An independent evaluation has found that FMO’s Renewable Energy investments in Fragile and Conflict‑affected States have generally delivered positive results, despite the elevated risks associated with operating in such contexts. The evaluation shows that FMO plays a highly additional role in these markets. Strong evidence was found of FMO’s financial additionality; high perceived risks levels and the need for long return periods do not make FCS very attractive for commercial parties (thus far).
Despite the perceived elevated risk profile, the proportion of RE debt investments in FCS that experience defaults (on either interest or principal repayments) was found to be comparable to those in non-fragile markets. This finding is particularly interesting given the challenges of investing in such countries and is consistent with findings from an earlier internal assessment that LDC debt investments are not structurally riskier from an FMO loss perspective. Often, collaboration between DFIs (pipeline sharing and co-investing for example) enables investors to adopt a portfolio approach and spread their risks, leading to better investment results.
While development impacts such as improved access to energy are often difficult to substantiate empirically - because electricity fed into national grids cannot easily be traced to specific end‑beneficiaries - the evaluation did find concrete evidence of positive effects. Case studies showed direct employment creation, and off‑grid investments in particular contributed to improved livelihood opportunities, including the establishment of micro‑enterprises providing services such as phone charging and cooling.
The evaluation identified several factors that contribute to successful renewable energy investments in fragile and conflict‑affected states. These include experienced project developers with strong local knowledge, supportive regulatory environments, reliable off‑takers for on‑grid projects, good community relations, and an on‑the‑ground presence. Collaboration with other development finance institutions and the use of concessional financing were also found to help manage risks and strengthen project viability.
In addition, many FMO customers were found to engage actively with local communities. This included providing public goods such as health centers, solar‑powered street lighting, and boreholes, often in contexts where government provision is limited. These measures, commonly labelled as corporate social responsibility, typically follow continuous consultation with communities and help to ease potential tensions.
FMO’s investments in renewable energy are particularly impactful in fragile and conflict‑affected states because access to energy is a key precondition for peace and development. Energy poverty and fragility often reinforce each other, contributing to conflict, forced displacement, and insecurity. By promoting access to sustainable energy sources, FMO aims to contribute not only to economic development but also to broader stability and peace.
Through its strategic ambition to reduce inequalities, FMO has committed to investing more in Least Developed Countries, many of which are also classified as fragile or conflict‑affected. Investing successfully in these contexts requires a conflict‑sensitive approach that carefully considers local dynamics to avoid unintentionally exacerbating fragility or conflict.
Between 2012 and 2023, FMO built a significant track record in this area, committing approximately €633 million to renewable energy investments in 15 fragile and conflict‑affected countries. The portfolio includes 39 customers across Africa, Asia, Eastern Europe, and Latin America, spanning technologies such as hydropower, solar, wind, and transmission and distribution, mainly financed from FMO’s own balance sheet.
Undertaken by Ecorys NL, the evaluation covered the period from 2012 to 2023, encompassing both debt and equity instruments. Specifically, the evaluation sought to:
Data collection and analysis included interviews and workshops with FMO staff, a peer review of practices at other Development Finance Institutions (DFIs); three country (case) studies of FMO-investments in renewable energy in Armenia, Burkina-Faso, and Nigeria, and desk-based review activities such as documentary and quantitative (portfolio) data analysis. In particular, the country (case) studies involved field work with customers and other stakeholders such as communities, other investors, civil society organizations and the Dutch Embassies.
The evaluation did not identify any cases in which renewable energy investments led to negative conflict‑related impacts in the three case study countries. Nevertheless, it concludes that conflict‑sensitive investing can be further embedded in FMO’s day‑to‑day practices. FMO has welcomed the recommendations, which align with ongoing efforts to strengthen contextual risk assessments within its investment approach.
Please find a summary of the report here
