External environment

The year 2022 was shaped by several major events. Although the COVID-19 pandemic became more manageable, Russia invaded Ukraine, inflation soared, access to energy and food was more restricted and economic growth slowed down. This chapter outlines key developments that impacted progress on the Sustainable Development Goals (SDGs) we aim to contribute to and the sectors in which we operate.

(Geo)political issues and social unrest

War and political unrest destabilized several countries in which we are active. In February, Russia invaded Ukraine. The war had a major impact on the people in Ukraine and Russia, the wider region, and global markets, as did the sanctions that were imposed on Russia and Belarus in response. In March, protests arose in Sri Lanka as the government was criticized for mismanaging the economy. In Myanmar, the civil war continued throughout the year. 

SDG 8 | Decent work and economic growth

The recovery of the global economy from the pandemic was negatively affected by rising inflation, supply chain disruptions and tightening monetary policy. Economic growth of emerging markets and developing economies declined from 6.7 percent in 2021 to an estimated 3.9 percent in 2022.[1] Countries with high public debt levels faced higher borrowing costs due to increasing interest rates and local currency depreciation. The ratio of public debt to GDP in emerging markets increased from an average 36 percent in 2012 to over 60 percent in 2022.[2] At the same time, several large middle-income countries, such as Brazil, showed resilience and outgrew advanced economies in 2022. Although the unemployment rate declined in FMO’s regions, it was still higher than before the pandemic. 

SDG 10 | Reduced inequalities

The war in Ukraine caused the global refugee population to increase to a record high and triggered food shortages for the world’s most disadvantaged people. The rise in food and energy prices affected lower-income households more as they tend to spend a larger share of their disposable income on basic human needs. Meanwhile, the effect of the pandemic continued to expose and exacerbate inequalities. For instance, the pandemic widened existing gender disparities as women lost jobs at a higher rate than men. In addition, high-income economies tend to recover much faster from the pandemic than low and middle-income economies.

SDG 13 | Climate action

If not urgently addressed, climate change will undermine the progress towards the SDGs and negatively affect our markets. According to the 2022 Global Carbon Budget report, global CO2 emissions are estimated to have increased in 2022. Extreme weather events continue to affect our markets, such as the floods in Pakistan, which were catastrophic to people and their livelihoods. In addition, loss of biodiversity in recent years has been unprecedented.

At COP27, the UN Climate Change Conference, few countries increased their ambition level towards climate mitigation. The conference, however, highlighted that there is no viable route to limiting global warming to 1.5°C without urgently protecting and restoring nature. Governments were able to agree on how to move forward on a global goal towards adaptation, which is expected to be finalized at COP28 and inform the first Global Stocktake, improving resilience among the most vulnerable. In addition, an agreement was made to provide loss and damage funding to vulnerable countries hit hardest by extreme weather events. 

Concern was expressed that developed countries have not fulfilled their promise to mobilize US$100 billion per year by 2020 and they were urged to meet that goal. Multilateral development banks and international financial institutions were called upon to facilitate the mobilization of climate finance in particular. 

Sector developments

In 2022, we observed the following trends in our focus sectors.

Agribusiness, food and water

In 2022, the price of agricultural commodities surged. By November 2022, the price of wheat and maize had increased by 25 percent or more.[3] This was caused, among others, by increases in demand following the pandemic and a steep rise in fertilizer and energy prices as a result of the war in Ukraine and extreme weather events. 

The war highlighted the global dependency on Ukraine and Russia for food. Due to the limited availability of staple products in combination with high prices, more than 200 million people faced acute food insecurity in 2022.[4] Many of these people live in countries confronted with other adversities such as extreme weather and conflict, which in turn may fuel social tensions. The fertilizer market was destabilized by restrictions on fertilizer exports, most notably from the Black Sea region, sanctions on exports from Belarus, and China’s fertilizer export ban.


Russia’s invasion of Ukraine caused turbulence in the energy markets and a reorientation of the global energy trade. As a result, the number of people without access to modern energy has risen. An estimated 75 million people who recently gained access to energy may lose the ability to pay for it and approximately 100 million people may return to the use of traditional biomass for cooking.[5] Meanwhile, the use of coal rose due to the higher prices for oil and gas, and European nations turned to Africa in search of alternative energy sources.

In contrast, the clean energy transition gained further momentum due to recent economic, climate and energy security conditions. Clean energy supply chains showed strong growth, as did the number of clean energy jobs, which now exceed the number of fossil fuel jobs worldwide. However, clean energy investments in emerging markets and developing economies still lag behind. Development finance institutions are crucial in supporting clean energy projects in developing countries.

