FMO is very pleased with its own success – now the local population still needs to be

CEO of development bank FMO, Michael Jongeneel, looks back positively on the profits of 'his' bank in 2024, as recently noted in the FD (March 25). Jongeneel seems to assume that FMO's investments in business in the global South automatically contribute to limiting climate change and reducing inequality.

But is that really the case? As a Dutch organisation with a large network of civil society organisations in the global South, we are often asked for advice: what can be done about a project financed by the development bank FMO that damages our environment and our livelihoods? 

Lack of transparency 

FMO focuses strongly on the energy, agriculture and food sectors. These types of projects – such as hydroelectric power stations and monoculture plantations – require large amounts of land and water. And that land is often scarce, which makes these types of projects prone to conflicts in which structurally marginalised groups – such as indigenous people or women – lose out.

For example, FMO finances a plantation in Uganda owned by the New Forest Company. This means that thousands of people have to move to make way for the plantation. More than ten years later, many of them still have no access to restitution land, and therefore no access to food and income. 

'Land rights for disadvantaged population groups are at stake in FMO investments' 

In addition, FMO's investments in (commercial) financial institutions worldwide have been a large part of the bank's portfolio for years. Due to a lack of transparency, it is still unclear to the uninitiated where this money ends up. However, the banks and funds in which FMO invests are often involved in projects that jeopardize the land rights of disadvantaged populations. 

For example, FMO invests in the Africa Finance Corporation, which invests in oil extraction in Senegal. Local women are protesting against this because they are very concerned about the consequences for their environment. The investment portfolio also includes many other controversial (fossil) energy projects. 

A few years ago, FMO announced that it would take as little responsibility as possible for the project investments of financial institutions in which it invests itself – a policy that does not demonstrate the due diligence that you would expect from a bank that is supposed to contribute to climate action and inclusive development on behalf of Dutch taxpayers. 

Years of monitoring 

Of course many people – including us – support FMO's objective to stimulate inclusive and sustainable development. This requires that FMO can guarantee that human rights are not violated and that existing inequalities are not exacerbated by the investments. This demands transparency, consultation and participation of people whose lives are affected by these investments – and years of monitoring to follow up on this.

To realise this, FMO must first invest heavily in available time and capacity, and recognise that development cannot be reduced to checking off a whole series of economic indicators such as growth and employment. Development always takes place within a political arena, which becomes tense when land, water and other natural resources are at stake. FMO would like to be a development bank – a bank that makes a difference. 

We therefore encourage FMO to put its money where its mouth is and become a bank that starts from equitable climate solutions, offering guarantees and hope to the people who now often suffer the consequences of large-scale infrastructure and agricultural projects. Then we will need a little more ambition than pride in achieved and expected profits. Money is still a means to an end, not an end in itself.

This op-ed was published originally in Dutch by Het Financieele Dagblad.