Mobilising Financing and Investment for Quality Infrastructure in Egypt

5. Aligning infrastructure investment with sustainability

Abstract

Egypt faces acute climate vulnerabilities that threaten infrastructure, water security, and economic stability. The government has integrated climate resilience into national planning through updated Nationally Determined Contributions (NDCs), a comprehensive National Adaptation Plan (NAP), and substantial investment in climate resilient infrastructure. The government is enhancing the regulatory environment through updated environmental impact assessments, new disclosure requirements, and the creation of a regulated voluntary carbon market to mobilise private capital. While progress has been significant, scaling private investment – especially from institutional investors – remains essential for Egypt to meet its adaptation needs and align its infrastructure systems with long term national climate and resilience objectives.

Egypt’s assets, infrastructure, and society are highly vulnerable to climate change, with risks varying across regions and population groups. Climate hazards, including sea-level rise, extreme weather events, and heatwaves are impacting critical infrastructure systems. Heatwaves reduce energy generation efficiency, while flooding damages highways, power lines, and inadequate drainage systems, leading to operational disruptions, higher maintenance costs, and power outages.

Egypt has taken steps to mitigate the adverse effects of climate change through various measures in water resource management, with projects such as water desalination using solar energy which has been allocated USD 625 million. Natural protection efforts along the Rosetta shoreline using techniques like the sand motor1 will cost USD 120 million, while the rehabilitation of irrigation canals to enhance agricultural resilience will require USD 4.5 billion. Coastal protection and development efforts in three Mediterranean cities, integrating climate adaptation into urban planning, are set to receive USD 2 billion, while scaling up solar-powered irrigation projects is expected to cost USD 50 million. Furthermore, infrastructure projects such as building a breakwater at the Port of Alexandria to mitigate the impacts of rising sea levels is expected to receive USD 41 million in funding. The total cost of implementing adaptation measures is estimated at USD 50 billion, forming part of Egypt’s broader climate strategy.

In 2023, Egypt updated its nationally determined contributions (NDCs) (IEA, 2025[1]), setting more ambitious climate action goals through 2030 as part of its preparations for hosting COP27 and decision to take bigger steps in alleviating climate‑related challenges. These objectives have been embedded in the country’s infrastructure development strategies, such as the National Adaptation Plan (NAP), whose primary objective is to enhance the country’s capacity to absorb and mitigate the risks associated with climate change. The NAP has focussed on sectors that are vulnerable to environmental shifts, such as transport and water management. For instance, infrastructure upgrades in water and wastewater systems are expected to make national water management systems more robust, ensuring they can withstand extreme weather events such as floods and droughts. Key investments include modernising dams, reservoirs, and treatment plants, all of which are critical for maintaining water security in the face of climate variability. In its 2023 update to the nationally determined contributions (NDC), Egypt outlined a conditional plan to reduce greenhouse gas (GHG) emissions across key sectors by 2030 compared to the business-as-usual (BAU) scenario.

The NAP is a comprehensive and strategic process that identifies medium- and long-term climate adaptation needs and formulates corresponding strategies and programmes. Within the framework of Egypt’s NAP, it incorporates the establishment of national adaptation co‑ordination mechanisms; the integration of adaptation considerations into existing national and sub-national plans; the development or revision of adaptation-related policies, laws, and regulations; the clarification of roles and responsibilities across institutions; the strengthening of cross-sectoral co‑ordination; the conduct of national and local climate risk and vulnerability assessments; the development and updating of climate scenarios and projections; the mapping of climate impact hotspots; and the establishment of baselines and monitoring indicators for vulnerability.

NAP serves to enhance climate resilience, integrating detailed risk assessments and sector-specific adaptation strategies developed in close consultation with key governmental ministries. The plan prioritises adaptation measures across several critical sectors, including agriculture, water resource management, coastal zones, public health, biodiversity, human settlements, and tourism. A particular emphasis is placed on human settlements and urban zones, where detailed studies have been conducted on heat islands, infrastructure resilience, storm water management, road networks, informal settlements, and coastal cities. These studies assess the impacts of climate change and estimate risk levels, providing a foundation for targeted adaptation actions.

