Green finance in Egypt: from foundations to scale

Egypt faces a dual challenge: stabilising its economy while preparing for the climate realities of the future. Rising debt and foreign currency pressures leave little fiscal space, yet water scarcity, land degradation and energy demands make sustainability urgent.

Since hosting COP 27 in Sharm el-Sheikh, the country has worked to cement its role as a hub for green finance in Africa and the Middle East and North Africa region.

Local banks are issuing landmark instruments, while development finance institutions (DFIs) are embedding sustainable finance capacity in the sector.

The next step is moving from isolated transactions to systemic transformation — scaling volumes of green and transition finance, in line with Egypt Vision 2030 and the National Climate Change Strategy 2050.

“Egypt, especially on the regulatory front, has already done a lot of the heavy lifting,” says Maya Hennerkes, director for green finance at the European Bank for Reconstruction and Development. “They basically opened up the markets for green bond investments around 2018-19, when the Financial Regulatory Authority issued a legal framework for green bonds. That was a big step, and we’ve seen issues since.”

Mandatory ESG reporting soon followed. “Disclosure itself doesn’t immediately translate into green finance,” Hennerkes says. “But what we’ve seen in practice is that once companies or banks start reporting ESG data, they figure out how to track green versus non-green use of proceeds. Once they’re confident in the quality of their data, they can think about a green lending product, or even a green bond issuance.”

Other initiatives include Egypt’s voluntary carbon market, launched in 2022, sustainability indices on the Egyptian Exchange and a planned national green taxonomy.

Egyptian banks are starting to translate these rules into strategies. Commercial International Bank (CIB), the country’s largest private lender, has developed a comprehensive sustainable finance framework, linking lending to environmental and social priorities.

It has rolled out sectoral programmes to help both corporates and small and medium-sized enterprises integrate sustainability into their operations, while also channelling billions into environmental and social projects.

“CIB’s Sustainable Finance Policy and Strategy recognises system thinking as an institutional mantra that strengthens the link between the financial industry and its surroundings, particularly the environmental, social and governance aspects,” says Islam Zekry, the bank’s group chief finance and operations officer. “As part of this vision, CIB has launched innovative programs such as Sustaining Sectors and Sustaining SMEs.”

Other banks are following suit. Arab African International Bank (AAIB) issued Egypt’s first sustainability bond in 2024, while Banque Misr closed the country’s debut sustainability-linked loan. The Central Bank of Egypt (CBE) has also set clear guidelines for classifying green assets, pushing banks to track and grow their sustainable lending portfolios.

DFIs are playing a catalytic role in this shift. One flagship initiative is the Green Economy Financing Facility, launched in Egypt in 2018. Through GEFF, EBRD has channelled $185m into 130 projects, largely via local partner banks. A second edition worth $175m is now under way.

“These programmes allow local banks to learn with us,” says Hennerkes. “They start with identification of green projects, then move to verification and reporting. Often, once banks gain that experience, they come back and say: ‘We’re ready for a green bond framework now.’ That way, capacity grows step by step.”

Blended finance has also mobilised substantial resources. Partnerships with the International Finance Corporation, Proparco and GIZ have delivered hundreds of millions in climate finance, alongside grant support for technical assistance.

In July 2024, EBRD arranged Egypt’s first sustainability-linked loan — a $100m facility with Banque Misr, tied to social performance targets. “SMEs need green lending lines, large corporates can issue bonds, and banks can structure sustainability-linked loans,” says Hennerkes. “They all have their place.”

The range of green instruments in Egypt is expanding. CIB’s 2021 corporate green bond remains a landmark, with proceeds allocated to energy efficiency, water treatment and green buildings. The AAIB sustainability bond reached $500m, attracting strong international demand.

Securitisation is also emerging as a tool, with banks piloting social and green asset-backed deals.

For Hennerkes, capital market solutions are essential to achieve scale, allowing loan portfolios to be bundled, securitised and financed at larger volumes than traditional SME-focused programmes.

Despite progress, gaps remain. “The toolkit is tried and tested,” says Hennerkes. “We’ve been blending donor resources with market capital for 20 years. But those resources are scarce. Each project requires careful structuring to find the sweet spot — enough concessionality to lift it over the hurdle, but not so much that you crowd out private capital.”

Adaptation and biodiversity finance are particular challenges. “We can now do renewable energy projects in a comparatively routine way,” Hennerkes explains. “But climate adaptation is harder to finance commercially, and biodiversity finance lacks tried-and-tested tools.”

The sector is starting to respond. The Federation of Egyptian Banks’ Sustainable Finance Committee — chaired by CIB — has encouraged members to adopt frameworks such as the Taskforce on Nature-related Financial Disclosures (TNFD), to integrate biodiversity risks into financial decision-making alongside climate. “CIB has spearheaded the collective effort to equip all 36 banks in Egypt with the knowledge and tools needed to embrace sustainable finance practices,” says Zekry.

“In my engagements with Egyptian banks, I find them to be very sophisticated,” says Hennerkes. “They’re interested in sustainable finance and invest a lot of time. And the regulator is active in international forums like NGFS, which drives attention at home.”

NGFS is the Network of Central Banks and Supervisors for Greening the Financial System.

Hennerkes also highlights transition planning as an emerging practice. “It’s a powerful exercise. It allows each bank to think about climate as a strategic and managerial challenge, not just a regulatory one. They can ask: where are we now, and where do we want to be in 2030 or 2050?”

For its part, CIB stresses that systemic transformation is the ultimate goal. “Our model showcases how a single industry actor can mobilise innovation to accelerate client decarbonisation,” Zekry says. “Finance must drive real economic change, where every transaction reflects a commitment to a more equitable and sustainable Africa.”

Egypt’s green finance agenda extends beyond carbon. Water scarcity, desertification and food security mean that adaptation and resilience are just as critical. Banks are already financing sustainable agriculture, water recycling and desert greening. National strategies such as the NWFE programme — focused on the water-food-energy nexus — aim to align investment across these interlinked priorities.

Egypt has laid the scaffolding for a functioning green finance market: regulation, flagship issues, capacity building and institutional champions. The next phase is about scale and depth — mobilising billions more, embedding sustainability across all banks, and attracting international capital into adaptation and biodiversity, alongside mitigation.

If successful, Egypt will not only meet its own Vision 2030 and Climate 2050 goals but also establish itself as a regional leader in green finance — showing how emerging markets can turn vulnerability into opportunity.

Lead image: The hydroelectric power plant of the High Dam in Egypt, 2024 © Alice Dias Didszoleit/Alamy