الهيئة العامة للرقابة المالية

Dr. Mohamed Farid , FRA Chairman:

• Arab African International Bank’s Sustainability Bonds: A Pioneering Initiative Integrating Banking and Non-Bank Sectors to Drive Sustainable Development and Climate Action
• Given the unequal historical contribution of different nations to climate change, it is unjust to impose equal obligations on all countries. Developed countries should provide financial assistance to developing countries to help them mitigate and adapt to the impacts of climate change

Dr. Mohamed Farid, FRA’s Chairman joined the launch of Arab African International Bank’s $500 million sustainability bond, a joint initiative with the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD) and the British International Investment (BII). This groundbreaking deal will drive efforts to build a sustainable green economy by integrating environmental, social, and economic considerations. It will also provide crucial support to small and medium-sized enterprises, fostering their growth and development.

The event was attended by Hassan Abdalla, Governor of the Central Bank of Egypt (CBE), Dr. Rania Al-Mashat, Minister of Planning and Economic Development and International Cooperation, Sérgio Pimenta , IFC’s Regional Vice President for Africa, and Tamer Waheed, Vice Chairman & Managing Director, Arab African International Bank.

The International Finance Corporation’s $605 million investment in Egypt aims to accelerate economic development by addressing critical sectors. This includes supporting climate-friendly initiatives, promoting sustainable tourism, and expanding financing opportunities for micro, small, and medium-sized enterprises. A key component of this investment is a $300 million commitment to the Arab African International Bank’s sustainability bond, a pioneering move that sets a new benchmark for sustainable finance in Egypt and Africa.

In addition to the International Finance Corporation, the European Bank for Reconstruction and Development (EBRD) and the British International Investment (BII) have joined forces to invest $100 million each in the bond. This investment will significantly contribute to green initiatives, with 75% of the proceeds allocated to projects such as improving industrial energy efficiency, promoting small-scale renewable energy, and building green infrastructure. The remaining 25% will focus on social impact, supporting inclusive finance and empowering micro, small, and medium-sized enterprises.

Dr. Farid emphasized the significance of issuing sustainability bonds in alignment with the commitments outlined in the Paris Agreement. He highlighted that this substantial issuance of sustainability bonds positions Egypt as a leader in the region, setting a new benchmark for financial institutions. He further noted that the Egyptian government’s pioneering issuance of the first sovereign green bond in the Middle East, worth $750 million in 2020, demonstrates its commitment to transitioning to a low-carbon green economy and protecting ecosystems. This aligns with Egypt’s adherence to the Paris Agreement and the National Sustainable Development Agenda “Egypt Vision 2030.” Additionally, Dr. Farid underscored the contributions of the non-bank financial sector, highlighting that three institutions under FRA’s supervision have successfully issued social bonds.

He emphasized that the issuance of these bonds represents a pivotal moment, signifying the collective efforts of the non-bank financial sector and regulatory authorities in both the non-bank and banking sectors. This signals a future where Egypt, Africa, and the Middle East move towards a sustainable, low-carbon economy.

FRA’s Chairman emphasized the remarkable surge in sustainability bonds in Africa, highlighting a staggering 412% increase in the first half of this year compared to the previous year. The total value of these bonds issued in Africa has reached an impressive $6.6 billion this year, up from $1.3 billion in the prior year.

Dr. Farid reviewed the efforts that began with the Egyptian Exchange launching a sustainability index in collaboration with Standard & Poor’s in 2010 to measure the commitment of listed companies to sustainability standards. He highlighted the Authority’s mandate for listed companies under its supervision to submit disclosure reports on governance, environmental, and social dimensions, taking into account the relative size of the companies.

FRA Chairman underscored the critical role of collaboration among all financial sector stakeholders, including banks and non-bank financial institutions, in driving the transition to a low-carbon economy. He emphasized the need to extend sustainable finance initiatives to medium-sized enterprises and all relevant stakeholders. Additionally, he called for a concerted effort to integrate the informal economy, small and medium-sized enterprises into sustainability and green investment initiatives and to support their efforts to decarbonize their investments.

Dr. Farid emphasized that countries around the world are not equally responsible for climate pollution. Developed countries, with their larger economies, have a significantly greater carbon footprint. He stressed the inequity of imposing equal obligations on all nations, given that developing countries contribute far less to climate change. He called for the provision of affordable financing to low-emission developing countries to implement adaptation and mitigation projects that support achieving carbon neutrality.

Dr. Farid emphasized that FRA took the initiative to propose amendments to the Capital Market regulations in September 2022. These amendments introduced specific categories for various types of bonds, including green bonds and sustainability bonds, providing detailed descriptions and criteria for each to foster a comprehensive approach to sustainability, encompassing all relevant aspects beyond environmental and carbon market considerations.

On the other hand, Dr. Farid underscored the pivotal role of robust regulatory frameworks in fostering sustainable development. He explained that well-designed regulations are essential for organizing and supporting market participants, taking into consideration the international best practices. He further emphasized the collective responsibility of all stakeholders to address the urgent challenges posed by climate change, particularly in vulnerable regions like Africa and emerging markets. He called for significant investment in these regions, which are highly vulnerable to the adverse impacts of climate change.

Dr. Rania El-Mashat , Minister of Planning, Economic Development and International Cooperation highlighted the critical role of these investments in accelerating Egypt’s economic growth and development. She stressed on Egypt’s commitment to strengthening public-private partnerships, citing the International Finance Corporation as a key ally in this endeavor. The newly announced investments, she stated, align with the government’s vision of achieving inclusive and sustainable economic growth while addressing climate change challenges.  She also emphasizes the pivotal role of the private sector in achieving a sustainable and more resilient future.