Financial institutions 

Central banks in advanced economies and emerging markets struggled with inflation. As a result, global financial conditions tightened and banks rebuilt their loan-loss reserves for the first time since the pandemic. Equity prices fell and credit spreads widened significantly. Demand for credit started to slow in emerging markets. Due to heightened economic and geopolitical uncertainties, investors pulled out and withdrew a record US$70 billion from emerging market bond funds in 2022.[6] Rising borrowing costs and the strong dollar (for part of the year) put further pressure on economies with shallow domestic financial markets. Currently, eight out of 69 low-income countries are in debt distress and 30 are at high risk of distress.

On the other hand, large emerging markets have proven resilient, in part due to increased sophistication and prudence of domestic financial markets. The resilience of the global banking sector has been strengthened by high levels of capital and ample liquidity buffers. Overall, the expected impact on banks in emerging markets is more severe as some face vulnerabilities from a high share of foreign currency debt. At the same time, the shift of financing burden to the domestic market is emerging as a vulnerability. Overall, up to 29 percent of banks in emerging markets would breach capital requirements in case of an abrupt and sharp tightening of financial conditions – and an accompanying recession amid high inflation – in 2023.[7]

An increasingly complex operating and regulatory environment

Pressure is increasing on financial institutions to reduce the impact of their operations and supply chains on the environment and local communities, as well as to protect the integrity of the financial system. Financial institutions are required by law to combat financial economic crime, and capital requirements are rising to ensure financial stability. At the same time, regulators are setting new standards for climate-related disclosure and risk management, demanding companies to take more ambitious action to address sustainability risks, with an emphasis on climate and environmental impact. We closely monitor and prepare for changes to regulations. We highlight the most important changes and updates to the regulations that (are likely to) impact FMO.

Financial economic crime and tax integrity

Financial institutions are expected to act as gatekeepers to help prevent financial economic crime (FEC) and preserve the integrity of the financial system. We safeguard customer integrity in line with European regulations and under the supervision of De Nederlandsche Bank (DNB, the Dutch central bank). We closely monitor high-risk countries, as defined by the EC and the Financial Action Task Force, to ensure customers in these countries undergo adequate due diligence. Further information is provided in the chapter ‘Our investment process’ and the ‘Risk management' section in the 'Consolidated Financial Statements'.

Basel IV

The translation of the Basel IV agreement into European law (CRR-3) will increase the capital requirements for FMO as of 2025. The draft text published in October 2021 proposed a higher risk weight for equity investments, although the increase was less than expected. In addition to a higher risk weight for equity investments, we will be required to apply a higher capital charge for some types of credit risk exposures, and for market risk and operational risk. Further information is provided in the ‘Risk management’ section in the 'Consolidated Financial Statements'.

Climate related risks

In 2020, the European Central Bank (ECB) published guidance on the prudent management of climate related and environmental risks and the supervisory expectations for banks. Following up, the ECB published the results of its thematic review in November 2022, which shows that banks are still far from adequately managing climate and environmental risks and set deadlines for banks to progressively meet all the supervisory expectations it laid out in its 2020 Guide. The ECB also published a collection of good practices observed in some banks, demonstrating that swift progress is possible and aiming to facilitate the improvement of practices across the sector.

We have a project in place to meet these expectations and, in 2022, we continued to align our internal procedures, disclosures, business strategy, risk management and governance frameworks. Further information is provided in the ‘Risk management’ section in the 'Consolidated Financial Statements' and in the separate TCFD report on our website.

Corporate Sustainability Reporting Directive

The European Commission (EC) adopted a proposal for a Corporate Sustainability Reporting Directive (CSRD) in April 2021.The proposal was approved by the Council in November 2022. The CSRD will amend the existing Non-Financial Reporting Directive (NFRD) and will introduce detailed reporting requirements, focused on ESG matters, including the requirement to report using mandatory European sustainability reporting standards (ESRS). 

For large and listed companies, the CSRD will come into effect in fiscal year 2024. As FMO falls within this scope, we will be required to publish our first report in accordance with the CSRD in 2025, based on the company’s 2024 financial year performance. We have been monitoring the developments related to the CSRD and ESRS closely and are preparing to set up the necessary internal structures and implement core procedures in 2023.

EU Taxonomy 

In 2020, the EC introduced a taxonomy for sustainable activities. It is a classification system that defines which economic activities are environmentally sustainable. This is the second year that we are disclosing in line with the EU Taxonomy. Please refer to the ‘EU taxonomy’ section for further information.

  • 1 IMF (Jan. 2023). World Economic Outlook Update: Inflation Peaking amid Low growth.
  • 2 IMF (Oct. 2022). Global Financial Stability Report.
  • 3 World Bank (Nov. 2022). Food Security Update 10 November 2022.
  • 4 GNAFC (2022). 2022 Financing Flows and Food Crises Report.
  • 5 EIB (Nov. 2022). Energy crisis makes public banks even more important.
  • 6 Financial Times (Oct. 2022). Outflows from emerging bond funds reach $70bn in 2022.
  • 7 IMF (Oct. 2022). Global Financial Stability Report - Navigating the high-inflation environment.