News / 4 June 2021

Welcoming step of FMO to phase out fossil fuels from their direct investments

FMO's new position statement on fossil fuel investments commits to ending new direct finance in the downstream and midstream coal and oil sectors, whilst still allowing for investments in gas-fired electricity generation under exceptional circumstances only. Both ENDS welcomes this development as a step in the right direction.

The Position Statement on Fossil Fuels in Direct Investments, published Tuesday June 1st 2021 forms part of FMO's wider Climate Action strategy and was was subject to a public consultation in 2020 in which Both ENDS participated.

In the context of the current climate crisis that we face, FMO's immediate ban on finance for new oil and gas production is a vital step. The allowance for investments in gas-fired power generation over the next five years, as well as for transmission infrastructure for new gas generation capacity, is not what we had hoped for. However, the inclusion of transition criteria that limit investments to LDC or LIC countries where no viable renewable alternatives exist, and require alignment with the objectives of the Paris Agreement, should make it hard for such investments to materialize.

Financial Intermediaries

One major omission from the position statement is FMO's Financial Intermediary (FI) portfolio, or its indirect financing. This relates to banks and other financial institutions that use FMO's finance to invest in their own portfolios. By not considering FIs, which form the largest part of their portfolio, FMO leaves itself exposed to providing continued support for the fossil fuel sector. We call on FMO to urgently address this gap so that it can truly pursue its stated aim of aligning its portfolio with the objectives of the Paris Agreement.

Equitable Climate Action

We hope that the commitments made in this position statement serve as a catalyst for broader shifts in FMO's Climate Action strategy. FMO should ensure that its investments in relevant sectors, including energy, agriculture and forestry, focus on building inclusive and resilient solutions that work for local communities. Diverting finance away from fossil fuels provides the perfect opportunity to do this, with viable alternatives such as distributed renewable energy already proven to be effective in this regard.

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