Egypt introduces novel sustainable development investment funds

25 / 08 / 2023

By Marwa Nassar - -

The Egyptian cabinet’s recent amendments to the Capital Market Law introduced sustainable development investment funds – the first of its kind in Egypt – to encourage green investments in addition to embracing social and environmental dimensions in projects.

Under the amendment, the board of directors of the Financial Regulatory Authority (FRA) will issue work regulations of these funds, investment rates, and data that must be included in the fund’s statute, subscription prospectus, or information memorandum, FRA said in a statement.

Egypt has been exerting painstaking efforts to boost green investments within the framework of its efforts to realize the Sustainable Development Goals (SDGs) under Egypt Vision 2030.

Go Green initiative:

Allowing the establishment of sustainable development investment funds serves the presidential initiative of “Go Green” which was launched as part of the National Sustainable Development Strategy “Egypt 2030”.

The initiative aims to change behaviors, spread environmental awareness and urge citizens -young people in particular – to protect the environment, natural resources, natural protectorates, and marine life to maintain sustainability.

It also seeks to disseminate awareness about the importance of afforestation, waste recycling, food and energy rationalization, air pollution reduction and plastic use abatement.

Go Green Initiative’s main goal is to maintain the balance of ecosystems and create a greater window of opportunities for economic and social development.

Within this context, the Central Bank of Egypt (CBE) has issued the Guiding Principles on Sustainable Finance to set the general framework for sustainable finance across Egyptian banks to incorporate the Environmental, Social, and Governance (ESG) elements into the processes and decisions related to credit advancement.

The Central Bank of Egypt (CBE) has also issued binding sustainable finance regulations alongside several initiatives aimed at achieving economic development and promoting sustainable finance by making specific amounts available for banks to use in granting credit facilities to their customers under the auspices of these initiatives at low interest rates. This type of financing plays a key role in developing the national economy and reducing unemployment rates by providing job opportunities for the youth. It takes into account the social components of sustainable finance, while focusing on sectors that consider the environmental component, such as the new and renewable energy sector.

Moving ahead to achieve sustainable development through “Go Green” initiative, Egypt’s Financial Regulatory Authority (FRA) set three types of green economy projects; venture aiming to cut greenhouse emissions, projects aiming to adapt to climate change, and project aiming to maintain biodiversity.

The FRA has also prepared green bonds guidelines in Egypt in order to promote the emergence of the Green Bonds market.

Green Bonds:

In 2020, Egypt issued the first sovereign green bonds in the Middle East and Africa at London Stock Exchange (LSE) at a total value of $ 750 million.

In 2021, the Commercial Investment Bank (CIB) became the first private sector issuer of green bonds in Egypt. The private placement is valued at $100 million in non-callable fixed rate bonds. The tenor of the issue is five years and proceeds will be used to fund a portfolio of green loans extended by CIB to its corporate as well as medium- and small-enterprise clients in addition to funding CIB’s green building capital expenditure for up to 20% of the proceeds. International Finance Corporation (IFC) will subscribe to the full value of the issue.

The bond proceeds will further be directed to various categories of climate supporting initiatives, including green buildings, energy efficiency, renewable energy, water and wastewater management and clean transportation.