In November 2022, Egypt will be hosting COP27, the UN Climate Change Conference, in Sharm El-Sheikh on behalf of the African nations, marking a turning point in global solidarity on climate action and addressing the adverse impacts of climate change on the world as a whole.
This is undoubtedly a “not to be missed” opportunity for Egypt not only to advance its climate action, but also to speed up the implementation of its Vision 2030 strategy that is well aligned with the UN 2030 Sustainable Development Agenda, the 2015 Paris Agreement on Climate Change, and the 2063 African Agenda.
Egypt’s Vision 2030 has placed equity, human development, risk reduction, adaptation and resilience building at the heart of its priorities. This is in addition to mainstreaming sustainability considerations into the national policy framework to ensure reducing poverty and inequality as well as promoting gender equality.
Preparing for COP27 can take place across a number of pillars to serve the national development agenda. In 2015, Egypt submitted to the UN Framework Convention on Climate Change its intended nationally determined contributions (INDCs), where it emphasised its need for international support on finance, technical assistance, and capacity building to address the harmful impacts of climate change.
Specifically, Egypt estimated that national climate action on mitigation and adaptation would require approximately $73 billion over the 2020-2030 period. Such an estimate needs to be updated and revised upwards in the light of emerging issues on the national, regional, and global scenes, particularly in the wake of the Covid-19 pandemic that led to fiscal pressures in both the developed and developing countries.
It is also important to work on aligning the mandate of the financial sector, banking and non-banking, with Egypt’s aspired transition to a more inclusive, green, and resilient economy. This can be achieved by enhancing the integration of environmental, social, and governance (ESG) considerations into the financial system’s business model, core strategy, and operations.
To that end, it would be useful to provide financial institutions with explicit incentives to promote sustainable and climate finance, hence increasing funding flows towards socially responsible and environmentally friendly investment. Such incentives may include preferential rates and priority sector lending, as has been the case in countries like India and Bangladesh where regulators have been proactive in raising their financial systems’ readiness to mobilise resources towards funding their national sustainable development agendas.
In this respect, the Arab countries could start working on a collective basis to develop a sustainable and climate finance taxonomy tailored to better reflect the region’s sustainable development financing needs and priorities. This is important to address the lack of good quality data as well as the absence of commonly adopted metrics, definitions, and methodologies in the region that have all acted as barriers to financing socially responsible, green, and smart investment.
Such a taxonomy would enable the various stakeholders, such as finance providers, investors, and regulators, to better understand sustainability issues, related risks and opportunities, and ultimately enable them to better adjust and respond to market needs.
As a key partner in implementing and financing the national development agenda, COP27 may also be an excellent opportunity to crowd in private investment, bringing in much-needed innovation and technology upgrading, whenever commercially viable.
Over recent years, Egypt has had good experience in raising private-sector engagement in renewable energy and energy efficiency projects. Special attention should now be dedicated to attracting private investment to projects that may be characterised as of low commercial readiness due to their high transaction costs and long payback periods and hence perceived low profitability.
This can be achieved through financial-engineering mechanisms such as blended finance and well-structured public-private partnerships (PPP). The recent amendments to Egypt’s PPP law represent a key step in the right direction, and it is also important to work on developing a pool of bankable investment opportunities, while working on aligning private incentives with public interests.
This pool of projects should reflect national needs and priorities and present the private sector with a business-deal flow over the coming few years in projects such as coastal zone protection, agriculture, water resources, and irrigation. These sectors have been noted in Egypt’s INDCs as the most vulnerable to climate change and where financial and technical assistance are much needed.
Finally, conducting major awareness and educational campaigns about the merits of sustainable development has become a must to reach out to the layman and to ensure support and buy-in for ongoing efforts on Egypt’s path to a more inclusive, green, and resilient economy. In this respect, several initiatives have been undertaken to reach out to Egyptian and Arab young people such as the Arab Sustainable Development (ASD) Week and ongoing work by the Ministry of Planning and Economic Development, including, but not limited to, the “Be an Ambassador” project.
Capitalising on young people’s enthusiasm and using digital platforms, among other things, would undoubtedly have a positive impact on promoting sustainable patterns of consumption and production. This would increase demand for responsible investment, thus promoting the mobilisation of sustainable financial flows and ultimately increasing private-sector engagement in financing sustainable development in Egypt.
*The writer is a former advisor to the minister of investment, and is currently an independent consultant.
* A version of this article appears in print in the 3 March, 2022 edition of Al-Ahram Weekly.