Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

FMO gives five-year window for gas power financing

European gas surges
A man fishes in front of a liquefied-natural-gas (LNG) tanker berthed at Tokyo Electric Power Co.'s Futtsu thermal power plant at night in Futtsu, Chiba Prefecture, Japan.

The Netherlands’ FMO has set out a new policy to move away from fossil fuel financing, although leaving open a small window of opportunity for African gas projects.

FMO issued a new position statement with a ban on direct investments in fossil fuels. It does, though, allow a five-year transition period for gas.

The entrepreneurial development bank said its next step was to limit the “indirect finance of fossil fuels”. For now, FMO’s indirect investments in fossil fuels – via banks or private equity funds – can continue.

FMO halted direct financing of coal projects in December 2016.

The bank has aligned its lending with the 1.5 degree Celsius pathway. While setting out its support of tackling the impact of climate change it has also committed to providing energy security at affordable levels.

FMO will not directly invest in upstream or midstream activities and will phase out direct investments in integrated mid- and downstream fossil fuel activity in power generation.

Over the next five years, it will finance gas and distributed power projects only where this is “critical” to safeguard energy security. After this period, it will not invest in gas-based power generation.

When FMO does invest in gas-fired power, it will publicly disclose how the project matches its transition criteria, it said.

It also set out plans to support the development of technology to shift to a low-carbon system. The bank noted the growing role of batteries and hydrogen as areas of interest.

Gas shift

For FMO to invest in gas-based power, the project must be in a country where energy access is challenged and the technology used provides the lowest possible amount of emissions. Combined cycle gas turbines (CCGTs) are the preferred option, it said.

For investments in distributed power, fossil fuels must provide less than 50% of the generation.

According to FMO’s annual report, energy accounted for 544,086 tonnes of greenhouse gases emitted in 2020, including scopes 1, 2 and 3. Financial institutions in FMO’s portfolio accounted for 892,690 tonnes, driven by scope 3 emissions.

FMO’s energy portfolio produced 50,000 GWh in 2020, up from 45,000 GWh in 2019. Renewables accounted for 77% of this amount. Gas-fired power plants accounted for most of the remaining 23%.

The International Energy Agency’s (IEA) pathway to 1.5 degrees Celsius allows gas production to increase in the near term. By 2030, though, it is in decline and demand falls by 55% from 2020 to 2050.

The Both Ends NGO welcomed FMO’s commitment but called for more progress.

“It is vital that FMO puts an immediate ban on finance for new oil and gas production. 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,” said the group’s Chris Chancellor.

“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 materialise.

“There still remains much room for improvement. The most pressing concern is that this position statement does not apply to FMO’s indirect investments, which account for the largest share of its portfolio. We call on FMO to urgently address this major gap.”

Flow chart showing what FMO will finance

Updated on June 3 at 12:12 pm with comment from Both Ends’ Chancellor. 

Recommended for you

Tags

More from Energy Voice

Latest Posts