NAP aims to strengthen Egypt’s capacity to plan for and manage climate risks at national, regional, and local levels, thereby supporting the country’s economic and development objectives while minimising adverse impacts of climate change. NAP tries to provide access to reliable information regarding sectoral risk zones and integrated risk scores at the governorate level, to support actionable, climate adaptation strategies, including estimates of potential loss and damage across sectors.

In the transport sector, Egypt plans to achieve a 7% reduction in emissions by 2030, representing a cut of approximately 9.0 MtCO₂e. Efforts to meet this target include a series of major infrastructure projects aimed at promoting sustainable mobility. These initiatives encompass the modernisation of road, railway, and seaport networks; the development of high-speed rail lines; the electrification of freight and passenger railways; and the deployment of electric vehicles within the public transit system, particularly in the New Administrative Capital. The Ministry of Transport has spearheaded the nation’s efforts in achieving these goals by implementing a range of projects aimed at reducing emissions and promoting sustainable mobility. Projects under the Ministry’s responsibility focus on modernising the network connectivity of roads, railways, and seaports by developing high-speed rail and electrifying rail networks for freight and passengers, as well as introducing electric vehicles in its public transit fleet in the new capital. Such projects are geared towards contributing to reduced carbon emissions and enhancing overall transport efficiency.

In the electricity sector, Egypt has set a conditional target to reduce emissions by 37% relative to BAU levels, corresponding to a reduction of approximately 80.52 million tonnes of CO₂ equivalent (MtCO₂e). This will be achieved by accelerating the transition to renewable energy sources, with the aim of raising the share of renewables in electricity generation to 42% by 2030, bringing forward a goal initially set for 2035.

In the oil and gas sector, Egypt has committed to a 65% reduction in emissions from associated gases by 2030, equivalent to approximately 2.0 MtCO₂e. This target focusses on minimising flaring and enhancing gas capture and utilisation technologies.

Box 5.1. Policies and measures in the transport sector from nationally determined contributions (2015‑2022)

• the expansion of the Cairo metro network

• the development of the Alexandria Metro (Abu Qir – Alexandria railway line) and rehabilitation of the Raml tram line

• the operation of the New Capital monorail, which is 56.5 km long (including 22 stations), and 6th October monorail, which is 42 km long (including 12 stations)

• the operation of the Light Rail Transit (LRT) electric train and the operation of the rapid electric train

• the transformation of public buses to operate on lower carbon intensive fuels, efficient routes through the adoption of Bus Rapid Transit (BRT) systems.

• the encouragement of bicycle use and construction of designated lanes and other infrastructure

• the implementation of the National Road Project aims to develop new roads, improve interconnections between cities and decrease commuting time and fuel consumption for road vehicles

• the greening of the civil aviation sector.

Source: Egyptian Ministry of Local Development and Environment.

In reinforcing the nation’s resilience to climate change, the Government of Egypt has prioritised water efficiency to address the growing water supply-demand gap caused by rapid demographic growth and dwindling freshwater resources. As a water-stressed nation, Egypt relies heavily on the Nile River for approximately 90% of its freshwater water supply, which provides an estimated 55 billion cubic metres annually – falling short of the 90 billion cubic metres needed to meet national demand (MPED, 2021[2]). Although the supply of water from the Nile has remained unchanged since 1954, the construction of the Grand Ethiopian Renaissance Dam (GERD) in Ethiopia has heightened the vulnerability of Egypt’s upstream water flows – posing an existential threat to the country’s water security (MPED, 2021[2]).

In response to these challenges, Egypt has adopted water management strategies to derisk its water supply, as highlighted in discussions with the Egyptian Water and Wastewater Regulatory Agency (EWRA). These strategies include adopting water-saving technologies in agriculture, industry, and households to reduce overall water waste and optimise its usage. Expanding desalination capacity has also become a central component of Egypt’s strategy to diversify its water sources, particularly as dependence on the Nile River poses risks in times of fluctuating availability. The ministry plans to source water for the Valley and neighbouring areas from the Nile and from desalination plants in coastal areas.

