الهيئة العامة للرقابة المالية

Dr. Mohamed Farid – FRA Chairman:

• Addressing climate change is no longer a luxury; it demands a united effort from state institutions to manage and mitigate its potential risks.
• FRA is developing innovative financial instruments to help entities execute sustainable projects that prioritize environmental considerations.
• FRA has amended the Executive Regulations of the Capital Market Law, introducing a comprehensive list of sustainability bonds to diversify financing sources.
• Without access to financing, sustainable projects will unfortunately remain theoretical concepts and a distant aspiration.
• The Voluntary Carbon Market aims to strengthen efforts and accelerate the deployment of climate finance for carbon credits initiatives.
• It is crucial to enhance public understanding of carbon credits and streamline the process for issuing and trading verified carbon credits.
• Regulatory bodies play a pivotal role in cultivating a conducive environment that actively fosters a substantial increase in private sector green financing.
• FRA is developing specialized insurance products to address risks in carbon certificate issuance and trading.

Dr. Mohamed Farid, FRA Chairman delivered the keynote speech at Climate Finance Forum. This event, a collaborative effort between the Ministry of Environment and Estedama – a platform designed to contribute to sustainable social and economic growth – was aptly themed: “Africa Grows Green”.

The forum’s sessions thoroughly examined financing obstacles to achieve a just and inclusive green transition in Africa, highlighting the critical importance of the private sector and innovative sustainable finance tools. It attracted a distinguished lineup of attendees, including Lieutenant General Eng. Kamel El-Wazir, Deputy Prime Minister for Industrial Development and Minister of Industry and Transport; Dr. Yasmine Fouad, Minister of Environment; Ahmed Kouchouk, Minister of Finance. In addition to Tarek El Khouly, Deputy Governor of the CBE and high-level representatives from the Ministries of Foreign Affairs, Planning and Economic Development, and International Cooperation.

During his speech, Dr. Farid emphasized the forum’s critical timing amid significant development challenges, particularly in financing a fair and comprehensive green shift. He asserted that tackling climate change is no longer a luxury but an urgent necessity, demanding a united front from state institutions to mitigate its escalating risks. He further highlighted that climate change is not a distant threat; it is a rapidly intensifying reality.

FRA Chairman concluded by emphasizing the enormous potential to reshape African economies, direct investment toward impactful climate initiatives, and empower the private sector to lead the transition to a sustainable future. He affirmed the Authority’s ongoing efforts to develop innovative financial instruments. These tools are designed to empower economic entities in implementing sustainable projects that prioritize environmental considerations. Dr. Farid highlighted the recently launched (August 2024) regulated and supervised Voluntary Carbon Market as a crucial component for reducing carbon emissions. He noted its potential to attract concessional climate financing from international institutions for projects focused on emission reduction.

Moreover, he emphasized that without easier access to Finance, sustainable projects will remain merely theoretical—a challenging dream to achieve.  Dr. Farid pointed out that the African continent faces a staggering annual climate finance gap exceeding $100 billion, according to the African Development Bank. While acknowledging the importance of government finance, he stressed its insufficiency, citing that the private sector’s contribution to climate finance flows in Africa is currently only 14%, a stark contrast to the global average of 49%.

Additionally, he explained that this substantial gap does not reflect a lack of private sector interest. Instead, its roots lie in factors like perceived risks, insufficient awareness, underdeveloped market readiness and the need for stronger regulatory support. He therefore underscored the essential function of regulatory authorities, including the Financial Regulatory Authority, in addressing these deficiencies and fostering an empowering ecosystem.

FRA Chairman highlighted the Authority’s early foresight regarding the importance of green finance tools. This proactive stance led FRA to issue Egypt’s inaugural regulatory framework for green bonds in 2019. This framework successfully catalyzed numerous and diverse bond issuances, seeing significant participation from various development institutions and investors.

FRA subsequently expanded this framework to encompass sustainability bonds. They achieved this by amending the Capital Market Law’s Executive Regulations to include all types of sustainable bonds, which empowered many entities to issue sustainability sukuk and bonds. Further amendments were introduced to incorporate green investment funds, thereby establishing a truly comprehensive regulatory system. This strategic move positions Egypt among the first African countries to adopt these pioneering financial instruments, which uniquely link funding terms to measurable environmental or social objectives. To date, this initiative has yielded five successful issuances, totaling EGP 11.56 billion in local currency and $599,000 in USD-denominated issuances.

Dr. Farid proudly announced FRA’s establishment of Egypt and Africa’s first regulated and supervised Voluntary Carbon Market in August 2024. This landmark launch, attended by six ministers, marks a pivotal moment in a journey that began with amendments to the Capital Market Law’s Executive Regulations, officially recognizing carbon Credits as financial instruments. A dedicated supervisory and oversight committee was formed, which has since accredited three verification and validation bodies: two local and one foreign.

He underscored FRA’s strong commitment to activate carbon credits trading market. This market is crucial for supporting Egypt’s journey toward achieving carbon neutrality, a paramount global objective. This drive is essential for ensuring a habitable planet by mitigating the severe negative impacts of rising global temperatures caused by carbon emissions that, in turn, lead to threats like fires and floods that endanger business operations.

The foundation for Egypt and Africa’s pioneering Voluntary Carbon Market was laid by a Prime Ministerial decree. This decree amended specific provisions of Capital Market Law No. 95 of 1992, formally recognizing carbon credits as financial instruments. It also paved the way for the establishment of a trading platform within the stock exchange and the creation of a supervisory committee, all based on FRA Board of Directors’ proposal. Following this, FRA took the lead in forming the first Carbon Credit Regulatory Committee (CCRC)chaired by FRA Chairman, its membership includes representatives from FRA, Ministry of Environment, Stock Exchange and experts in carbon markets.

FRA then issued listing and delisting rules for carbon credits on Egyptian exchanges, alongside accreditation standards for local voluntary carbon registries. These registries serve as centralized electronic storage, maintaining comprehensive records for the issuance, registration, and tracking of ownership transfers for carbon credits. These carbon credits are generated from verified reduction projects, adhering to methodologies set by standard-setting bodies. In parallel, FRA approved trading and settlement rules for carbon credits on Egyptian exchanges after extensive consultations and coordination.

FRA Chairman noted that Carbon Credit Regulatory Committee (CCRC) has already approved the registration of several projects, sourced from India, Oman, Bangladesh, and Egypt, into its carbon emission reduction database.

He clarified that carbon credits are issued for investments directly contributing to carbon emission reduction. Dr. Farid affirmed FRA’s commitment to further market development by establishing a regulatory framework for carbon credit evaluation and classification to attract specialized rating agencies. Furthermore, FRA is developing specialized insurance products to mitigate risks associated with the issuance and trading of these certificates. He underscored that the market’s core objective is to attract climate finance for carbon emission reduction projects.

Dr. Farid ended by expressing FRA’s keenness to collaborate with all partners – governments, investors, entrepreneurs and development institutions- to transform Africa’s climate aspirations into a collective reality. He highlighted that sustainable finance instruments are accessible and ready to enable companies to pursue their development initiatives.