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Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO)

PRI reporting framework 2020

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You are in Direct - Inclusive Finance » PIIF Principle 4: Responsible investment

PIIF Principle 4: Responsible investment

IFD 18. Tools for social performance reporting

Possible action:

Negotiate terms and conditions that are transparent, fair and reasonable, including fair break-up clauses.

18.1. Indicate if you use the following tools for social performance reporting:

Externally developed tools

During due diligence.

For monitoring and reporting purposes.

Describe the approaches used and frequency of use.

We use the Joint Impact Model for reporting purpose on direct and indirect jobs created.


 

In-house tools based on externally developed tools

During due diligence.

For monitoring and reporting purposes.

Describe the approaches used and frequency of use.

Several ESG tools based on international guidelines and IFC Performance Standard are used to report on FMO social performances. For higher CPP risk clients we have an in-house Due Diligence questionnaire based off/referring to the Smart Campaign self-assessment questionnaire.

Tools developed solely in-house

During due diligence.

For monitoring and reporting purposes.

Describe the approaches used and frequency of use.

FMO has a Rapid Risk Screen (RRS) to assess the level of risk that potential new investees pose in the area of Client Protection. The RRS makes a first assessment of the investee’s business model, pricing, and context to determine areas of possibly higher risk that should be more thoroughly analysed during due diligence. External consultants are often engaged for higher risk prospects to draw up action plans prior to approval.

18.2. Additional information. [Optional]


IFD 19. Retail institutions have independent financial/social rating and/or social audit

19.1. Indicate if you require the retail institutions in which you invest to have an independent financial rating.

19.2. Indicate if you require the retail institutions in which you invest to have an independent social rating.

19.3. Indicate if you require the retail institutions in which you invest to have an independent social audit.

19.4. Additional information. [Optional]


IFD 20. Due diligence on and monitoring and reporting of corporate governance among investees

Possible action:

Assist in developing appropriate references for corporate governance issues.

20.1. In relation to your due diligence on and monitoring and reporting of corporate governance among investees, indicate if you assess:

Compensation of the Board of Directors and Executive Directors (i.e. its transparency, the use of benchmarking)

Pre-investment

Post-investment

Describe what you look at and, if post-investment, the frequency of assessment. [Optional]

FMO only evaluates the compensation of the BOD once FMO nominates a member to the BOD.

    

Composition of the Board (i.e. breadth and depth of experience, effective client representation, diversity)

Pre-investment

Post-investment

Describe what you look at and, if post-investment, the frequency of assessment. [Optional]

Regularly during the term of the investment the Board will be scrutinised on mix and deficiency of skills, age and gender as investee companies mature. At each stage of investee company’s life time requirements to board composition vary accordingly.

    

Whether the Board receives social performance management-related information from the management team that is analysed and contributes to Board decision making.

Pre-investment

Post-investment

Describe what you look at and, if post-investment, the frequency of assessment. [Optional]

Regularly during the term of the investment the Board will be scrutinised on mix and deficiency of skills, age and gender as investee Companies mature. At each stage of investee company's life time requirements to board composition vary accordingly.

20.2. Additional information. [Optional]


IFD 21. Training or assistance for investees on corporate governance

Possible action:

Assist in developing appropriate references for corporate governance issues.

21.1. Indicate if you provide training or assistance for your investees on corporate governance.

21.2. Additional information.

Training and assistance to FMO’s investee companies can be provided for in a number of ways:

1. Training sessions to be supported by FMO’s Capacity Development programme;
2. Training sessions to be provided by FMO’s Corporate Governance Unit;
3. Assistance in (re-)design of investee Company’s corporate governance structure by FMO’s Corporate Governance Unit;

Training of FMO’s Nominee Directors appointed as member of the BOD of FMO’s investee companies.


IFD 22. Percentage of investees where board seats are held (Private)


IFD 23. Procedure to integrate environmental issues in investment decision processes

Possible action:

Assist in developing appropriate references for environmental issues.

23.1. Indicate if you have a procedure to integrate the consideration of environmental issues in your investment decision processes.

23.2. Describe how your procedure to integrate the consideration of environmental issues in your investment decisions processes affect decisions pre-investment. [Optional]

FMO categorizes all proposed transactions according to environmental and social risks. Depending on the risk category we conduct no, light, or thorough environmental risk due diligence. Investments in inclusive finance generally are categorized as low environmental risk.

Based on outcomes of the E&S due diligence, environmental and social requirements are tailor-made for each client.

23.3. Describe how your procedure to integrate the consideration of environmental issues in your investment decisions processes affect decisions post- investment. [Optional]

We monitor compliance with requirements on an annual basis for low risk clients. For high risk clients, monitoring is more intensive and according to E&S action plans. If we detect non-compliance or lack of progress, FMO engages the client and if necessary escalates conversations to CEO level. Contractually, we could declare a default. In practice, consequences have included turning down repeat financing to clients. In few occasions, a sale or exit took place.

23.4. Indicate if you request your investees to comply with an environmental exclusion list.

23.5. Additional information. [Optional]

Harmonized EDFI exclusion list.


IFD 24. Anti-corruption and whistle-blowing policies

Possible action:

Promote implementation of anti-corruption practices.

24.1. Indicate if you have anti-corruption policies.

24.2. Indicate if you have internal whistle-blowing policies.

24.3. Indicate if you review whether your investees have anti-corruption policies as part of your due diligence process.

24.4. Indicate if you review whether your investees have internal whistle-blowing policies as part of your due diligence process.

24.5. Additional information.

Regarding clients or fund managers & funds: FMO conducts a Know Your Customer (KYC) risk assessment in which it is assessed whether a client/fund and fund manager may be involved in e.g. corruption, money laundering etc. In the contracts, legal ‘Objectionable Practices’ clauses are included indicating to the clients/fund manager and investors to refrain from fraud, corruption, money laundering etc. We do not check specifically whether or not a client, fund manager or investee companies of a fund also have a ABC policy and or Whistle blower policy. For more information please see:

anticorruption statement: https://www.fmo.nl/l/library/download/urn:uuid:318390ee-d7b7-49ef-80f6-4d0a610cc42a/anti-bribery+and+corruption+statement.pdf?format=save_to_disk&ext=.pdf

whistle blowing scheme: https://www.fmo.nl/about-us/governance-codes-and-regulations

 


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