The Financial Regulatory Authority (FRA) attaches great importance to sustainable development, stemming from its firm belief in the role of sustainability in supporting the stability and competitiveness of the non-bank financial sector and enhancing its ability to address environmental, social, and governance (ESG) challenges. Sustainability represents a key pillar of the FRA’s strategic vision, as it is essential to ensuring inclusive and sustainable economic growth that supports the national economy and keeps pace with global trends in green and sustainable finance.
The Authority’s efforts in the field of sustainability are based on four main pillars:
First Pillar: Legislative and Regulatory Framework
This pillar focuses on building a comprehensive legislative and regulatory framework for sustainable finance instruments, starting with the issuance of green bonds in 2018 and extending to the regulation of sustainability and climate-related disclosures, including disclosures on environmental, social, and governance (ESG) practices and the impacts of climate change, in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Second Pillar: Supervision and Oversight
In light of the FRA’s role in promoting the principles of transparency and disclosure in the non-bank financial market, the Authority places a particular emphasis on monitoring companies’ compliance with (ESG) disclosure requirements, as well as disclosures related to the financial impacts of climate change in accordance with (TCFD) recommendations.
Third Pillar: Capacity Building and Awareness
The FRA organizes training programs, workshops, and awareness seminars. In this context, it has held a series of specialized interactive seminars on bonds and has launched several initiatives aimed at supporting women’s empowerment and enhancing diversity and inclusion in the non-bank financial sector, including:
- The Women’s Empowerment Application
- The FRA’s Excellence Award for Outstanding Female Leadership
- The Egyptian Directors Center Initiative to Support Women
- The Code of Ethics for the Prevention of Harassment
Fourth Pillar: International Cooperation
The FRA is keen to maintain direct and continuous engagement with international institutions and organizations concerned with financial sustainability, in order to keep pace with global developments in this field and enhance the position of Egypt’s non-bank financial market at the international level. The FRA is an active member of several working groups of the International Organization of Securities Commissions (IOSCO), where it actively participates in discussions on current financial sustainability issues and contributes to the preparation of international reports issued by the Organization.
With regard to the Carbon Market, the FRA has adopted an ambitious plan to establish Africa’s first voluntary carbon market, reflecting its continued commitment to supporting the efforts of the Egyptian government across all fronts, including through the adoption of effective policies and measures that contribute to the shared global objective of achieving carbon neutrality.
Recognizing the important role that capital markets can play in supporting the Egyptian government’s efforts to achieve carbon neutrality and in enhancing the participation of economic entities across various productive sectors in carbon emission reduction activities, the FRA has developed and commenced the implementation of an ambitious action plan. This plan includes the establishment of a comprehensive regulatory framework and the necessary rules and regulations for the creation and launch of the first voluntary carbon market for the trading of carbon emission reduction certificates.
The foundation of the new market was laid with the issuance of Prime Ministerial Decree No. (4664) of 2022, amending certain provisions of the Executive Regulations of the Capital Market Law No. (95) of 1992, to recognize carbon emission reduction certificates as financial instruments. This was followed by the FRA establishing the first committee for the supervision and oversight of carbon emission reduction units and their related activities. The committee is chaired by the Chairman of the FRA and includes representatives of the Authority, the Ministry of Environment, the Egyptian Exchange, as well as experts in the field of carbon markets.
To accelerate the activation of the new market, the Authority continued its efforts by issuing a decision regulating the criteria for the registration of verification and validation entities for emission reduction projects in the register maintained by the Authority. The committee subsequently began receiving applications from entities seeking registration to operate as verification and validation bodies, conducted interviews to assess their capabilities and qualifications, and approved the registration of three entities to perform verification and validation functions—two local entities and one foreign entity.
Subsequently, the FRA issued the rules governing the listing and delisting of carbon emission reduction certificates on the Egyptian exchanges, as well as the criteria for accrediting local voluntary carbon registries. These registries serve as centralized electronic custody systems, comprising records for the issuance, registration, and tracking of the transfer of ownership of carbon emission reduction certificates resulting from the implementation of emission reduction projects, in accordance with methodologies issued by recognized standard-setting and methodology-setting bodies. These efforts were undertaken in parallel with supporting the Egyptian Exchange in issuing the trading and settlement rules applicable to voluntary carbon certificates on the Egyptian exchanges.
- Presentation on the Voluntary Carbon Market
- Dr. Mohamed Farid Saleh’s, Chairman of the Financial Regulatory Authority, speech at COP27, Sharm El-Sheikh
