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Other reporting definitions

We have aligned our indicator definitions with internationally harmonized definitions if these are available. Below we have included the definitions of the reported indicators, insofar as they were not included in chapter Our Performance.

Customer satisfaction and Net Promoter Score

Customer satisfaction shows how satisfied customers are with the services FMO offers on a scale of 1 to 10. The customer satisfaction score is calculated as the average of the scores given by respondents and expressed as an absolute number between 1 and 10.

Net Promoter Score shows the extent to which customers would recommend FMO to others. The customer is regarded as 'promoter', 'passive' or as 'detractor'. The NPS is calculated by subtracting the percentage of 'detractors' from the percentage of 'promoters'. The score is expressed as an absolute number between -100 and +100.

The scores for 2020 are based on 118 responses from customers that participated in a customer satisfaction survey held in December 2020 and closed in January 2021.

Direct Jobs

Direct jobs are defined following the HIPSO definition as the “number of full-time equivalent employees as per local definition working for the client company or project”. This includes directly hired individuals and individuals hired through third-party agencies as long as those individuals provide on-site services related to the operations of the customer company. Also, this includes full-time equivalent worked by seasonal, contractual and part-time employees.

Part-time jobs are converted to full-time equivalent jobs on a pro rata basis, based on local definition (e.g., if working week equals 40 hours, a 24 hr/week job would be equal to 0.6 FTE job). Seasonal or short-term jobs are prorated on the basis of the portion of the reporting period that was worked (e.g., a full-time position for three months would be equal to a 0.25 FTE job if the reporting period is one year). If the information is not available, the rule-of-thumb is two part-time jobs equal a full-time job.

Corporate Governance risk categorization

During the early stages of the investment process, FMO makes an initial assessment of the Corporate Governance (CG) risk for a customer. A questionnaire supports the investment staff with identifying CG risk factors and determining whether a CG Officer should be consulted. The outcome of the CG Questionnaire is either low or high CG Risk. If the outcome is 'high', a CG officer should be consulted.

Corporate Governance performance tracking

The CG officer or the investment officer assesses the maturity of the corporate governance of a customer, based on five CG attributes in a predefined tracking sheet: 1. Commitment to CG; 2. Structure and functioning of the Board of Directors; 3. Control environment and processes; 4. Transparency and disclosure; and 5. Shareholder rights. These CG attributes originate from the methodology of the DFI Corporate Governance Framework. Subsequently, the officer assesses whether the maturity level (basic, emerging, or developed) is adequate for the specifics of the company and its context. The conclusion on the adequacy of the corporate governance considers the size, risks, and complexity of the company, country context and (absence of) strong CG regulations, as well as the track-record with FMO. If the CG maturity is considered inadequate, FMO agrees on a CG action plan with the customer.  

In September 2020, with the introduction of our new Sustainability Information System (SIS), the tracking sheet has been integrated in this application, including supporting approval workflows. Investment teams complete the tracking sheet after due diligence and the assessment is included in the Financing Proposal to support investment decisions. The CG adequacy assessment gets evaluated again during annual review and when significant changes occur. The Credit Department reviews and approves the CG tracking sheet as part of the transaction approval.

E&S risk categorization

During the early stages of the investment process, FMO screens all transactions on E&S risk and categorizes them in accordance with our Sustainability Policy. This classification is based on inherent E&S risk, irrespective of how it is managed by the customer. It allows us to determine the relevant E&S requirements and the (initial) resources needed. We have the following categories available: A & B+ (high), B (medium) and C (low) for direct investments and A, B and C for indirect investments in Financial Institutions and Funds. The E&S risk category of most customers is relatively stable, however, if the inherent risk profile of a customer changes following, for example, a significant shift in a fund’s portfolio or pipeline, we adjust the categorization. 

E&S performance tracking

To monitor the E&S performance of our high risk customers we use predefined tracking sheets structured around the IFC Performance Standards and international best practices. Our E&S specialists assess customers’ exposure to applicable risks (low, medium, high) and subsequently their performance in terms of mitigating such risks. Up until August, three levels were used (green = acceptable, amber = insufficient, red = unmanaged). In September, with the introduction of our new SIS, the metric has been extended to five elements: exemplary, good, satisfactory, caution and unacceptable. E&S specialists update the scoring after due diligence and the assessment is included in the Financing Proposal to support investment decisions. The score gets evaluated again during annual review and when significant changes occur. Before contracting, an independent validation of the information is carried out by an E&S specialist in the Credit Department.

