Environment section writer Ariel Dodds talks with Charissa Bosma of the Dutch Development Bank on how to drive a sustainable impact in banking.
Ariel Dodds: What is your current role at the Dutch Entrepreneurial Development Bank?
Charissa Bosma: My name is Charissa Bosma. I’ve been at FMO (Dutch Development Bank) for about eight years now. I ended up there relatively soon after graduating. In my current role, I work in our Impact Department, advising our clients and our internal deal teams on green topics. At FMO, ‘green’ is a bucket category of climate mitigation, climate adaptation, pollution prevention, biodiversity, circular economy, and water. In my current role, I aim to discuss with our existing and potential clients how they can become greener. I also work with our internal deal teams to incentivize structuring their transactions so that they are more impactful.
AD: What does your day-to-day work look like, and what are some of the most exciting projects you’ve worked on?
CB: There are three elements to my day-to-day work. First, I am involved in some of the more strategic corporate work – providing content input. For example, providing input on our adaptation and resilience strategy. The input is based on my experience with the topic and what I see with the clients. It’s translating what I see happening on the ground and feeding that into our corporate strategy and our corporate activities. The second element, I work with our internal teams. I partially incentivize them to do green transactions and knowledge building. The transaction teams are more commercial, and their speciality is client interaction. Because of this, they call me in when they want to know more about how a client could become more adaptive to the impacts of climate change. This could be on anything, such as reducing a client’s pollution or greenhouse gases. The third element is about the client. It’s a lot about knowledge building with the client about what the next steps could be. To give an example that we are often working with, say we have a company in Vietnam. This company is a factory that wants to become more efficient and reduce its emissions. We want to figure out what measures will be effective and efficient for them. You could start by thinking about putting solar panels on the roof – just a basic example, but those kinds of discussions would be something that we have with the client, and then it would be up to the transaction team to see if that’s something they could fund.
AD: Could you share your career path and what led you to work at the Dutch Development Bank?
CB: As a student, I studied Economics and Business in the Netherlands. I finished my master’s there, but I was a bit frustrated with what I had learned. I had studied financial economics, so I was prepared to go work for a bank, but that path didn’t fully satisfy me. I questioned why we were only talking about profit.
I decided to do another master’s in environmental sustainability at the University of Edinburgh. When I finished that, I wanted to do something that combined both financial economics and sustainability. I wanted to work with something related to finance but in a more sustainable way than working for a big commercial bank or investment fund. I went to work for a research company for a year and researched the sustainability actions of banks. I looked at the investments of banks and assessed what proportion was in oil and gas. After a year, I felt far from the action. Instead of researching it, I wanted to be involved with some of those projects. That’s when I found FMO. I applied, was hired as an intern, and eventually stayed on and got a position in one of the impact funds (which work to quantify how FMO’s investments are impacting communities). While I started in a slightly different department, it gave me good insight into the work being done.
AD: Can you briefly explain the Dutch Development Bank’s mission and how it is implemented?
CB: Many countries have development banks; in the UK it’s the BII (British International Investment). FMO supports private sector companies in emerging markets and developing economies. We work in Africa, Asia, Latin America, and the Middle East. FMO provides investments to private sector companies through loans, equity, and sometimes grants. We do that in three different sectors: an energy sector, which is focused on renewable energy; an agriculture sector, which is focused on food, water, and forestry; and a financial institution sector. We invest in other banks and financial intermediaries, such as microfinance institutions. The microfinance institutions then pass our money to smallholders or microentrepreneurs.
AD: What are some examples of impacts the investments have made on the communities it serves?
CB: Impact measurement is always challenging and is dependent on the sector. In the renewable energy sector, electrification has a big impact. We work on some large-scale renewable energy generation projects, such as big solar plants. We also work with companies that provide off-grid electricity, where the impact is a bit different. With off-grid electricity, you can reach populations in very rural areas. In the agricultural sector, we invest in big agricultural companies, and we work with smallholders. The agricultural sector is under stress in many countries – climate-related stress, for instance – and we work with smallholders to provide them with the right tools, knowledge, and support to tackle these challenges. This can be through training and advice on types of seeds for example – potentially using more drought-resilient seeds when water scarcity is increasing in the region. Through our investments, we aim to reach more disadvantaged populations, as well as more rural populations, such as small-holder farmers and poorer families. Microfinance has been under criticism, so it depends on who you work with. It’s up to FMO to assess ‘impact-minded microfinance institutions’ versus those that simply aim to make money at the expense of those who do not have access to finance because of a lack of collateral.