The Ministry of Housing, Utilities and Urban Communities has prepared a strategic plan for seawater desalination to cover drinking water needs from 2020 to 2050, with a total capacity of 8.9 million m3/day in 11 governorates. The first five‑year plan for water desalination covers the implementation of 23 desalination plants with a capacity of 2.6 million m3/day, including (1) provide drinking water needs to meet the current requirements and future increase of population; (2) replace surface water by desalination water in coastal governorates; (3) provide drinking water needs to stop long transmission of surface water governorates; and (4) provide drinking water needs requirements for new urban communities.

Water recycling has emerged as a key pillar of Egypt’s water conservation efforts. Approximately 14.2 million cubic metres of treated water are directed daily to agricultural irrigation, easing the pressure on freshwater resources. This shift is part of a deliberate policy change from safe disposal to resource reuse, particularly in light of climate change and water scarcity challenges. Advanced wastewater treatment facilities, such as the Gabal El-Asfar Wastewater Treatment Plant, illustrate this approach, with daily wastewater treatment capacity of 2.5 million cubic metres.

The National Water and Sanitation Sector Strategy 2050 includes the safe reuse of treated wastewater and agricultural drainage as one of the objectives. Wastewater treatment plants are not limited to Gabal Al-Asfar wastewater treatment plant’s capacity of 2.5 million m3/day. The Extension of Gabal Al-Asfar by 1 million m3/ Day with total cost of EUR 510 million is funded by African Development Bank (AfDB), Agence Française de Développement (AFD) and European Bank for Reconstruction and Development (EBRD).

In line with Egypt’s Green Investment Plan, there is a growing integration of renewable energy into the water sector. According to the Ministry of Housing, Utilities and Urban Communities, investments are being made to power water infrastructure with solar and wind energy that not only help reduce greenhouse gas emissions (GHG) but also ensure that energy demands are met sustainably. The State Ownership Policy includes desalination projects planned to be assigned, executed and financed by the private sector. In the same vein, energy-efficient technologies are being introduced into water treatment and distribution systems to provide reliable water sources, and upgrades to water distribution networks are aimed at minimising leakage, optimising operations, and minimising energy consumption. This can be seen in initiatives launched by the EWRA to improve efficiency and reduce waste across the water and wastewater sector through the use of artificial intelligence (AI)-enabled smart metres to track consumption patterns and optimise resource use.

Over the past decade, Egypt has pursued projects aligned with strategies advancing sustainable infrastructure, with a focus on both resource management and environmental conservation. Along the lines of water conservation and treatment, sludge management has become an important area, where projects aim to divert waste from landfills and repurpose sludge for biogas production and composting. By transforming waste into valuable resources, Egypt aims to reduce methane emissions, conserve landfill space, and support sustainable agricultural practices by using organic fertilisers and sludge byproducts.

Egypt’s State Ownership Policy indicates that sludge management projects are to be assigned and executed by the private sector within three to five years, as part of the National Water and Sanitation Sector Strategy 2050. The Egypt Sludge Management preparatory technical assistance grant is funded by the EIB to produce the necessary background, research, option analysis, feasibility studies, financial model and tender documents to allow moving ahead with financing and implementation of sludge management solutions in the proposed locations. Alex East wastewater treatment plant with a capacity of 800 000 m3/day, was rehabilitated and added sludge digestion to decrease the sludge environmental impacts by decreasing the sludge disposal by 30% and to provide 50% of the power needed for the whole plant. The Extension of Gabal Al-Asfar WWTP by 1 million m3/ Day will integrate wastewater treatment and sludge management to generate biogas/energy.

In parallel, green infrastructure is being integrated into Egypt’s urban development plans. Systems such as rainwater harvesting and greywater reuse are becoming critical in addressing water scarcity and improving resource efficiency. Another focus is on expanding green spaces, particularly in ports and urban areas, to mitigate the urban heat island effect and improve air quality. These initiatives have been essential for Egypt’s climate resilience, as they contribute to both climate adaptation and ecological preservation, and reduce reliance on limited freshwater supplies, and manage water sustainably in growing urban areas. Ministry of Housing also targets to plant 7 million trees in 37 new cities by 2030 at a rate of 1 million trees per year.

