’s Investment Management arm.
We aim to increase our catalyzing role through fund management for third parties and syndicated loans, in order to maximize the development impact of our projects. We will also tighten our link to the Netherlands by partnering with Dutch companies and making use of the growing network of similarly oriented organizations within the Dutch market.
Within this new strategy, our goal is to be the first financial institution that sets measurable targets for both our development impact and our environmental footprint – comprising both FMO’s activities and those of the clients we finance. These will also go towards further refining our integrated reporting efforts.
Instrumental to the success of our new strategy is the choice of countries and sectors in which we operate. In the coming years, we will invest at least 70% in low and lower-middle income countries, and at least 35% in the 55 poorest countries through own financing. Please refer to the table below for more information on our portfolio commitment in 2012.
1] Based on World Bank GNI/capita data per April 2012.
committed portfolio in 55 poorest countries in percentage of total portfolio
|2012||Investment funds||Other||Energy||Agribusiness, Food & Water||Diverse Sectors||Total|
|Latin America & the Caribbean||0||0||1||1||0||2|
|Eastern Europe & Central Asia||0||1||0||0||0||1|
Underlying our new strategy is our financial sustainability and efficiency in which we target a return on shareholders’ equity of a minimum of 6% and a cost to income ratio between 25% and 30%.
 Based on World Bank GNI/capita data per April 2012
Catalyzing Investment (2013-2016)
Provided that investments meet our criteria, more investments create more impact. To maximize impact, we will increase both our own investment volumes and those catalyzed from others so that by 2020 we are catalyzing one euro for every euro we invest. We will do this in three ways:
- Catalyze commercial investors from the North and South, particularly in more developed countries, through syndications and risk sharing. We will focus on investors from the South to partially replace the crisis-induced withdrawal of investors from the North.
- Become a fund manager for investors who seek broad exposure in emerging markets and/or wish to make a positive developmental impact. This growing appetite for impact investing presents an opportunity to access a new pool of funds and for FMO to lead investors towards emerging markets.
- Mobilize other DFIs to efficiently serve larger demands from clients in less developed countries.
Clients are the means by which FMO achieves its objectives. Based on client feedback, we have identified three principal areas in which we can add value in addition to providing financing, and can ensure we remain a relevant partner for clients in the future.
- We will enhance our transfer of knowledge through advisory services, with a specific focus on environmental, social, and governance aspects.
- We will promote networking and matchmaking between clients and with parties in the Netherlands.
- We will increase client intimacy by building on the strength of our client interaction and account management.
FMO has a unique position between the Netherlands and developing markets. This position can be used to benefit both our clients overseas and our stakeholders at home. We will tighten our Dutch link by combining the assets of FMO and those of universities, knowledge centers, businesses and networks in the Netherlands. We will focus on four areas:
- Knowledge-sharing per focus sector through partnerships with relevant Dutch knowledge centers, such as universities. There is great potential for establishing partnerships on sustainability and climate change.
- Providing finance to or for the benefit of Dutch companies. This can be through direct finance to Dutch companies expanding into emerging markets or enhancing trade finance for Dutch banks, which further benefits Dutch exporters.
- Fund management for Dutch institutional investors who often lack the scale and experience to invest directly in emerging markets. FMO is a knowledgeable partner with a good track record, and offers a diversified portfolio that smaller investors would be unable to build themselves.
- Matchmaking between clients and with parties in the Netherlands.
2013 is the first year of our new four-year strategic period. We expect to invest substantially in the new strategic initiatives we have set. One initiative that stems directly from our new strategy is our Strategic Horizon for Impact and Footprint Transition (SHIFT) project. Launched in the third quarter of 2012, the SHIFT project team is responsible for defining draft targets, indicators, deliverables and methodologies in line with our commitment to double our impact and halve our footprint by 2020, as well as kicking off their implementation throughout FMO. This work will pick up pace in 2013, when we plan to draft a baseline measurement for impact and footprint, which in time will form the basis of individual targets for the bank, sectors and/or departments.
Another important strategic initiative is a drive to increase efficiency. This will help FMO to serve clients better, remain competitive, to be prepared for growth and to be an attractive catalyzer of commercial and impact investors.
The year ahead holds potential and uncertainty in equal part. Although it began with signs of an upswing, the Eurozone remains fragile and economic growth in the West is set to remain sluggish. As Western commercial banks remain under regulatory and capital pressure, they are unlikely to invest more in developing countries. Within this global economic environment FMO will have an increasingly important role to play. We enter 2013 with a strong investment portfolio, a healthy pipeline, a well-diversified funding base and a solid capital position; these place us in an excellent position to continue pursuing greater sustainable and inclusive development impact.