In September, Egypt issued its first sovereign green bonds — the first of a kind in the Middle East and North Africa (MENA) region — worth $750 million, signalling its commitment to its environmental and sustainable development goals.
In October, the country went further through offering such bonds on the London Stock Exchange (LSE) in five-year terms.
Through the issuance, Egypt managed to attract 16 new investors from Europe, the US, East Asia and the Middle East, at 47 percent, 41 percent, six percent and six percent respectively, in terms of asset managers, investment and insurance funds, pension funds and high-quality banks that keep their investments over longer terms.
The World Bank is expected to extend the required technical assistance for preparing and issuing annual reports regarding the utilisation of Egypt’s green bonds revenues and the expected developmental and environmental impacts of approved projects.
In an exclusive interview with Ahram Online, World Bank senior financial officer Concepcion Aisa explained how the World Bank will help support Egypt's economy in this regard amid ongoing challenges.
Ahram Online: What kind of support does the World Bank expect to extend to Egypt regarding its first sovereign green bond issuance?
Concepcion Aisa: The World Bank is pleased to share its knowledge and experience with the government of Egypt for this landmark transaction.
Investors expect green bond issuers to report on how the proceeds of the bond are used and what are the expected environmental impact of projects that receive financing.
Many first-time issuers find impact reporting challenging, especially public sector issuers. As one of the first and largest issuers of green bonds and pioneers of green bond impact reporting, we are looking forward to working with the Egyptian Ministry of Finance and other ministries to ensure that the post-issuance impact report is in line with international best practices.
AO: What are the reasons behind the World Bank action to back Egypt in this step?
CA: The World Bank Group is working with the Egyptian government on many fronts to help Egypt progress towards environmental and social sustainability.
Green bonds play a very important role in raising the capital needed to mitigate the impact of environmental challenges, such as worsening air quality, soil degradation and water scarcity — all important challenges for Egypt, affecting health as well as economic growth.
We are helping the government to diversify their funding sources, explore innovative capital markets solutions, and tap private sector financing to address their environmental and development challenges.
With our global knowledge and experience, we can provide the government with timely advice to help maximise the environmental and social benefits from these investments.
AO: What is the importance of issuing such bonds, especially in light of the ongoing Covid-19 crisis and Egypt’s efforts to recover from its impacts?
CA: Green bonds finance environmental sustainability objectives and provide an opportunity for sovereign issuers to tap into the $715 billion in assets in the impact investing market.
These investors are interested in financing sustainable development, including the fight against climate change and broader environmental challenges. This represents an opportunity for governments like Egypt, Germany, Sweden and Thailand, who have issued green bonds recently, to ensure that the recovery from the Covid-19 crisis is good for the environment.
AO: What is the expected impact of such bonds on the Egyptian economy and its growth?
CA: According to Egypt’s finance ministry, the net proceeds of the green bonds will be used to finance projects in the following categories: renewable energy; clean transportation; pollution prevention and control; energy efficiency; climate change adaptation; and sustainable water and wastewater management.
These project types are expected to have a positive impact on Egypt’s economy and its growth. Egypt has taken many actions to reduce greenhouse gases emissions, including setting a target to increase the share of renewable energy in the electricity mix by 20 percent by 2022 and 42 percent by 2035. Additionally, Egypt is pursuing an ambitious plan to upgrade its infrastructure across all sectors and all regions for greater energy efficiency and resource conservation.
Egypt has a portfolio of eligible green projects of $1.9 billion, of which approximately 16 percent is renewable energy, 19 percent is clean transportation, 26 percent is sustainable water and wastewater management, and 39 percent is pollution prevention and control (as of September 2020).
AO: Does the World Bank provide similar support to other countries in the region, or to Arab countries, regarding green bonds?
CA: Yes, it does. The World Bank promotes the development of sustainable capital markets and facilitates thematic bond transactions that finance resilient and sustainable development.
The bank has been working with countries in the Middle East and North Africa region to understand the benefits and develop green bond guidelines for local markets.