Between 2014 and 2024, Egypt secured USD 5.9 billion from development partners, including USD 925 million in grants. This investment has facilitated 56 key projects, contributing to the country’s transformation towards more sustainable infrastructure (Government of Egypt, Ministry of Planning and Economic Development, 2025[3]). The influx of foreign funds demonstrates global confidence in Egypt’s commitment to sustainability and underscores the vital role of international co‑operation in achieving long‑term environmental goals. Together, these initiatives – spanning sludge management, green infrastructure and foreign investment – are supporting Egypt’s transition towards more resiliency and sustainability. However, sustaining this momentum will require greater private sector involvement.

Three main committees established green and sustainable framework for a list of green and sustainable projects (registers):

• First Committee by MoF Decree #798 of 2019: Responsible for selecting environmental projects (green financing).

• Second Committee by MoF Decree #506 of 2020: Responsible for preparing allocation and impact reports.

• Sustainable Finance Committee by MoF Decree #17 of 2023: Combines the responsibilities of the previous two committees and manages the pre‑ and post-issuance stages.

While Egypt has attracted foreign investment into its sustainable infrastructure through these various channels, the country could scale up investment into green projects by engaging institutional investors like pension funds or unlisted funds (see Box 5.2 for insights into the role of unlisted funds on green infrastructure investment). Regarding the latter, unlisted funds have played a significant role in scaling up green infrastructure projects globally. For instance, the UK’s Pensions Minister has called for UK pension schemes to increase investment in domestic assets as the government seeks to make more assets available to invest in so trustees can meet their fiduciary duties (McDougall, 2025[4]). These assts include renewable energy projects such as solar photovoltaic and onshore wind farms, as part of the UK Government’s reform to boost economic growth.

Another example is Saudi Arabia’s Public Investment Fund (PIF), which although not an unlisted fund itself, has partnered with major financial institutions, including BlackRock and Goldman Sachs, to bolster its domestic asset management industry (Reuters, 2025[5]). Most recently, PIF has become the anchor investor in Goldman Sachs Asset Management’s new Gulf-focussed funds, designed to channel global equity capital into investments across the GCC, with a significant share allocated to the kingdom’s infrastructure development pipeline (Reuters, 2025[5]). Leveraging sovereign wealth fund partnerships to attract institutional capital could serve a viable model for Egypt as it seeks to expand private investment in green infrastructure.

Box 5.2. Green infrastructure investment through unlisted funds

Unlisted funds are not just a popular instrument for infrastructure investments in general but are also a key instrument for making infrastructure investments greener. Only 31% of the infrastructure investments made through unlisted funds are currently allocated to green assets. This suggests that there are already substantial green investments through unlisted funds, but also considerable potential to upscale green infrastructure investment through this instrument. The key function of unlisted funds is particularly striking for pension fund investments, as the bulk (75%) of pension fund infrastructure investment is channelled through unlisted funds.

The importance of unlisted funds for greening infrastructure investment lies also in their use as a primary asset classes for investments in the real economy. More than 70% of the investments through unlisted funds (as well as through direct equity and debt) are directed towards physical assets. This means that investments through unlisted funds have an unmitigated effect on the infrastructure composition of the economy and, therefore, can help to directly and quickly shift and scale up green infrastructure in countries’ infrastructure portfolios.

Unlisted funds are also a welcome channel for direct public intervention. Rather than intervene at the project level, public financial institutions such as development banks or green investment banks can set up a fund or co‑invest at the fund level, thereby supporting multiple projects at once. De‑risking instruments or credit-enhancement techniques, among others, have successfully been deployed to mobilise institutional investment to large effect, most notably by the UK Green Investment Bank before being privatised.

Source: OECD (2021[6]), OECD Implementation Handbook for Quality Infrastructure Investment, https://doi.org/10.1787/479131b2-en.

Investments in sustainable infrastructure are also aligned with Egypt’s National Climate Change Strategy (NCCS) 2050, particularly its goal of enhancing adaptive capacity and resilience. Projects associated with the NCCS 2050 aim to reduce climate‑related risks by safeguarding public health, minimising losses to infrastructure and ecosystems, and expanding green spaces. For instance, the Beach Protection Authority and the Ministry of Water Resources and Irrigation have been actively involved in coastal protection projects designed to mitigate erosion and protect key infrastructure from the effects of rising sea levels and extreme weather events, such as the construction of breakwaters in ports like Damietta and Alexandria.

