Letter from the MB of the Fund Manager
Staying the course
In 2023, the volatile global economic and geo-political circumstances were aggravated by more extreme weather conditions, food crises, the collapse of several major banks, the ongoing war in Ukraine, the war in Gaza, and Sahel coups. All with direct and prolonged, devastating effects on the well-being of entire communities, in particular in FMO’s geographies. This instability is often worsened by adverse financial factors in many emerging markets such as higher interest rates, high inflation, and increased sovereign debt.
Within this context, FMO's 50+ year mission becomes more relevant by the day: enabling entrepreneurs to increase inclusive and sustainable prosperity. Over the next decade, the World Bank estimates one billion young people — a majority living in emerging markets — will try to enter the job market. If they won’t be able to find decent jobs, this will leave millions without hope for a sustainable future. FMO’s investments support jobs in local markets – around 990 thousand direct and indirect jobs in 2023 – and enhance access to energy, food and finance: crucial factors in breaking the downward cycle of poverty and migration.
Maximizing our impact towards the SDGs is the foundation of FMO’s strategy towards 2030. This past year marks the first full year dedicated to implementing and working towards these 2030 goals. Staying on course, we had similar priorities as in 2022: growing impactful business, ensuring FMO’s foundations are solid, and organizational development.
The main objective of the Access to Energy Fund (AEF) is to finance private sector companies and projects aimed at providing access to renewable energy services in emerging markets and developing countries. This is achieved most efficiently through investing in both on-grid projects and off-grid companies. 2023 was a successful year in terms of new commitments. FMO, through AEF, contracted a considerable number of new loans and equity investments, totaling up to EUR 47.7 million. On the other hand, however, the existing AEF portfolio suffered after several difficult years with Covid, inflation, devaluation of some of the currencies, and sovereign debt issues at the level of the utilities. Consequently, we had to provision loans and decrease the fair value of some of the equity investments – resulting in a loss of EUR 25 million in 2023.
Looking ahead
Staying the course, in 2024 we will focus on the three same priorities as in 2023, continuing our work towards our 2030 goals. With regard to growing impactful business, we aim to further increase new investments in Reduced Inequalities and Green. We will take the next steps in market creation, supporting the new generation of entrepreneurs. FMO’s Public Funds and facilities will be fundamental to reach these goals.
With the fragile global economic and political situation in some of our markets, we do realize our financial result can be volatile and further growth to maximize our impact will be challenging. But given the immense climate challenge that lies ahead and the huge investments that are needed to support job creation and overall economic development in emerging markets, we see it as our role to be countercyclical and focus on the long term. We invest when others shy away, always with our mission in mind: enabling entrepreneurs to increase inclusive and sustainable prosperity.
The Hague, 25 April 2024
On behalf of the Management Board
Fatoumata Bouaré, Chief Finance & Operations Officer
Franca Vossen, Chief Risk Officer
Huib-Jan de Ruijter, Co-Chief Investment Officer
Michael Jongeneel, Chief Executive Officer
Peter Maila, Co-Chief Investment Officer