The Netherlands Development Finance Company (FMO) has published at the end of october its first sustainability report. In the report FMO explains the impact that FMO’s financing operations have on economic, environmental, social and administrative development in developing countries. With the funding it provides to the private sector in developing countries, FMO makes a structural contribution towards combating poverty.
"Sustainable development is in our genes. Sustainability is an essential part of FMO’s mission. Only a healthy private sector in developing countries will result in a steadily growing middle class: a vital precondition for combating poverty", states Arthur Arnold, the FMO CEO. "We are ambitious about achieving sustainable improvements for our clients, for our partners and their environment and in our own organization. This sustainability report sets out our ambitions and performance for all our stakeholders to see."
Managing risks – creating possibilities
FMO has developed an analytical method for identifying the development impact of a project. With the aid of a scorecard, an assessment is made of the extent to which a project or client contributes towards the financial, economic, social, ecological and administrative development of an enterprise on its environment. There are two key factors when it comes to encouraging sustainable growth in developing countries: risk and development impact. FMO has developed a systematic method based on a scorecard for objectifying the risk and development impact. FMO’s risk management may essentially be compared with that of any bank. Experience indicates that FMO’s risks – which are by definition higher than those of commercial banks – become more manageable where a healthy policy of sustainability is in place.
Transparency and accountability
In the case of over half the loans provided by FMO in 2004, action plans were drawn up with clients and partners in order to identify concrete improvements. Examples include the setting up of management systems for the social and environmental dimensions of running a business, HIV/AIDS awareness programs and the improvement of corporate governance. "The assistance provided by FMO and the action plans that have been agreed help us improve the governance of our company. We have been able to take important steps to bring our transparency and accountability into line with international accounting standards", says Patrick Wong, CEO of the Chinese company Titan Oil, an FMO client.