FMO INVESTOR PRESENTATION FMO - THE DUTCH DEVELOPMENT BANK March 2019 www.fmo.nl Women-owned business, Cambodia
CONTENTS I. About FMO 3 II. FMO Strategy 5 III. Relationship Dutch State 8 IV. Funding Plan 2019 10 V. Sustainability Bonds Framework 12 VI. Portfolio 21 VII. Liquidity Management & Funding 26 VIII. Contact 30 IX. Appendix 32 Cookhouse wind farm, South Africa 2
I. ABOUT FMO 3
FMO THE DUTCH DEVELOPMENT BANK (CLICK) COSTA RICA, WIND ENERGY CAMBODIA, MICRO ENTREPRENEUR TUNESIA, FOOD SUPPLY KEY SECTORS FOR DEVELOPMENT Agribusiness, food & water Investing across the agribusiness value chain Energy Promote the transition to a low-carbon system and safeguard energy security Financial Institutions Increasing access to finance and support financial inclusion 4
II. FMO STRATEGY 5
FMO STRATEGY VISION We believe in a world in which, in 2050, more than 9 billion people live well and within the means of the planet’s resources. OUR MARKETS OUR SDGs MISSION Agribusiness, Food & Water We empower entrepreneurs to build a better world. Energy STRATEGIC GOAL Financial Institutions Your preferred partner to invest in local prosperity. STRATEGY Dutch Business Higher Deeper Higher Impact Portfolio Relationships Productivity 6
FMO STRATEGY: invest in local prosperity H1 18 HIGHER IMPACT PORTFOLIO DEEPER RELATIONSHIPS • NN FMO Emerging Markets Loan fund: 1 st close $ 250 million €1.0 billion 175,000 jobs supported total new commitments • NASIRA risk sharing facility approved by European Commission ( € 75 million ) 24% • Climate Investor One investments contributing to reducing • Client Satisfaction inequalities (% of total) 414,000 35% HIGHER PRODUCTIVITY green investments avoided greenhouse gas emissions (% of total) (tCO2eq) • Business Process Optimization 7
III. RELATIONSHIP DUTCH STATE 8
STRONG LINK TO DUTCH STATE FMO is the Strategic government vehicle for promoting • I. Ownership private-sector growth in developing countries Public private development bank The Ministry of Finance and the Ministry of Foreign • Dutch State Affairs jointly oversee FMO’s activity and accounts 7% The relationship with the Dutch State entails 3 pillars: • Dutch banks: ABN AMRO, Ownership, Support Agreement and Manager of State Funds ING, Rabobank 51% 42% Integral link with the Dutch State results in • Trade Unions, Employer's Federations, Companies, AAA ratings S&P and Fitch Individuals II. Explicit support agreement* III. State Funds FMO manages funds for €1.1 bln on behalf and for the risk Documented in the bilateral ▪ of the Dutch State to finance high risk projects “Agreement State – FMO of 16 November 1998 ”** Art. 7: Maintenance Obligation: 154 The Dutch State is committed to covering all losses from operations that cannot be covered by general or specific Access to Energy Fund 422 provisioning and reserves Infrastructure Art. 8: Financial Security Obligation: Development Fund The Dutch State shall prevent situations arising in which MASSIF FMO is unable to meet its commitments on time 513 Valid for an indefinite period and may be cancelled ▪ subject to a twelve-year notice period 9
IV. FUNDING PLAN 2019 10
FUNDING PLAN 2019 Focus on USD funding Renewable energy projects Funding need of approximately USD 1.5 bln 1. USD funding (USD 900 mln) ― 5y USD 500 mln inaugural Green* Bond (Reg\S) ― Social** Bond (USD 100 mln) ― Short-term funding \ MTNs (USD 300 mln) 2. Local Currency (LCY) Frontier issuance: ― USD 250 mln Social projects aimed at reducing inequality ― Tenors: 2y-3y 3. Other funding in EUR, SEK, AUD or other hard currency ― USD 400 mln ― Long dated funding: 7y-12y *Contingency funding option: EUR Green Bond **Contingency funding option: EUR Social Bond or another currency 11
V. SUSTAINABILITY BONDS FRAMEWORK 12
SUSTAINABILITY BONDS FRAMEWORK 2018 BONDS CATEGORIES ELIGIBILITY CRITERIA 13
SECOND OPINION SUSTAINALYTICS “ SUSTAINALYTICS IS OF THE OPINION THAT FMO’S SUSTAINABILITY BONDS FRAMEWORK IS CREDIBLE AND IMPACTFUL” “ The eligible categories for the use of proceeds – (i) Climate Change Mitigation, (ii) Climate Change Adaptation, (iii) Other Footprint, (iv) Investments in ▪ Use of Proceeds: aligned with Least Developed Countries (LDCs), and (v) Investments in Inclusive Business – are aligned with market best practice those recognized by the Green Bond Principles 2018, Social Bond Principles 2018 and Sustainability Bond Guidelines 2018.” “ Sustainalytics considers that the eligible projects can contribute to decreasing GHG emissions and provide ▪ Impact of eligible projects positive social impact in emerging markets” 14