E&S Management gaps table

The E&S Management gaps table was prepared in two steps. Firstly, as part of our E&S performance tracking, we detected activities with a potential for (serious) adverse impacts on people and/or environment that are not adequately managed. Secondly, we summarized the management gaps by theme and prepared a table which illustrates the high priority issues which are still ongoing and thus require attention. The information was anonymized to respect customer confidentiality.

Employee statistics

  • Total number of (internal) employees: The total number of employees (with a definite or indefinite employment contract with FMO N.V.) at the last day of the reporting period, minus the employees leaving the organization as per the that same day. Interns are not included.

  • Employees in senior and middle management: Number of employees in a management position including Management Board member, Director, Manager at the end of the reporting period, excluding the incumbents in these positions leaving FMO per the last day of the reporting period. Note: ad interim Directors and Managers roles are included.

  • Number of new joiners: Number of new joiners during the reporting period, being between the last day of the previous reporting period and the last day of the actual reporting period. Note: employees joining and leaving in the same reporting period are included as new joiners and as leavers.

  • Number of leavers: Number of leavers between the last day of the previous reporting period and the last day of the actual reporting period. Note: employees joining and leaving in the same reporting period are included as new joiners and as leavers.

  • Net growth percentage: Number of new joiners minus number of leavers divided by starting balance of the total head count in the reporting period.

  • Staff turnover: Number of departures during the reporting period divided by the starting balance of total head count of the reporting period. 

  • Share of bonus amount paid in the period: Percentage of total bonus amount paid out to female and male employees related to the performance review over the previous year (payments made in March of the reporting year).

  • Promotion ratio in the period: Promotion in this context is defined as progression to a higher salary scale, either based on the latest appraisal or during the period e.g. as the result of an appointment in a different role based on an internal vacancy process. 

  • Employee engagement: Engagement score based on latest employee engagement survey (September 2020) sent to all employees with a minimum of 3 months in service. 

  • Number of internal FTEs: Sum of the related Full Time Equivalents (as contractually agreed) of all internal employees.

  • Percentage non-Dutch employees: Total number of employees with a different nationality from the Dutch nationality divided by the total number of employees. 

  • Number of nationalities: Total number of different nationalities of employees in service of FMO N.V. as registered based on employees' passports when joining FMO. Note: if an employee has more nationalities among which the Dutch nationality, the Dutch nationality will apply.

  • Absenteeism: Percentage of total sick leave (short, medium and long term sick leave) calculated as total number of sick leave days divided by the sum of work days.

  • Number of external employees: Total number of people working for FMO as 'Temporary External' on an agreement not being an employment contract with FMO N.V.

Green investments

Definition

Green-labelled investments contribute to climate mitigation, climate adaptation or other footprint reduction (water, waste, biodiversity). Green labels are applied ex-ante for the new commitments in a running year. Please note that we apply the labels to new commitments, but that these are referred to as investments throughout the report. To facilitate steering on SDG 13 through our Green label, we set an annual target on ‘Green’ as a percentage of new commitments that influences customer selection, project preparation and investment decisions. FMO’s Green criteria for climate mitigation and climate adaptation are in line with the IDFC - MDB list of Green investments. FMO Green definition also recognizes activities that do not directly target climate change mitigation or adaptation yet have a positive impact on the environment including water treatment, waste management and biodiversity conservation ('other footprint reduction').

All Green labelled investments need to comply with two underlying Green principles by default, namely 1) Green investments should contribute to a genuine improvement beyond the local regulatory requirements; and 2) Green investments should not contribute to a long-term lock-in of high carbon infrastructure. Based on these principles, FMO has defined a non-exhaustive list of pre-approved eligible activities such as making, installing, distributing or financing renewable energy projects/products and agriculture in line with certain certification schemes. Improvements that are not included on this list, may still be found eligible if they meet the Green principles. In these cases, a minimum threshold of 20% improvement against a baseline needs to be substantiated. For example:

  • Upgrade: If the investment is going towards an activity/equipment that is 20% more efficient than what it is replacing, FMO’s investment will be labelled 'Green' based on the amount of FMO's investment going towards that specific upgrade.

