Egypt’s Green Bonds and Why Green Finance is Critical to COP27

Expect to hear frequent talk about green bonds in the run-up to COP27, the UN’s annual Climate Change Conference hosted this year by Egypt in Sharm El-Sheikh on behalf of the African nations. Globally, business leaders and policymakers are increasingly seeking opportunities for green finance — including green bonds. One keynote event paving the way for COP27 is BEBA’s UK-Egyptian Business Mission. During this annual Mission to London, the role that green bonds — and green financing more generally — play in supporting climate-driven policy in Egypt and beyond will be high on the agenda.

Pioneering Green Bonds in MENA

Green bonds — designed to finance climate-focused projects while returning fixed income to investors — are a critical instrument for connecting “environmental projects with capital markets”, according to the World Bank. These bonds offer investors opportunities to help address the climate emergency while gaining similar returns to those they may expect from traditional investments. For its part, Egypt played a pioneering role in autumn 2020, as the first country in the Middle East and North Africa (MENA) to issue sovereign green bonds. The issuance was well received by the markets, with the Egyptian bond entering the Sustainable Bond Market on the London Stock Exchange. The bond issuance itself was five times oversubscribed, which allowed the Egyptian government to raise its initial offering from 500 million USD to 750 million USD. Moreover, the venture generated close collaboration between the Egyptian Ministry of Finance (MoF) and Ministry of the Environment (MoE). Together, the ministries devised a sustainable framework for the successful deployment of the bond. HSBC played a key role as a joint green structuring adviser, joint lead manager and bookrunner, supporting each step of the process, from finalising the bond’s green framework to coordinating the syndication process and filling the order book. This landmark transaction marked Egypt’s commitment to the global sustainability agenda and demonstrated HSBC’s role as the leading bank in sustainable finance, bringing our global expertise to bear in support of Egypt’s sustainability agenda. This success set the stage for further issuances of corporate green bonds, the appetite for which extends far beyond Egypt. Demand for sustainable financing is growing internationally: according to data from Climate Bonds, the global volume of sustainable debt issued in 2021 surpassed 1 trillion USD annually for the first time. Egypt, nonetheless, remains highly focused on the deployment of green bonds inside its own country and across Africa.

Egypt’s Role in Enabling a Green Africa

As one of Africa’s most populous countries, Egypt is a key player in helping address the significant threat of climate change to the continent. This includes ensuring the necessary financing is in place to fund the climate-driven development that is so urgently required. Indeed, the dangers of climate change to Africa are alarming. The IPCC’s most recent assessment of climate change’s impacts on Africa could hardly be clearer:

• The rate of surface temperature increase has generally been more rapid in Africa than the global average.
• Marine heatwaves have become more frequent since the 20th century and are projected to increase around Africa.
• Relative sea level has increased at a higher rate than global mean sea level around Africa over the last three decades.
• The frequency and intensity of heavy precipitation events are projected to increase almost everywhere in Africa.

Egypt recognises the pivotal role of green financing in supporting sustainable development projects across the African continent. Since 2015, the Egyptian Government has been busily advancing green finance initiatives, with the entire continent in mind. In this spirit of cooperation, Egypt developed its national Sustainable Development Strategy (SDS), known as Egypt Vision 2030, in close alignment with the UN’s own 2030-focused Agenda for Sustainable Development and the African Union’s Agenda 2063. In pushing for more international collaboration around green financing, Egypt is not alone. The Glasgow Climate Pact that arose out of COP26 called for a doubling of finance to support developing countries in adapting to the impacts of climate change. 

Infrastructure Opportunities for Green Finance

Green financing does not exist in a financial vacuum — it needs critical infrastructure projects to invest in. Faced with the threat of water scarcity and a rapidly growing population, Egypt is mobilising substantial private sector investments to develop its programme of solar-powered desalination plants. This will transform the future of water management in Egypt. Similarly, an impressive investment programme into green logistics is underway. From renewable energy generation to the adoption of clean energy vehicles, Egyptian policymakers are actively encouraging private sector investment into climate-driven projects. Mobilising finance is key to the success of green projects that will create future-proof jobs, drive sustainable growth, and benefit both UK and Egyptian businesses. The question is how to strengthen these partnerships to identify climate-focused investment opportunities that will bolster Egypt’s adaptation to climate change.

Explore BEBA’s Green Financing Sessions

Join the UK-Egyptian Business Mission in London from May 17-20, hear first-hand from UK and Egyptian ministers and industry leaders and explore what green financing looks like in practice. One session, entitled ‘Innovative Financing Key to Green Economy’, on Wednesday, May 18th, deals with the innovative nature of green bonds and other clean finance initiatives. Scheduled panellists include HE Dr. Rania Al Mashat, Egypt’s Minister of International Cooperation, Chris Antonopoulos, CEO of renewable power generation company Lekela and Sherine Shohdy, Cairo-based Coverage Director for British International Investment. Or join HE Mohamed Maait, Egyptian Minister of Finance, Rami Abul Naga, the Deputy Governor of the Central Bank of Egypt, Sherif Samy, the Non-Executive Chairman of the Commercial International Bank (CIB) and myself on Thursday, May 19th as we address the issue of finance and climate change in support of developing countries.

Get Involved

At BEBA’s UK Business Mission, get the lowdown on economic incentives — including green bonds — to promote green transformation in Egypt and the wider African continent. Learn more about BEBA and the UK Business Mission on the dedicated Mission page, and check out the event programme for the full list of sessions.