In 2015, the Paris Climate Agreement set a global warming goal of “well below” 2C. To achieve this, the 196 signatories must reduce their CO2 emissions to ‘Net Zero’ (the point where the greenhouse gases you add to the atmosphere are at least matched by those you take out through measures such as reforestation).
FMO already had a strong record on environmental issues. Most projects use green energy, for example, and research confirms FMO’s portfolio emits less CO2 than most cohorts. Nevertheless, inspired by Paris, and conscious that one of its main investors, the Dutch government, was a signatory, FMO vouched to do more.
It set itself the ambitious global warming goal of 1.5°C (the stated ideal at Paris). But equally importantly, FMO joined one of the first initiatives within the financial sector to work together to reduce carbon emissions. Teaming up with other Dutch financial institutions to form the Platform Carbon Accounting Financials (PCAF), they have developed a methodology for measuring the carbon footprint of a financial institution’s portfolio of investments and loans.
This Emissions Measurement tool will be shared publicly and other financials are encouraged to adopt it. It’s just one example of how FMO, as a climate change pioneer within the sector, is keen to share its knowledge and tools with other financial institutions and help them reach their climate goals.
FMO is aware that its climate strategy will affect local working conditions and impact social and economic development. To achieve their goals, FMO and other financial institutions will ultimately have to stop investing in industries that emit high levels of CO2, like Coal and Oil. And as a frontrunner, FMO has already withdrawn from Coal. But as these industries slowly disappear, so we see capital and jobs shifting to greener industries.
Even in narrow risk management terms, financial institutions need to reduce the risk to investments global warming presents simply from natural disasters such as hurricanes, floods or drought. But still, banks operate in a complex world, and have far-reaching social and economic responsibilities. When considering investments, FMO constantly weighs up climate impact against improvements it can drive within that industry. So while it still invests in high-emission sectors, like the Beef industry, it also advises and guides those clients on how to minimise their CO2 footprint. With time, FMO will set some industries strict ground rules on carbon emissions or even withdraw from the sector altogether.
For this vital change to happen, every section of society has a role to play and everyone must work together. So underpinning all these investment decisions is FMO’s commitment to engage all its stakeholders. As a major investor, the Dutch government will continue to influence how FMO frames its climate strategy. With their vast knowledge on how to tackle specific environmental problems, NGOs can help FMO develop and finetune that strategy. And in turn, FMO aims to inspire and help clients and other financial institutions to raise their own climate ambitions, and then achieve them.