Box 5.3. Contributions to achieving the National Climate Change Strategy objectives

For resilient infrastructure and services in the face of climate change impacts:

• integrating climate adaptation and resilience in infrastructure projects

• capitalising on existing infrastructure to implement new projects related to climate change

• raising the efficiency of road infrastructure, which would reduce periods of traffic congestion

• availability of an appropriate infrastructure that can provide healthcare to targeted individuals and communities

• preserving state assets, such as infrastructure and historical heritage monuments from the impacts of climate change is one of the most important strategic goals due to its great social, economic and cultural dimensions.

Performance Indicators towards NCCS:

• Percentage of the Development of infrastructure in health facilities

• number of infrastructure development projects related to education, digital transformation and distance education technologies.

Source: Egyptian Ministry of Local Development and Environment

In addition to coastal defences, the Ministry of Transport reported that Egypt is investing in climate‑sensitive road and railway systems. Bitumen with high temperature resistance is being used in road construction, while flood diversion strategies are integrated into road network designs. These measures include building obstructive and diversion dams to manage floodwaters as well as constructing bridges over waterways to allow the unimpeded flow of floodwaters. Furthermore, studies on wind and sand movement are critical in protecting desert roads and railways from encroaching sand dunes. The Ministry of Transport has been actively implementing measures to protect ports and coastal roads from erosion and flooding. For instance, extensive breakwaters have been constructed in key ports like Alexandria Grand Port, with barriers stretching up to 6 945 metres to shield infrastructure from rising sea levels and storm surges.

These initiatives have also been supported by technical studies to address immediate climate risks but also anticipate future challenges. For example, the Ministry of Transport is signing a co‑operation agreement with the Egypt-Japan University of Science and Technology to conduct a scientific study on the future impact of climate change on Egyptian ports over the next 50 to 100 years. Additionally, the Ministry of Transport has also committed to adhering to international standards to ensure the quality and sustainability of its infrastructure projects by integrating disaster risk reduction measures.

The technical specifications for these projects are guided by globally recognised frameworks and international consulting firms. Specifically, the ministry implements ISO 9 001 for quality management, ISO 14 001 for environmental management, and ISO 45 001 for occupational health and safety. The application of these standards highlights existing commitments made by the Egyptian Government in meeting both international benchmarks and local demands.

5.1. Climate risk and adaptation

While Egypt’s highly arid climate is naturally predisposed to desertification, the natural phenomenon is being accelerated by climate change, affecting vast areas of arable land and threatening agricultural productivity. Rising temperatures and erratic weather patterns have heightened concerns over water scarcity which already poses a severe risk to food security and economic stability.

The frequency of erratic weather events, including heatwaves and heavy rainfall have already disrupted agriculture activities along the Nile River Delta. Simultaneously, rising sea levels have endangered Egypt’s low-lying Mediterranean shoreline, exposing both regions to flooding, coastal erosion, and land subsidence. In light of these overlapping risks, the Government of Egypt has increasingly recognised climate‑related threats and have developed and pursued a climate adaptation strategy through its National Adaptation Plan (NAP).

Led by the Ministry of Local Development and Environment,2 Egypt’s NAP will serve as a comprehensive framework for climate resilience, integrating risk assessments and sector-specific solutions in consultation with key ministries. The adaptation plan prioritises climate adaptation measures across sectors such as agriculture, water management, and infrastructure. It emphasises urban resilience, drawing from lessons learned from existing cities to inform sustainable urbanisation and human resettlement strategies for new city plans (see Box 5.4 for insights into the Netherlands’ adaptive water management strategy and its integration into national water policy and resource management). Implementation of the NAP has not yet commenced, as Egypt is currently in the Formulation and Advancement Phase of the NAP project, funded by the Green Climate Fund (GCF). The transition to the implementation phase will follow the formal government approval and national release of the NAP document.

