Groups react with dismay to FMO’s position statement on Financial Intermediaries, pointing to outstanding human rights and climate concerns
On October 13th 2022, FMO published the final version of its Position Statement on Impact and ESG for Financial Intermediaries (FI statement). As civil society groups which have engaged with FMO on this topic for more than four years, we are extremely disappointed with the result. In the statement, FMO does not show sufficient commitment to ensuring its investments into financial intermediaries – which represent the bank's largest investment sector* – do not violate human rights or contribute to environmental harms.
Much higher risk
How FMO invests its funds in FIs – third parties such as private equity funds or commercial banks, which then on-lend to projects – matters. Not only does this form of financing make up around 40% of FMO's total portfolio*, but it is a much higher risk financing model than direct lending. Investments of FMO's FI clients have been linked to human rights abuses, environmental destruction, and harms to indigenous peoples among other impacts**. For this reason, civil society groups – including Both ENDS, Oxfam Novib, SOMO and Recourse – engaged with FMO over a long period to advise on how to reduce risks in FI lending.
Following years of advocacy on the topic, these groups provided substantial recommendations on a preliminary draft of the FI Statement and on the draft statement posted for the official consultation process in May 2022. Both times FMO failed to include recommendations by civil society experts. Their concerns centre around the human rights violations through and the environmental and climate impacts of FI investments, as well as the opacity surrounding these investments. This lack of transparency indeed prevents communities impacted by high-risk projects from knowing who is behind investments and what protections they have. This denies them their right to information, and consequently their access to remedy for adverse impacts is significantly limited.
Also, through its financial intermediaries, FMO is exposed to investments in the fossil fuel sector in fragile countries (i.e. via Africa Finance Corporation). We are extremely concerned by the bank's apparent unwillingness to address climate-related responsibilities throughout its FIs portfolio, as FMO's Position Statement on Phasing out Fossil Fuels*** still applies only to its direct investments. The current FI Statement does not guarantee the bank will indeed stop investing in the fossil fuel industry.
"The FMO's FI Statement is a big let-down and demonstrates a worrying lack of regard not only for the groups that have engaged with FMO for years to try to improve its human rights and climate record, but also for the communities on the receiving end of FI projects which go wrong. FMO has failed to ensure its FI investments will do no harm," said Anne de Jonghe of Both ENDS.
"Too many communities – from Guatemala to Liberia – have suffered from FMO 'outsourcing' development to FI clients. The FI position statement is a missed opportunity to right these wrongs and ensure FMO will avoid similar disasters in future," said Ruben De Winne of Oxfam Novib.
"FMO has failed to ensure its indirect investments live up to the commitments it made on fossil fuels in direct investing. This makes no sense – why should different rules apply to its indirect investing, which makes up more than a third of its portfolio? The Dutch government should question this anomaly and hold FMO to account," said Kate Geary, Co-Director of campaign group Recourse.
* See FMO’s 2021 Annual Report.
** For example, FMO invested in the Santa Rita and Barillas hydropower projects in Guatemala via financial intermediaries LRIF and CIFI respectively, which were found by the independent accountability mechanism of the International Finance Corporation to have violated safeguards on consultation with indigenous peoples, provoking repression and violence. See: https://www.cao-ombudsman.org/cases/guatemala-cifi-01-hidro-santa-cruz and https://www.cao-ombudsman.org/cases/guatemala-real-lrif-01coban. FMO also invested in FirstRand bank, a South African commercial bank, which financed a gold mine project in Liberia. The project caused several serious issues for local communities (e.g. physical and economic displacement without adequate compensation, loss of income, destruction of agricultural lands and threats to food security, and health and safety concerns). See https://www.inclusivedevelopment.net/cases/liberia-holding-avesoro-resources-to-its-community-development-promises/.
*** Available on https://www.fmo.nl/policies-and-position-statements.
Read more about this subject
News / 23 December 2021
2022 is the year for FMO to make good on its promises and provide financial support only to sustainable development
2021 was a turbulent year for Dutch development bank FMO, to say the least. The bank has been under fire for many years for investments linked to human rights violations and suspected corruption. But in the past year, the Dutch press and media have reported on one new development after the other in ongoing cases involving FMO. Below we give a short summary of these cases and call on FMO to make the promised improvements in 2022.
Indigenous Hondurans are resisting the construction of the Agua Zarca hydrodam. Their fight has cost several lives, including that of Berta Cáceres. After considerable public pressure, Dutch development bank FMO withdrew from the project.
Development banks should comply with strict environmental and human rights rules to ensure that their projects benefit and do not harm the poorest groups. Both ENDS monitors the banks to make sure they do.
The Barro Blanco dam project in Panama, which has Dutch financial support, is causing indigenous lands to disappear under water. Both ENDS is working to protect the rights of indigenous communities living near the dam.
News / 17 May 2018
Today, three representatives of the Honduran indigenous people's organisation COPINH, together with the family of environmental activist Berta Cáceres, who was murdered in March 2016, announced that they are preparing to press charges against the Dutch development bank FMO. COPINH accuses the FMO of complicity in human rights violations in connection with the controversial Agua Zarca hydroelectric project.
News / 8 November 2021
Both ENDS and SOMO condemn violence against Indigenous community near the Barro Blanco dam in Panama
Members of the Indigenous Ngäbe Buglé people were brutally attacked by Panamanian police on Friday 29 October 2021 from a parcel of private land near the FMO-financed Barro Blanco hydroelectric dam. The victims, all members of the anti-dam movement M22, had peacefully occupied the land after their protest camp got dismantled in July this year.
