Egypt - The Financial Regulatory Authority (FRA) has received two requests to establish investment funds in agriculture with a value of EGP 2bn, and the other in climate change response, the first of its kind in the Egyptian market, according to FRA Chairperson Mohamed Omran.

During a press conference to announce the capital market strategy for the next four years, Omran said that the authority submitted a request to the prime minister to amend the regulation of financial instruments related to sustainability, including sustainability, gender equality, and green bonds, as well as carbon credit.

Omran expects the amendment to be issued and that these new instruments would be made available next week.

He added that the authority continues to encourage companies to issue green bonds, and study the possibility of developing new financial instruments aimed at urging companies to reduce harmful carbon emissions. This would be made possible by adopting advanced technology to reduce carbon emissions that lead to global warming, and these certificates are known as carbon emissions certificates.

He stressed that the authority aims to amend the executive regulations of the capital market law by adding a regulation for carbon emissions certificates.

Carbon credit is a permit that allows the owner to emit a certain amount of carbon dioxide or other greenhouse gases. This aims to allow market mechanisms to drive industrial and commercial operations towards emissions reduction.

Omran explained that the regulation of carbon certificates will help establish many green investment funds. He noted that FRA has received requests to establish a charitable fund focusing on green investment during the past days, and the carbon certificates will have an influential role in their approval.

He expects the volume of issuances to reach EGP 390bn by 2026.

Omran added on the sidelines of a press conference on Sunday, that the total value of issuances in the primary stock market amounted to EGP 280bn during 2021.

He added that the authority aims to issue bonds and sukuk worth EGP 80bn by 2026, compared to about EGP 25bn in 2021, supported by the development of future securitization bonds.

The FRA is considering making an amendment to the registration rules to increase free trading after the stability of the markets following the Russian-Ukrainian war.

He pointed out that 85% of the total securities in the Egyptian market are in the hands of the founders of companies and are not traded. They are estimated to be EGP 548bn, compared to shares traded at a value of EGP 70bn, representing 15% of the total shares.

He explained that these indicators are the main reason behind the authority’s study to amend the registration rules, pointing out that implementation is difficult due to the current market conditions.

Omran added that the important factor for attracting an institutional investor is the market size and the periodicity of liquidity.

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