ESG incentives

FMO continues to carry out the pilot project to encourage clients to implement ESG best practices through an incentives mechanism. As far as we know, we are the first development bank in the world to have developed a framework to offer a reduced interest rate to borrowers who meet ESG standards within a set timeframe. We term this pricing incentive a 'margin reduction incentive'. FMO works with third-party consultants who assess whether client agreements have been fulfilled.

This innovative lending approach, which reflects FMO's philosophy of partnering with our clients and offering concrete financial benefits for ESG compliance, was very well received in 2011, both by clients and DFIs. Following close review of ESG action targets via our Sustrack monitoring system, one of our clients - Banco Continental - qualified for this margin reduction incentive in 2011.

In 2012, we will evaluate the pilot on the margin reduction incentive and continue streamlining sustainability into our business ensuring our clients implement contractually-agreed ESG action plans.

To find out more about Banco Continental, please visit last year's report.