Green banks could be happening in Egypt and here’s what we know so far

Could green banks make their way to Egypt? The Central Bank of Egypt (CBE) has indicated the possibility of establishing green banks in the country in accordance with the CBE’s rules and the new Banking Law, its recent financial stability report (pdf) showed. The mission-driven institutions would come under legislation allowing for the licensing of such “specialized” banks.

What is a green bank, Enterprise? Green banks are dedicated banking institutions that facilitate private investments to accelerate the transition to clean energy and green sectors such as water and waste management.

What we know: The CBE plans to issue licenses for green banks within a timeframe of two years, an government source told Enterprise Climate. The green banks will be a part of a general framework devised by the state to create a green economy, transforming several planned projects into green initiatives to drum up investments, the source said. The plan will also stimulate private sector projects to incorporate green initiatives in order to benefit from incentives, the source added. The banking sector will complement the plan, which is being outlined by the Finance and Planning Ministries. Per the plan, banks will be providing “green” finance to projects under various systems similar to those provided by banks abroad.

The rationale: Such green banks would help in securing low-cost capital for clean and renewable energy projects and other projects that seek an improvement of environmental quality under suitable prices and terms, the CBE report said.

All part of a sustainability push: The CBE affirmed its support for the state’s efforts in providing sustainable financing due to its low-risk environmental and social nature. This would reflect positively on the stability of the country’s financial system, it added. Sustainable financing could also pave the way for further investments and FX by luring in a new segment of investors that have sustainable finance among their main goals. It could also help bolster the issuance of green bonds on the back of an increased prevalence of social and environmental-focused investments.

REMEMBER- The CBE recently issued the guiding principles for sustainable finance to incorporate Environment, Society, and Governance elements (ESG) into banks’ processes and decisions on credit advancement. It is part of the sustainable finance roadmap, which seeks to develop the capacity of the country’s financial sector for sustainable finance through training programs and education papers to help boost knowledge in the sector.

IN OTHER EGYPT NEWS- Egypt’s Financial Regulatory Authority (FRA) signed a MoU with the Institute of National Planning (INP) to bolster cooperation in sustainable development and sustainable finance mechanisms, according to a statement released last week. The main goals behind the cooperation include raising awareness on sustainable development and development finance and building capacity for financial instruments for the green economy among others, according to the statement.