If you would hear about the combination of these topics: CSR standards, Foreign Investments, Civil Servants and Developing Countries, would you think the combination would end in Profit?
FMO- a Foreign emerging Markets investment Bank
FMO, the Dutch Development Bank makes it happen: they finance middle sized companies in developing countries through a thorough due diligence process. In this process they have to adhere to the same OECD guidelines and UN Global Compact Guidelines as Multinationals on Sustainable business Development. The Bank is 50% funded by the Dutch Government, half funded through other, Commercial banks from the Netherlands. 350 Civil Servants work in this Bank, and 342 are responsible for the foreign companies requests for Finance, the eight others are responsible for the start up loans for Dutch Companies who want to build up a good business in a developing Country.
The rich have the wrong of Image doing business in developing countries
And one of the eight of the FMO came to Beijing this week, to present the business case of the success of the FMO. As I said, I’d be very happy for a 6% profit from a half state owned, and fully state run development bank (and all the tax payers in the Netherlands must be delighted to hear this too). I wish they could ‘brand’ their success more: we have the impression in Western Countries and in China that investing in the developing world has something to do with small social enterprises who work on making rough woolen handbags in ugly colors and candlesticks made of recycled material to buy and give to your mother- in-law. We do not associate responsible investing in developing countries with investing in midsize companies in the Agro-Food or telecom sector, but this is happening, and its making a good profit.
Back to the presentation in China by FMO: here in China the FMO has expertise in the Agro-Food sector, and gave as an example a Breeding Pig Farm company that had the ambition to expand responsibly in China. The company did not have a CSR policy yet, but for FMO in the Due Diligence process with the companies they deal with, they look if a company is willing and capable of obtaining this and growing in it.
Responsible investments with a reliable and decent profit- its possible
And I think this is most interesting point: investment banks and investment companies do not have to look at small social enterprises alone to obtain sustainable investment opportunities. Small enterprises are too small for the bigger banks anyway, and will always be in the margin of an impact to the whole investment portfolio (and consequent carbon- footprint of the total investments made).But Midsize companies in the developing world (in emerging markets!) can be very interesting to invest in, and then to require the OECD CSR Guidelines from these companies make a great balance: the developing country profits from a sustainable business sector, that does good for them both in economically and community wise, and the Western tax payers get the money back from investing in Developing Countries.And note: with 6% profit, and that’s a whole lot better than investing in sub- prime mortgages in the US…
The Fund Emerging Markets (FOM) is a joint initiative of the Dutch Ministry of Economic Affairs and FMO. Main goal is to promote economic development in Emerging Markets by stimulating investments by Dutch companies in these countries. Financial markets in emerging market economies are often inefficient. Together with higher risks, this makes it difficult for joint ventures & full subsidiaries of Dutch companies to raise capital. By financing companies that would otherwise not have access to finance in those markets, FOM supports Dutch companies in their international strategy and maximizes the development impact of these investments.
FOM offers these joint ventures/subsidiaries a direct opportunity to strengthen their financial structure. This can be equity, a loan or a guarantee. The form is tailored to the specific finance needs of the local enterprise. One of the conditions of FOM finance is that the Dutch sponsor contributes to strengthening the financial structure of the local enterprise and is prepared and able to provide certain guarantees. The finance amounts to max. €10 million. The maturity can range from three to 12 years and often includes a grace period.