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Wednesday, 1 December 2021

ESG, social, gender, and sustainable development bonds come to Egypt

Egypt’s bond menu now includes everything from ESG to women’s empowerment: Companies in Egypt will soon be able to list social, ESG, gender equity and women’s empowerment, and sustainable development bonds on the EGX after the Financial Regulatory Authority (FRA) approved (pdf) yesterday amendments to the executive regulations of the Capital Markets Act.

Incentives to sweeten the terms for investors: Private equity funds, hedgies, and charity organizations will get a 50% markdown service fees charged by the FRA for examining investment certificates if they choose to invest in these bonds.

The FRA has not yet specified the criteria for bonds’ inclusion under these categories. Generally, social bonds are used to raise funds for new and existing projects with positive social outcomes (such as affordable housing) while ESG bonds take into account projects that impact environmental, social and governance principles (such as workplace diversity initiatives or, say, greening your production process). Gender bonds would help finance projects or initiatives that support women’s empowerment such as a program to provide financing to women-led SMEs, while sustainable development bonds can help finance a wide range of projects from sectors including education, health, and sustainable transportation projects.

The rollout comes a year after Egypt first introduced green bonds as part of a debt diversification strategy and a way to support the transition to a green economy. Egypt held the region’s first-ever issuance of sovereign green bonds last year, while our friends at CIB took to market the country’s maiden corporate green bond issuance, completing a USD 100 mn sale in July. A fresh offering of corporate green bonds is reportedly in the works, with unnamed private sector players planning to issue USD 120-200 mn-worth of the climate-friendly securities.

Other types of debt instruments in the works include Egypt’s maiden sovereign sukuk offering that could go to market in early 2022, as well as new “floating rate” bonds being considered by the government.

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