Climate action

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Taking climate action
How to align our portfolio with a 1.5˚C pathway?

Climate change is real and requires urgent action. It will affect us all and developing countries even more. 

A strong commitment

Since we adopted our 2050 vision (already in 2013), tackling climate change has been central to our strategy. Climate Action (SDG13) is also one of the three sustainable development goals that we have committed ourselves to, alongside Reduced Inequalities (SDG10) and ensuring Decent Work and Economic Growth (SDG8).  Equally important, we made a pledge in our  Sustainability Policy  to contribute to limiting the global temperature rise to well below 2.0-degrees or, preferably, 1.5-degrees Celsius.

Delivering on our climate ambition 

Since 2015 we have a Green Label in place that steers our investments towards reducing greenhouse gas emissions, increasing resource efficiency, preserving and growing natural capital, and supporting climate adaptation. Over 80% of our energy portfolio is in renewables and our Agriculture Food and Water department is investing into forestry and climate smart agriculture. Furthermore, we are leveraging new opportunities for climate finance through blending structures like like Climate Investor One, ElectriFI. and the Dutch Fund for Climate and Development (DFCD).

We recognize the importance of growing the green part of our portfolio, but equally important we see the need to ensure that our overall portfolio is aligned with the goals of the Paris climate agreement. For us, Paris alignment means a portfolio that is consistent with a 1.5-degrees pathway.

As we are working towards a portfolio that is aligned with a 1.5-degrees pathway, the first question we aksed ourselves was: What is FMO’s fair share of the global carbon budget? To answer this question our first technical paper presents a methodology for a financial institution to derive its own emissions reduction pathway in line with the Paris Agreement.

Once we knew which benchmark to compare ourselves against the second question we had was: How to assess GHG emissions from the full portfolio? Here the second paper outlines an accounting approach to measure absolute emissions (i.e. both generated and sequestered). 

We wish to offer these two technical papers as contributions to the ongoing climate debate and hope they will contribute to further harmonization around methodologies and accounting approaches. We will continue to adjust our position as we learn, international standards develop and global negotiations advance. The GHG footprinting approach prepared by the Partnership for Carbon Accounting Financials has been a starting point for FMO and we fully support the current efforts to globalize the initiative.

A global challenge you don’t solve alone

As we share our research and thinking with the outside world more broadly, we hope not only to collect some new insights but also to inspire other investors and financial institutions to adopt an emission reduction pathway in line with the science of the Paris Agreement.

Both papers (1 Deriving a 1.5-degrees pathway for a financial institution | 2 Absolute GHG accounting approach for financed emissions ) are the start of FMO’s Paris journey through which we intend to advance our ability to measure absolute emissions and climate impact. Throughout our journey we actively engage with peers and important stakeholders. We are also a strong advocate of harmonizing accounting approaches. We will take a collaborative approach to further build and refine our GHG accounting methodology while we gain practical experience through our implementation efforts.

The papers are disclosed to spark discussion and inspire action.