PM — Good news / bad news for clean energy

Good afternoon, wonderful people. We’re officially in that sweet, sweet slide towards the weekend — and our reward (or punishment, depending on how you see it) is another busy and interesting news day.

THE BIG STORY TODAY

There’s a lot more investments coming from our friends in KSA: A subsidiary of Saudi Arabia’s Fawaz Alhokair Group is planning to invest around USD 135 mn (SAR 500 mn) in a new renewable energy project in Egypt in partnership with our Electricity Ministry, Al Mal reports the subsidiary’s CEO Turki Alhokair as saying. The project, the details of which are still under negotiation, could produce wind power, Alhokair said. Meanwhile, a group of Saudi real estate developers are set to visit Egypt next week to kick the tires on potential fresh investments here, particularly in new cities, Al Mal reports, citing Egyptian Businessmen Association Vice Chairman Fathallah Fawzi.

THE BIG STORIES ABROAD

There’s a whole lot happening in the international business press this afternoon. First up is the ongoing energy crisis in Europe, which is getting more time in the spotlight with the International Energy Agency’s (IEA) latest World Investment Report sounding alarms over the need to accelerate investments in clean energy to both address the crisis and global climate pledges, particularly as Russia’s exit from Europe’s energy market “creates clear openings for non-Russian suppliers.” We have more highlights from the IEA’s report below, in our Commute section. The story is getting ink in Reuters and the Financial Times, among others.

Meanwhile, UK inflation hit a 40-year high of 9.1% in May as the country continues to struggle with rising global food and energy prices. This comes following another multi-decade high in April, when it sat at 9%. Inflation could rise even more, with the Bank of England saying it could hit 11% later this year when the government raises the cap on domestic energy bills. The story is getting plenty of attention in: Reuters | FT | CNBC | AP | BBC.

Also getting digital ink:

• The death toll from a massive earthquake that hit Afghanistan has surpassed 1k people, while another 1.5k others were injured. The 6.1-magnitude quake is the deadliest to hit Afghanistan in the past two decades (BBC | New York Times | Reuters | The Independent | AP).
• An oil refinery in Russia’s Rostov region caught fire after a drone attack that is believed to be part of Ukraine-backed strikes, reports the FT and Reuters. The Novoshakhtinsk refinery has suspended operations until the damage is assessed, but no casualties have been reported.

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** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• Egypt signed 14 investment agreements with Saudi Arabia worth USD 7.7 bn during Crown Prince Mohammed bin Salman’s visit to Cairo yesterday.
• MPs give the green light to FY 2022-2023 budget: The House of Representatives approved in a plenary session yesterday the state’s budget for the upcoming fiscal year that begins in July.
• “We are not yet in a recession” despite the World Bank, IMF, and others reducing their expectations for economic growth, but the risk is very much there, Finance Minister Mohamed Maait said yesterday.

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FOR TOMORROW-

The Central Bank of Egypt is set to meet tomorrow to review interest rates. The majority of analysts and economists we surveyed in our customary poll expect the central bank’s monetary policy committee to leave rates unchanged.

???? CIRCLE YOUR CALENDAR-

The Big 5 Construct Egypt (pdf) construction industry exhibition runs from 25-27 June at the Egypt International Exhibition Center (EIEC) in Cairo.

Amcham AGM next week: Our friends over at Amcham will hold their annual general meeting on Monday 27 June at the St. Regis Cairo Hotel. Finance Minister Mohamed Maait will address the gathering.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

☀️ TOMORROW’S WEATHER- The mercury is heading back to the 40°C range tomorrow as we’re set to see a few really hot days, our favorite weather app tells us. The temperature will fall to 24°C at night.

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The world is still lagging behind on clean energy investments — but there’s some improvement: Global energy investments are set to rise 8% to USD 2.4 tn this year, with a significant growth in clean energy investments that is offset by a rising reliance on coal, the International Energy Agency’s latest World Investment Report (pdf) shows. While investments in clean energy account for over three quarters of this year’s growth in energy investments (more than USD 1.4 tn), the IEA still described that as “well short of what is required to hit international climate goals, but nonetheless an important step in the right direction.” Clean energy spending is also “unevenly distributed,” according to the report, which notes that developed economies and China account for the bulk of investments.

And the ongoing energy crisis could drive coal investments up even further: Coal investments are on course to rise another 10% this year, after rising by the same levels to hit USD 105 bn in 2021, the report says. European countries like Italy, Germany, Austria, and the Netherlands are considering a return to coal to plug the shortage from Russia’s reduced flows into the continent. The report notes, however, that the energy crisis should not stand in the way of global climate pledges, adding that a “massive surge in investment to accelerate clean energy transitions” is “the only lasting solution.”

The European Investment Bank joined in the chorus of voices calling for increased investments in clean energy, particularly in Africa, with Vice President Ambroise Fayolle telling Reuters that the European lender will not be funding fossil fuel projects in a bid to safeguard climate goals.

Remember: Egypt is poised to be one of the EU’s most important allies for energy exports, after it signed a landmark agreement with the EU and Israel to increase exports to the continent last week.

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Just in time for the start of summer: A new app can help you track UV radiation level forecasts to avoid extensive exposure to the ultraviolet rays, said the World Meteorological Organization, which launched the app with the World Health Organization, the United Nations Environment Programme, and the International Labor Organization. “It highlights time slots when sun protection is required with the aim of helping people around the world know when to use sun protection, in an effort to reduce the global burden of skin cancer and UV-related eye damage.” The app, which relies on “data from country-level weather and UV measuring stations to provide accurate and location-specific UV Index readings,” is designed to help achieve one of the UN Sustainable Development Goals related to global health and wellbeing.

