Letter from the ExCo of the Fund Manager

Dear reader,

2019 was a rough year for global development cooperation and climate action. The Madrid climate conference ended in an agreement to disagree and postpone a future consensus. Despite scientific reports that the window of opportunity for meaningful climate action is closing, nations have not been able to muster the strength to act as one community in charge of saving the global commons.

Against this backdrop of multilateral strain and rising systemic risks, the global community continued its efforts to attain the Sustainable Development Goals of the 2030-Agenda. Despite signs of progress, investments needed to overcome the USD 2.5 trillion financing gap are still lagging, particularly in fragile states, in climate adaptation and in the human development sectors such as health and education. At the time of publication of this report, these concerns are compounded by the COVID-19 pandemic in the first months of 2020. The expectation is that the world will face the worst recession since the Great Depression, due to the abrupt halt in economic activity in the last months. More than ever, there is a need for channels such as the FMO-managed state funds to play a counter-cyclical role and help address the global challenges of inequality and climate change.

With a growing world population and increasing disruption from extreme weather events, it is critical to increase agricultural capacity without exacerbating the effects on climate. This is the challenge that the Dutch government Building Prospects Fund embraces. Infrastructure and innovation can help less agriculturally developed regions and the world to retain access to jobs, food and products. The Fund supports the acceleration of private sector development by investing in sustainable agriculture value chains, infrastructure and forestry projects. The total portfolio currently reaches over 3 million people, and supports 822,559 jobs. In 2019, Building Prospects successfully reached and exceeded its EUR 60 million target, investing in 15 clients for a total amount of almost EUR 104 million.

This year, Building Prospects has ventured into pioneering sectors, such as aquaculture and the first renewable power plant in Djibouti. Projects can have high environmental and social risks, particularly in fragile states. In 2019, the situation in and around one of our most complex projects in DRC deteriorated. Consequently, Feronia, the company we invested in, encountered severe ESG challenges. FMO remains committed to tackling these issues in dialogue and partnership with civil society.

We thank all our stakeholders for their continuous support, including our clients and investors, the Dutch Ministry of Foreign Affairs, the NGOs that help us to improve and our colleagues for giving their best every day.

The Hague, 8 May 2020

On behalf of the Executive Committee

Fatoumata Bouaré, Chief Risk & Finance Officer

Linda Broekhuizen, Chief Investment Officer

Peter van Mierlo, Chief Executive Officer