I have been on investment-related trips to see the impact. Recently, I was in a rural community in Myanmar where I had conversations with a few women who received a loan from a microfinance institution that we funded. One woman had managed to considerably build up her shop, and she explained how the loan helped allow her children to access education, helping her stay focused on her business. That kind of impact is nice to see firsthand.
AD: Given the global shift toward green energy, what role does the bank play in supporting renewable energy projects, especially in developing countries?
CB: Our financial institution sector is our biggest, but the agricultural sector and energy sector investments also make up a substantial part of our portfolio. Renewable energy projects tend to be quite large – they tend to be a project finance market. What we’re noticing is renewable energy has become increasingly popular for private sector investors. Over the previous five to ten years, it was seen as a high-risk market, but it seems to have proven itself. There are more interested investors going into this market, so FMO’s role is unsure. FMO is aiming to be additional to the market, and we aim to provide funding to unfunded companies, so our projects are shifting toward newer technologies. We are looking into translation and distribution on the climate adaptation side. The investment team is currently looking into desalination projects, which will likely be a large financial endeavour.
AD: Are there recent innovations or technologies that the bank is excited about in the field of sustainable finance or environmental impact?
CB: For forestry and biodiversity conservation, remote sensing satellite technologies are exciting. We don’t use them a lot yet, but there are many opportunities present. For instance, they could be used for carbon and biodiversity credits. For the financial sector, blended finance will be an impactful innovation. Blended finance involves combining public and private funding. At FMO, we have several blended finance funds – we have received some funding from the Dutch government, and we pair that with private funding allowing the bank to transfer some risk from private to public parties, increasing the total amount invested. Especially for high-risk new technologies, we have a public party (e.g. the Government or European Commission) that put in money, taking away some of the risks, and then we ask private sector investors to come in. It isn’t a full-on innovation, but it’s an innovative mechanism to steer funding towards higher-risk projects.
AD: Because most of our readers are students who will soon enter the job market, what skills or qualities do you believe are most important for someone interested in development banking or international finance?
CB: In any organization, you need diverse sets of qualities. Having a general interest in the concept of impact is important. That could be the topic of ‘green’, climate change, or reducing inequality. It also depends on what type of role you would want to have. If you enjoy undertaking transactions and working with investment and companies, then people skills are handy. Cultural sensitivity is also important because we visit many different countries and work with various clients. Understanding the cultural background and the climate of a country can help connect with the client, as well as considering the challenges that they have, and the opportunities that are there. Financial skills are also handy. There are plenty of aptitudes you learn on the job, but it is good to be aware of the basic concepts.
AD: What advice would you give to students wanting to enter the field of development finance?
CB: Talk to people. It’s helpful to talk to people within the organizations you are interested in because you can get a feeling for what the company culture is like and what type of work they do. Asking what someone does daily is a good question because it allows you to understand what they do. Whether it’s sitting behind a screen and making reports the whole day, talking to clients, or something in between. If you create a network, it can help you get into an organization. While it doesn’t guarantee you a job, it certainly helps.
I recommend reading up on companies and looking into what’s out there. Everybody knows the ‘big banks’, but there are a lot of very interesting organizations that you won’t be familiar with. I’m not saying that people can’t have a nice career at those big banks, but there are a lot of companies that do more impactful work and are most likely more ethical to work for.
Starting your career with an idea of what field you want to contribute to is important. In the end, working is a big-time commitment. You are spending a big part of your week committed to one job, so it’s better to contribute to something that you find important.
AD: Where do you see the field of development banking going in the next decade? How do you think students can prepare to be a part of that future?
CB: Compared to five or ten years ago, I see that there are a lot more investors going into the impact market. Many non-development banks are going into developing markets as well as emerging markets. There are a lot of pension funds now funnelling part of their money toward green topics. The idea of what a development bank is has shifted, whilst what a regular bank is not delineated.
My hope for development banks is to continue being at the forefront of sustainability. The renewable energy market is becoming saturated, so moving projects to where there isn’t a lot of renewable energy, like developing countries, is necessary. Development banks can keep on playing a relevant role as long as they stay ahead. Finding markets where the development banks are necessary, especially in less developed countries, is imperative.
The St Andrews Economist would like to warmly thank Charissa Bosma for sitting down with us. The St Andrews Economist is the official student-run publication of the St Andrews Economics Society. The above content has been edited for clarity.
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