News / 27 July 2021
In April 2021, the Dutch development bank FMO announced that it is no longer involved in the Barro Blanco project, a controversial dam in Panama. GENISA, the Panamanian company that built the dam, unexpectedly paid off the multi-million dollar loan early. The question is to what extent, now that the bank is no longer actively financing the project, FMO can still be held responsible for the damage and suffering that was caused when this was still the case.
External link / 31 May 2018
Sometimes things must go terribly wrong before big players start to move. In March 2016, Honduran activist Berta Cáceres was murdered because of her leading role in the protests against the Agua Zarca hydro dam, co-financed by the Dutch FMO. One and a half year later, FMO changed their policies to prevent such events in the future.
Large-scale infrastructural projects have detrimental effects on local people and the environment, while their benefits are felt elsewhere. Both ENDS is working to ensure that local people have a greater say in decision-making and is investigating the way these projects are funded.
Press release / 5 October 2022
Independent research confirms FMO’s responsibility for destruction caused by Barro Blanco dam, recommends compensation
Utrecht, 5 October 2022 - Dutch development bank FMO bears responsibility for the destruction of livelihoods, economic losses and environmental damage caused by the construction of the Barro Blanco dam in Panama, according to a report by the bank's Independent Complaints Mechanism (ICM). Indigenous communities affected by the dam are pleased that their complaints have been confirmed and reiterate their call for apologies and compensation.
News / 23 July 2021
The million-dollar loan that the Dutch development bank FMO provided to project developers of Honduran company DESA for the construction of the controversial Agua Zarca dam project in Honduras, may be related to gross corruption and malpractice. This is concluded in an article published today in the Dutch news paper Financieel Dagblad, based on information provided by COPINH, the indigenous organisation that has been opposing the construction of the dam for years. Several members of the organisation, including its leader Berta Cáceres, were murdered. DESA director David Castillo has recently been convicted of being involved in the assassination of Cáceres in 2016.
News / 7 February 2017
Last week, Global Witness published 'Honduras: the deadliest place to defend the planet'. This shocking report clearly shows the worrying situation of human rights in Honduras and backs the demand of Both ENDS and partner COPINH: FMO must divest from the Agua Zarca dam.
News / 1 December 2018
On Thursday, November 29, seven suspects of the murder of Berta Cáceres (in March 2016) were found guilty. Members of the indigenous human rights organisation COPINH, of which Cáceres was the leader, and close relatives of Cáceres herself see the ruling as the first step towards justice for her murder and the recognition that the company DESA is co-responsible for this. They also point out, however, that the process was permeated with corruption, intimidation and other abuses from the very beginning, and that the masterminds behind the murder are still walking around freely.
News / 6 March 2018
On Friday, March 2, the director of DESA, David Castillo, was arrested in Honduras on suspicion of involvement in the murder of Berta Cáceres, exactly 2 years ago. The Honduran government refused for a long time to not only detect the actual murderers, but also the intellectual authors of the murder of Cáceres.
News / 6 July 2017
Both ENDS and SOMO welcome the announcement done today by the Dutch and Finnish development banks, FMO and FinnFund, to exit the controversial Agua Zarca hydroelectric project in Honduras. Conflict about the project has led to violence in the region, including the murder of three leaders who opposed the project. In March 2016, renowned human rights defender Berta Caceres was murdered for opposing this project in indigenous Lenca territory.
News / 16 December 2019
Earlier this month, the seven men found guilty of the murder of Berta Cáceres were sentenced to jail for periods between 30 and 50 years. The court confirmed its opinion that Berta Cáceres was murdered for her role in defending the rights of the indigenous Lenca communities.
News / 2 March 2017
Today, it is exactly one year ago that Berta Cáceres was brutally murdered in her home in Honduras. Cáceres was a globally known human rights defender and coordinator of the indigenous Lenca organisation COPINH. The murder of Berta is closely related to her protest against the Agua Zarca dam, a hydroelectric project financed partially by the Dutch development bank FMO.
News / 2 March 2021
Today it is 5 years ago that Berta Cáceres was shot in haar home in La Esperanza, Honduras, for defending the rights of indigenous people. The leader of indigenous organisation COPINH resisted the Agua-Zarca hydropower dam that was planned to be build in indigenous territory. The actual murderers have been convicted, but not so the intellectual authors of the murders.
News / 28 June 2022
On Tuesday 28 June, the Honduran organisation COPINH and the Global Justice Association filed a complaint with the public prosecutor in the Netherlands against Dutch development bank FMO. For COPINH, this is part of their continued efforts to bring to justice those involved in the murder of their leader Berta Cáceres. FMO financed the Agua Zarca project in Honduras in 2014. The new complaint is based on documents indicating that FMO's money has been used improperly.
News / 10 July 2020
Dutch development bank FMO is considering investing in the controversial Ficohsa bank in Honduras. The bank has close ties with the elite in Honduras, which holds considerable power in politics, the (para)military and the business community. Last Wednesday, a number of Honduran organisations, including the indigenous organisation COPINH – whose leader Berta Cáceres was murdered in 2016 – sent a letter to the FMO management. The letter, signed by forty organisations including Both ENDS, calls on FMO not to do business with this bank.