  • Expansion: If the investment is going towards an activity that is 20% more resource efficient than the company's current practice, FMO’s investment will be labelled 'Green' based on the amount of FMO's investment going towards that specific expansion.

  • Greenfield: If the investment is going towards an activity that is 20% more resource efficient than the current business as usual practice, FMO’s investment will be labelled as 'Green' based on the amount of FMO's investment going towards that specific greenfield.

Approval process

Investments can only be labelled Green following a robust approval process. The deal team is responsible to assess its investments based on FMO's Green principles and Green definition. The deal team should supplement the request with adequate substantiation for the Green eligibility of the financed activities. A specialist independent of the investment teams assesses the label request and determines the Green percentage. For example, if FMO finances an agricultural holding that has 30% of its operations certified under a pre-approved FMO certification while the rest are not certified and don’t have other underlying Green elements, then the Green percentage for that investment will only be 30%. The approval process is traced and documented in Impact Card.

Scope

The volume of Green investments includes a decrease or increase in an existing commitment for an existing customer, a new commitment for an existing customer, or a new commitment for a new customer. The volume of Green investments includes investments from FMO’s own books, funds managed on behalf of public entities and mobilized funds. Mobilized funds are amounts committed by third parties that are demonstrably mobilized by FMO as well as guarantees provided by third parties on investments on FMO’s existing portfolio. 

FMO also reports on its Green-labelled investments at portfolio level. Ex-ante labelling is applied to both the volume of new Green-labelled investments and the Green-labelled portfolio. Therefore, our criteria, the label process and documentation requirements are only enforced prior to providing a credit facility or making an equity investment. FMO’s full Green Methodology is available on FMO’s website.

Human rights due diligence indicator

The total number of significant investment agreements in FMO’s portfolio for which E&S due diligence including human rights was performed, or human rights clauses were included in the contract. This includes high E&S risk customers in our portfolio per 31 December 2020 with an approved E&S Tracker.

New admissible complaints received

Number of complaints filed with the Independent Complaints Mechanism (ICM) in the reporting period that were declared admissible by the Independent Expert Panel (IEP). When the IEP groups several complaints pertaining to the same project as one case, that is treated as one complaint.

Reducing Inequalities investments

Definition

FMO defines two sub-categories in social projects aimed at reduced inequalities: investments in the least developed countries (reducing inequality among countries) and investments in inclusive business (reducing inequality within countries). Least developed countries (LDCs) are identified by the United Nations as low-income countries confronting severe structural impediments to sustainable development.

Investments in inclusive businesses expand access to goods, services and livelihood opportunities on a commercially viable basis, either at scale or scalable, to people at the Base of the Pyramid (BOP). This is done by making them part of companies' value chain of suppliers, distributors, retailers or customers. Deals are eligible for inclusive business in case they relate to investment in inclusive business:

  • Microfinance;

  • Agricultural SME lending;

  • Smallholder finance;

  • Agribusinesses working with smallholders;

  • Youth finance;

  • Off-grid power;

  • Innovative solutions for the ‘Base of the Pyramid’;

  • Women-owned SME lending;

  • Other inclusive business investments targeting female end-beneficiaries.

Whereas the sub-categories are similar to the inclusive business/gender categories of IFC, the eligibility criteria and thresholds are FMO-specific as other DFIs (including IFC) have not developed similar eligibility criteria.

Approval process

Similar to Green labels, requests for Reducing Inequalities labels are made through Impact Card. For the LDC sub-label, a request is not needed if the investment is single-country and the country of impact is the same as the Country of Risk Exposure. A request for the LDC sub-label is only needed if the investment is multi-country with at least 50% of the investment expected to benefit LDC countries, or in the case the country of impact is an LDC and is different from the Country of Risk Exposure.

For the inclusive business sub-label, a request through the labels tab in Impact Card is always required. A deal team submits a request via Impact Card, after which Credit receives an email notification. Credit assesses the request for the relevant labels and decides whether the labels are granted. If the (sub)label is likely to be granted but more evidence is needed at a later stage (e.g. evidence of a use of funds clause in the contract), the label request can be conditionally approved. Credit archives the Green and Reducing Inequalities Labels tab and informs the deal team about the outcome of the assessment. Information on the Green and Reducing Inequalities status of the proposed transaction is to be included in the CIP and FP.

Scope

Refer to scope Green investments.

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