FMO IMPACT UNIVERSE A world where in 2050 nine billion people live well and within the means of the planet’s resources Goals (doubling & halving), targets (labels), ambitions (1.5-degree portfolio) Position Statements Investment Criteria Sustainability Policy Exclusion List 2025 Strategy Higher Deeper Higher impact portfolio relationships productivity 15
GBP 1: ELIGIBILITY CRITERIA GREEN PROJECTS ▪ Eligible green projects : ‒ Climate change mitigation ‒ Renewable energy : Solar, wind, run-of- river hydro ‒ Energy efficiency : Buildings, transportation and industrial ‒ Climate change adaptation ‒ Other Footprint ▪ FMOs Green Principles: Rajasthan Sun Technique ‒ Green investments contribute to a genuine FMO has financed the 100 MW improvement Concentrated Solar Power (CSP) project ‒ Green investments should not contribute to developed by Reliance power in India. a long-term lock-in of high carbon structure The solar plant will power homes and businesses and help to bring the country ▪ Exclusionary criteria: investments in fossil closer to its ambitious solar power generation goals. fuels, large hydros, biofuel from sources FMO financing: USD 30 million. that deplete carbon pools Avoided GHG: 10,938 t/CO2eq *http://www.eib.org/attachments/documents/joint_report_on_mdb_climate_finance_2013.pdf 16
GBP2: GREEN IN THE INVESTMENT PROCESS Credit Treasury Strategy Front office • Approve • Apply for • Consider • Take note green label green label for green of green • Green • Exclusion bond label definition list • Green • Impact • IFI • ESG label narrative definition criteria • Issue mgt of climate • IFC PS finance 17
GBP 3: MANAGEMENT OF PROCEEDS ▪ Eligible projects include projects : ‒ Committed after bond issuance ‒ Committed before bond issuance but funded thereafter ▪ Pending disbursement, the net proceeds are held in FMO’s liquidity portfolio ▪ Liquidity portfolio consists of: ‒ Short-term investments ‒ Long-term bond portfolio ▪ FMO is using both positive and negative screening for its liquidity portfolio ‒ Targeting 30% in investments with extra focus on sustainability 18
GBP 4: REPORTING Annual Report Newsletter 19
WITH A LEADING ROLE IN THE SUSTAINABLE BOND MARKET Industry leading Sustainability Ratings • Sustainability Bond allocations in Sustainalytics ― EUR million (per Dec-17) Oekom Research ― Member of the Green Bond Principles (GBP) • Use of proceeds reporting via Sustainability Bond Newsletter ― 264 292 https://www.fmo.nl/susbonds Available funding IFI working group on Green Bond Impact reporting harmonization ― Disbursed, green Disbursed, inclusive Project disclosure on FMO world map: https://www.fmo.nl/map ― 1,219 External assurance to confirm alignment with GBP • Sustainalytics ’ 2nd opinion on FMO Sustainability Framework - Sustainalytics ’ review of eligible projects - EY: use of proceeds (financial perspective) - FMO awarded First Green Bond – Netherlands certificate • by Climate Bond Initiatives (partnership per Feb-16) 20
VI. PORTFOLIO 21
INVESTMENT PORTFOLIO Currency* (per Jun-18) Sector (per Jun-18) 8% 12% 9% Financial Institutions Euro Energy 35% 28% Other* USD Agribusiness Local currency 80% 28% • *FMO ceases new business in Other sectors since 31-Dec-17 Product * (per Jun-18) Private equity portfolio (per Jun-18) 5% Equity 4% Private equity Loans 31% 42% funds Guarantees Direct 58% Mezzanine investments 60% • • Provide LT financing Typical holding period of 5-10 years • • Fund management & syndication Focus on direct investments in focus sectors • • Diverse product portfolio Focus on exits * Based on committed investment portfolio, excl. government funds, of EUR 7.9 bln per Jun 2018 22
ACTIVE WORLDWIDE in emerging markets €7.9 billion total committed portfolio Head office The Hague, The Netherlands Top five countries 1. Turkey 2. India 3. Nigeria 4. Bangladesh 5. Georgia Most exposure No exposure Local office Johannesburg, Excluding regional investments South Africa Eastern Europe & Latin America Non-specific region Africa Asia Central Asia & The Caribbean €0.5 bln €2.6 bln €1.3 bln €1.7 bln €1.8 bln 23
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