For development finance institutions, exiting an investment is not simply the final step in a financial transaction. It is also a moment to consider whether the positive impact achieved during the investment period can be sustained, and whether environmental, social and governance commitments can continue after the investor has stepped away.
FMO has evaluated its approach to responsible exits over the period 2018 to 2024. The independent evaluation, conducted by ADE S.A., looked at how FMO defines and manages responsible exits, how this compares with international standards and peer institutions, and where further improvements can be made. The review combined document analysis, portfolio data, staff and client input, case studies and a peer comparison.
Responsible exit is an evolving area in development finance. There is no single, universally accepted definition. For FMO, the core principle is clear: when exiting an investment, FMO seeks to preserve positive impact and avoid negative impact as much as possible. This is also aligned with the Operating Principles for Impact Management, to which FMO is a signatory. Principle 7 asks investors to consider how the timing, structure and process of an exit affect the sustainability of impact.
The evaluation finds that FMO’s approach to responsible exits is logical, well integrated into its policies and procedures, and broadly understood by relevant staff. It also compares well with peer development finance institutions. FMO’s approach is risk-based and focuses most strongly on exits where it has the greatest degree of influence, such as actively managed equity exits and non-performing exposures handled by FMO’s Special Operations department.
The evaluation reviewed a sample of 211 exits between 2018 and 2024. Most were debt investments, with 178 debt exits compared with 33 equity exits. The majority were planned and passive exits, meaning loans were repaid as expected and without major ESG issues. In the equity portfolio, most investments generated positive returns and performed well on ESG. Where Environmental and Social Action Plans were required, these were almost fully completed by the time of exit.
The evaluation also makes clear that responsible exits start well before an investment ends. FMO’s ability to preserve impact is strongest at the beginning of the relationship, when client selection, contractual arrangements and ESG expectations are still being shaped. Building these considerations into the investment from the outset can increase the likelihood that progress continues after FMO exits.
The evaluators make three recommendations: strengthen internal and external communication on what responsible exit means in practice, build stronger institutional memory by bringing together expertise from across FMO, and continue to monitor lower ESG-risk clients where relevant. FMO has indicated that the first two recommendations will be actively followed up, while the third is considered sufficiently addressed through its existing risk-based ESG approach and annual investment review process.