Annex 9 | How do we report

We prepared the sustainability information in this integrated annual report using the GRI Standards 2021 and the principles of the Integrated Reporting Framework. We strive for transparent reporting on our strategy, the dilemmas we face and the way in which we implement our strategy in order to create value for our stakeholders.

Reporting Policy

The period covered by this report is the calendar year 2024. There have been no significant changes to our legal structure, activities, or policies in the course of 2024 that would require a restatement of information.

Many of our financing and investing activities take place in foreign currencies, mostly in US dollars. Unless explicitly stated otherwise, all investment amounts mentioned throughout the report have been translated into our functional currency, the Euro, based on the foreign exchange rates on the date of contracting. Figures referring to the year-end (total) committed portfolio have been converted into euros using the year-end foreign exchange rates.

For the closing-of-the-books processes, data was taken from our internal systems. Data pertaining to our portfolio was taken from our financial systems. Non-financial elements of our portfolio, specifically data for measuring impact and footprint, are based on data from customers and macroeconomic data sources.

Data quality is important as it forms the basis for management reporting and steering. To safeguard data quality, financial and non-financial data registration are embedded in our core investment process. The results are analyzed by an employee independent of the investment process, both on project level during the year and on an aggregated level after closing of the books. Beyond that, as a third line, FMO’s Internal Audit department considers data quality and the underlying processes to be important audit areas.

Joint Impact Model

Over the years, development finance institutions (DFIs) and multilateral development banks (MDBs) used input-output modeling to estimate indirect impact associated with their investments. In 2019, AfDB, BIO, CDC, FinDev Canada, FMO and Proparco together with Steward Redqueen (SRQ) signed a memorandum of cooperation to harmonize their methodologies on indirect jobs, value added and emissions estimations. Later, CIF, OeeB, KFW, and PIDG joined the initiative and formed the Development Panel. The initiative was named the Joint Impact Model (JIM).

In 2021, these partners worked on several work streams to further improve the JIM and align it with international standards. In November 2021, the JIM 2.0 was launched, which aligned with the PCAF Global Standard. From May of 2022, the JIM Foundation was established, managing the JIM and creating credible oversight for its development. As the JIM 3.0 was not released on time to be implemented by FMO, we are currently using the JIM version 2.08. This version had some technical corrections in comparison to the previous versions. The latest version of JIM, version 3.0, was not used for this report due to the timing of its release, which did not allow for the technical implementation at FMO. Please refer to our website for further information about how FMO applies the JIM and its methodology.

Limitations of the model

The impact model allows quantifying the wider impact of investing in various economic regions and sectors both directly and through financial institutions and funds. The model makes use of data from international statistical sources and investment-specific information which we obtain from our customers’ annual accounts. The JIM is an economic input-output model, which enables us to trace product and money flows through an economy. It can provide more complete impact insights as it is applicable to the full portfolio and has low data burden. As with any model, there are several limitations:

  1. Estimates of indirect impact are based on industry averages (via input/output tables). In reality indirect effects will be different at the individual company level due to differences in individual company characteristics. As a result, model outcomes become less accurate for smaller numbers of investments.

  2. Estimates are based on historical relations, while the methodology is based on the most recent (macro) economic data available, which means that the JIM does not reflects macroeconomic developments of the past years.

  3. FMO’s investments are treated as investments from any other lender and it has been assumed that FMO’s financial support does not affect the relations of sectors within an economy.

JIM attribution rules

FMO provides part but not all the capital a company may need. Other investors likely also contribute to a company’s business (either by providing capital or advice). In addition, external circumstances such as changing market conditions, climate change and technological developments may also influence the impact created by a business. This raises the question of attribution: which portion of results of an invested company or portfolio of companies is due to the activities of an investor, taking into account other investors and additional factors that may have influenced the achievement of the results? The JIM takes a pragmatic approach to this attribution question and applies prorating to attribute part of the impact to the investor’s intervention. In line with the PCAF Global Standard we use book values for debt investments and apply an ownership percentage for equity. For a full description please see the JIM application methodology.

Mobilised Amounts

The calculation of the amounts mobilized is based on the OECD DAC methodology. This methodology is used for calculating mobilized private finance. To be able to report on public mobilization as well, the calculation template was amended while making sure that no double counting of mobilization occurred. It includes only commitments for mobilized finance in 2024.

Local Currency Investments

Equity investments and synthetic local currency loans are administered as hard currency investments but take a local currency risk (de facto local currency investments). Due to administrative reasons, these investments are not shown as local currency in the annual report.