Egypt has required non-banking financial institutions with capital over EGP 100m to measure their carbon footprints and offset 20% of annual emissions by purchasing carbon credits, Minister of Investment and Foreign Trade Mohamed Farid announced. The statement came at the International Finance Corporation conference on innovation for resilience.
In a move to bolster sustainable finance, Minister of Investment and Foreign Trade Mohamed Farid stated that Egypt has shifted from theoretical sustainability concepts to a comprehensive institutional application of a sustainable financing system. Farid spoke on Sunday at the International Finance Corporation (IFC) conference titled “Innovation for Resilience – Financing for a Sustainable Future,” attended by Central Bank of Egypt Governor Hassan Abdalla, IFC Regional Vice President for Africa Ethiopis Tafara, German Ambassador to Cairo Juergen Schulz, and Nigerian Central Bank Governor Olayemi Cardoso.
The minister explained that Egypt implemented an integrated package of structural reforms across the banking and non-banking financial sectors through collaboration between the Central Bank and the Financial Regulatory Authority (FRA). These reforms have produced a qualitative shift in the environment for issuing sustainable financing instruments, enhancing the market's capacity to attract international investment. Regulatory frameworks now include clear definitions and classifications for green bonds, transition bonds, and gender-linked bonds within the executive regulations of the Capital Market Law.
Building an accurate and integrated database on carbon emissions serves as the “cornerstone” for developing the sustainable finance system, according to Farid. Clear disclosure requirements regarding sustainability standards and carbon footprints were approved based on the principle that “what cannot be measured cannot be managed.” The FRA's decisions require non-banking financial institutions to prepare periodic reports on their carbon footprints and offset a portion of emissions through the carbon trading market.
The current phase seeks to expand sustainability concepts to various companies and institutions while adhering to the principle of proportionality, with larger companies facing more extensive disclosure requirements aligned with international standards S1 and S2 from the International Financial Reporting Standards (IFRS) Foundation. Farid emphasized the pivotal role of the banking and non-banking financial sectors in financing companies and supporting their transition to more sustainable practices.
Egypt’s voluntary carbon credit system has developed significantly, with approximately 160,000 carbon credits now registered, Farid confirmed. The necessary regulatory and accounting frameworks for registration and trading processes have been completed, paving the way for further expansion in financing sustainability projects. The minister concluded by stressing the importance of enhancing regional and international cooperation in sustainable finance and praising the IFC's support for developing nations.