FMO climate ambitions include helping others follow their lead

In 2016, the Paris Climate Agreement set a global warming goal of “well below” 2.0°C by 2100.

To achieve this, the 196 signatories must first reduce their greenhouse gas emissions to ‘Net Zero’ (the point where the greenhouse gases you add to the atmosphere are at least matched by those you take out through measures such as reforestation). In the 2nd half of the century they will have to move to ‘Net Negative’ and start removing greenhouse gases that are still present.

Leading by example and sharing knowledge to achieve more

FMO already had a strong record on environmental issues. We have a green ambition and a label in place to steer our investments into climate finance (e.g. renewable energy projects), biodiversity and reduced water usage. Research confirms FMO’s portfolio emits less CO2 than most cohorts. Nevertheless, inspired by Paris, and conscious that one of its main investors, the Dutch government, was a signatory, FMO vouched to do more.

Because climate change affects all but developing countries most, FMO set itself the ambition of aligning its total portfolio with a 1.5°C emissions pathway (the stated ideal in the Paris Climate Agreement). This means we need to be able to not only track and measure absolute emissions of our portfolio, but also to assess progress against the 1.5°C pathway. Therefore, we developed a methodology to establish a 1.5°C emissions reduction pathway, as well as a GHG accounting approach for absolute emissions. Equally important, FMO joined one of the first initiatives within the Dutch financial sector to better account for carbon emissions, the Platform Carbon Accounting Financials

FMO’s work on the Paris Climate Agreement alignment and GHG accounting are two examples of how FMO is keen to share its knowledge and tools with other financial institutions and help them reach their climate goals. You can find both papers on our FMO website, click here.

Investment in a complex world

FMO is aware that its climate strategy will affect local working conditions and impact social and economic development. To achieve their goals, FMO and other financial institutions will ultimately have to reconsider involvement in industries that emit high levels of CO2, like coal and oil. Already in 2016, FMO decided not to finance coal-based power and coal mining projects. As these industries slowly disappear, we see capital and jobs shifting to greener industries.

When considering investments, FMO constantly weighs up climate impact against improvements it can drive within that industry. That is why FMO still invests in high-emission sectors, like the dairy industry, and advises and guides those clients on how to minimise their CO2 footprint.

A global challenge you
don’t solve alone

For this vital change to happen, every section of society has a role to play and everyone must work together. Underpinning all these investment decisions is FMO’s commitment to engage all its stakeholders. As a major investor, the Dutch government will continue to influence how FMO frames its climate strategy. With their vast knowledge on how to tackle specific environmental problems, NGOs can help FMO develop and finetune that strategy. In turn, FMO aims to inspire and help clients and other financial institutions to raise their own climate ambitions, and then achieve them.