Financing is critical to enable developing economies to protect themselves against climate change and transition to a more sustainable model.
Without it, Egypt, and many other African countries, which are already acutely vulnerable to the impact of rising temperatures, will struggle in their mitigation and adaptation efforts, leading to them experiencing even harsher consequences.
This is why climate finance – and specifically reaching agreement on unlocking $100bn in annual financial support from developed economies to developing economies – is one of the key areas of focus at COP27. Indeed, a key objective of COP27 is ensuring that this finance begins to flow.
While there is great hope and expectations for this, some developing world economies are already proactively financing their transition investment plans, and Egypt is a prime example.
In 2020, the country broke new ground for the Middle East and North Africa when it successfully sold $750m of five-year green bonds – the first such transaction by a country in the region.
The deal was not only symbolic of Egypt’s commitment to its own sustainable transition, it also demonstrated the country’s ambition to lead on the growth and development of sustainable finance in the MENA region. It has done this, setting a benchmark for other countries to follow, at the same time as opening-up and enabling the growth and development of sustainable finance in Egpyt.
It is an opening that has since been capitalised on by Commercial International Bank (CIB), the country’s largest private sector bank, which last summer pioneered Egypt’s first green corporate bond, raising $100m in the transaction supported by the International Financial Corporation.
For Hussein Abaza, CIB’s CEO and managing director, the bond issue is a crucial component in kick starting the growth and development of sustainable finance in the country, and specifically enables the bank to increase lending to businesses that want to invest in eco-friendly initiatives, including green buildings, renewable energy and energy efficiency, markets which are still nascent in Egypt.
These financing solutions will not only enable Egypt’s transition towards a low carbon economy, but also meet the objectives of Egypt’s Vision 2030, Egypt’s Climate Strategy, and the newly revised Nationally Determined Contributions
“We are building on our multi-year strong partnership with IFC to expand our funding options and introduce a new asset class to the Egyptian capital market,” said Abaza. “We see a growing demand for climate finance in Egypt and this innovative instrument will help us promote environmentally friendly projects and fight climate change.”
While still early, the impact of this transaction on Egypt’s burgeoning sustainable finance market could be significant. For CIB, the transaction has already been impactful, enabling the bank to enhance its own sustainable operations, and innovate new sustainable finance options.
“These include sustainability-linked loans, and sustainability, social and blue bonds, financing solutions which will not only enable Egypt’s transition towards a low carbon economy, but also meet the objectives of Egypt’s Vision 2030, Egypt’s Climate Strategy, and the newly revised Nationally Determined Contributions,” says Dr Dalia Abdel Kader, CIB's chief sustainability officer.
A green revolution
CIB’s groundbreaking bond issue is one of the many initiatives the bank has, and continues to undertake, to promote sustainability through its banking business.
For instance, the bank has been focusing on advancing sectoral decarbonisation through its “Sustaining Sectors – Sustaining Growth” programme, which provides a series of sectoral capacity building workshops to CIB’s clients across different sectors. The aim is to introduce the concept of sustainable finance and green products to clients, as well as help them in the transition phase to help lower carbon emissions in each sector by introducing applicable green projects in each industry.
It is a focus CIB applies to its own business, demonstrated by its commitment to global initiatives. The bank is a founding member of the Net Zero Banking Alliance (NZBA), which aims to deliver the banking sector’s climate commitments in alignment with Paris Agreement goals. CIB is also the only MENA bank to join the NZBA and was Egypt’s first bank to support the Task Force on Climate Related Financial Disclosures.
These commitments to fight climate change and help clients decarbonise is rightly an important area, but CIB’s sustainability focus also stretches beyond this and into the social side, where it promotes and supports financial inclusion of women, youth, disabled, and the underprivileged in Egyptian society.
As Egypt accelerates its transition, CIB is playing an important supporting role in multiple areas, including in the country’s ambitious renewable energy drive.
In June, Egypt’s Minister of Electricity and Renewable Energy, Mohamed Shaker, said the country’s target is for new and renewable energy to account for 42% of energy generation by 2035.
Large-scale investment, particularly from foreign investors, in energy technology and infrastructure will be required to achieve these aims.
Indeed, Egypt has a total portfolio of eligible green projects that need investment worth $1.9bn, of which approximately 16% are in the renewable energy sector, 19% in clean transportation, 26% in sustainable water and wastewater management, and 39% in pollution prevention and control.
The country is already making great strides in renewables. The shining example of solar energy generation is the Benban Solar Park in Egypt’s western desert. The site has a planned capacity of 1.8GW, which will give it an annual energy production of more than 4Twh per year. Together with this, Egypt also has the 10MW Siwa Solar PV Plant, and Kuraymat, which is the world’s first Integrated Solar Combined Cycle power plant, boasting an overall capacity of 135MW.
Egypt’s Red Sea coast is also proving a highly suitable location for wind farms. The Gabal El-Zayt windfarm, begun in 2015 and linked to the grid in 2018, is the largest wind farm in the region.
Expansion in renewable energy production is not only important to power Egypt’s sustainable transition, but also to support rapid urbanization and an expanding population, which has exploded to 102 million from 68 million in 2000. By mid-century, the population is forecast to grow to 158 million.
To support this, investment in clean transportation and the development of green cities is crucial.
To this end, Egypt is building a new 50 mile plus mono rail network to connect Cairo to the New Administrative Capital in the east and Giza in the west. On completion it will be the world’s longest monorail, and importantly, will be emission free.
In addition, Egypt has also unveiled ambitious plans to create 45 new cities, Suez, Ras Al-Hikma, El-Alameinm, and also transform the cities of Sharm El-Sheikh and Hurghada into green cities, supported by the European Bank for Reconstruction and Development though its Green Cities Development Programme.
“This indicates the effort Egypt has already made to ensure that its green infrastructure is as sustainable as possible in order to deliver on the better living promised in Egypt's Vision 2030,” says Dr Dalia Abdel Kader.