In a funding drought hitting all sectors, biotech’s fate seems especially dry: US biotech companies are struggling to keep their head above water amid a tight investment market fueled by a worrying global economy, the Financial Times reports, citing analysts and investment banks. Biotech companies — who have long and risky development cycles — are looking less than appealing to investors and even their own backers. This has pushed many listed biotech companies to sign off on “draconian” agreements to survive such as raising equity at huge valuation reductions, taking out risky loans, monetizing future royalty streams, or looking to big pharma to lend a hand. Over half of listed companies who raised money this quarter had to offer incentives to get the agreement across, the FT found. Meanwhile, others such as Genocea, which was working on cancer treatments, have been forced to shut down operations in a clear sign that the biotech industry is in a tough predicament.

???? ON THE TUBE TONIGHT-
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“Will dogs be surfing the internet?” and more theories about how the future will unfold: Netflix and The Verge teamed up to bring The Future Of docuseries, which consists of episodes that each discuss a certain topic or aspect of our lives and how the future will see it change. Each episode is bite-sized, running at around 20 minutes, with the released episodes looking at dogs, dating, houseplants, gaming, space vacations, and cheeseburgers. A lot of what could drive drastic change is the incorporation of tech into everything in our lives, from using biometric data to find your perfect match to using food tech to reimagine your favorite comfort food. More new episodes will be released next Tuesday, but the topics have yet to be disclosed.

⚽ Important matches for the top three Egyptian league teams tonight: El Zamalek, Pyramids, and Al Ahly are playing important matches today, as El Zamalek plays against National Bank and Pyramids against Eastern Company at 7pm. Meanwhile, Al Ahly faces Ghazl Al Mahalla at 9:30pm. El Zamalek is in the lead with 45 points from 21 games, followed by Pyramids with the same number of matches and a difference of two points, and then Al Ahly who played 3 fewer games and scored 41 points.

???? OUT AND ABOUT-
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Local music ensemble BubbleGum Kollective is playing retro pop at Cairo Jazz Club in Agouza tonight at 8pm.

Meanwhile, Massar Egbari are celebrating the launch of their new album Anis tonight at CJC 610 Sheikh Zayed at 9pm.

???? UNDER THE LAMPLIGHT-

How to collaborate in a purposeful and efficient way: In Beyond Collaboration Overload, Rob Cross looks at the idea of collaboration in a workplace and how it has become essential to continuing operations and growing a business. Collaborative work consumes 85% of employees’ time and is slowly inching into all times of the day after the remote work era of the pandemic. The wrong kind of collaboration can hurt employees’ performance, health and overall well-being, argues Cross who instead attempts to show a different approach to teamwork. His strategy outlines when collaboration is necessary and when it isn’t as well as how to motivate and energize others to work together. If put to use, the methods in the book promise to “coach you to reclaim close to a day a week.”

The EGX30 fell 0.9% at today’s close on turnover of EGP 431 mn (48.3% below the 90-day average). Local investors were net buyers. The index is down 19.6% YTD.

In the green: Abu Dhabi Islamic Bank Egypt (+1.2%), Palm Hills Development (+0.7%) and GB Auto (+0.7%).

In the red: Madinet Nasr Housing (-3.2%), Heliopolis Housing (-2.4%) and e-Finance (-2.2%).

ESG equities have been under fire — but ESG bond funds appear more resilient: While some investors have turned their backs on ESG-focused equity funds amid greenwashing criticism, ESG funds that track bonds don’t appear to have been tarred with the same brush.

The difference in performance between ESG equities and bonds has been stark this year: Between January of this year and the end of April, ESG bond funds (spanning both corporate and sovereign debt) saw some USD 7.4 bn in inflows, while non-ESG funds hemorrhaged some USD 168 bn, according to a Bank of America (BoA) report cited by the Financial Times. By contrast, investments into ESG equity funds fell 36% during 1Q 2022 and further in April — “the worst showing since before the pandemic began,” BoA analysts said — as investors in ESG equities lost faith that asset managers are really investing ethically.

Now ESG ratings agencies are pointing out that when it comes to sovereign debt, investors would do well to pay closer attention to ESG-related risks: Russia has become a cautionary tale, after the value of its sovereign debt plummeted immediately following the invasion of Ukraine. But consulting firm Verisk Maplecroft had identified a mismatch between its listing value and how the country was faring along its ESG metrics (hint: pretty poorly) that predated the war, the FT notes. Investors wouldn’t have ended up out of pocket if they hadn’t been “complacent” about the ESG risks inherent in Russian sovereign debt, Verisk argues.

There are a bunch of other bonds investors should be concerned about, Verisk says — and we’re one of them. Fifteen bond-issuing countries including Egypt, Turkey, Peru, and Nigeria all score worse than Russia on Verisk’s ESG metrics. Turkey, for example, scores very low because of labor rights problems, food security issues and judicial weakness.

The MENA region doesn’t do well overall: Poor scores for Egypt and Tunisia are “part of a broader picture across MENA of markets that are persistently poor, or deteriorating, on ESG,” Verisk says.

This isn’t about judging which countries are “ethical,” proponents say, but about managing risk and maximizing returns. Verisk says high ESG scores are indicative of higher returns on countries’ sovereign bonds. And even where returns are similar across bonds, those with better ESG credentials present lower volatility, JPMorgan researchers have found (pdf).