The comprehensive risk assessment is set to serve as the foundation for the country’s NAP, highlighting the climate hotspots across all sectors at the governorate level and proposing tailored adaptation measures based on the specific circumstances and coping capacities of each governorate. Vulnerable sectors include, but are not limited to, agriculture, urban areas, biodiversity, groundwater, public health, and tourism. As outlined by the Ministry of Local Development and Environment, the assessment also contains studies on the impacts of climate change and its associated risks on human settlements, water resources, coastal zones, and desert areas.

Regarding human settlements, the study evaluates the impacts of climate hazards on urban areas, including operational strain and damage to infrastructure such as roads, bridges, wastewater treatment plants, and power grids, as well as property losses caused by extreme weather events like flooding, storms, and heatwaves. It also estimates the losses and damages incurred in each city due to the widespread destruction of critical infrastructure such as power grids, communication networks and transportation systems. A separate study on Egypt’s water resources identifies the main climate risks that would affect the stability and operations of infrastructure for irrigation and drainage systems, namely elevated Nile River flood levels due to heavy precipitation in the Upper Nile, intensified rainfall, sea-level rise (increasing backwater effects for pumping stations only), heatwaves, and drought. It also assesses the vulnerabilities of irrigation and drainage systems across governorates to extreme weather events.

The assessment also incorporates topographic and geographic studies. The analysis of Egypt’s coastal zones examines the impacts of climate change on infrastructure along the Mediterranean and Red Seas, identifying the most vulnerable across a 2 100‑kilometre coastline. For desert regions, the study utilises a Dynamic Watershed Simulation Model (DWSM) to delineate watersheds and sub-basins using digital terrain data. Through GIS modelling, it maps valleys and identifies flood hazard zones, categorising them based on the likelihood and severity of flooding. The resulting maps provide insights on vulnerable areas and critical infrastructure at risk. Based on these studies, the NAP will outline specific adaptation measures to strengthen infrastructure resilience to withstand severe climate impacts and prepare Egypt to address the challenges posed by climate change.

One of the flagship projects under the adaptive resilience actions is the USD 105 million project on enhancing climate change adaptation in Egypt’s North Coast and Nile Delta regions – executed by the Ministry of Water Resources and Irrigation and partially financed through a Green Climate Fund’s grant (Green Climate Fund, n.d.[7]). The eight‑year project, which is due to be completed in 2026, aims to employ a nature‑based approach and integrated coastal management to adapt to coastal flooding from sea level rise and increased frequency of storms. The construction of a 69‑kilometer-long low-cost sand dune dikes system along five vulnerable hotspots was completed, reducing the vulnerability of coastal infrastructure, and protecting surrounding rural communities, and agricultural lands. The project will also lead to the development of an integrated coastal zone management plan for the entire North coast of Egypt, and will establish a systematic observation system to monitor the changes of Oceanographic parameters under a changing climate and assess the efficiency of different shore protection scenarios on the coastal erosion and shore stability.

Box 5.4. Adaptive water management in the Netherlands

The Netherlands has a long and robust tradition of living with water. Located in a delta, more than half of the country’s territory and population and two‑thirds of its economic activity are flood prone. Safety against flooding and the management of excess rain have long been the foundation of water management in the Netherlands. Centuries of concerted action and investment helped build and maintain the country’s extensive system of primary and regional flood defences.

A new paradigm towards adaptive water management has put thinking about the future and long-term sustainability at the heart of Dutch water policy. This shift began with the programme “Room for the River” and culminated with the adoption of the Delta Act in 2012. The act established the Delta Programme, the Delta Commissioner, and the Delta Fund to advance an adaptive water management approach that places primacy on a long-term perspective (up to 2100) and flexible strategies to cope with future challenges related to water safety and freshwater supplies.

Adaptive management is seen as a structured, iterative, learning-based process involving the fundamental features of learning and adaptation leading to both improved understanding of the (resource) system and to improved management based on that understanding. This entails integrating a long-term perspective into water management planning with iterative decision making, considering how decisions in the short term potentially enable or foreclose future options, and the use of nature‑based solutions, which can avoid or delay lock-in to capital-intensive, conventional “grey” infrastructure.

Source: OECD (2021[6]), OECD Implementation Handbook for Quality Infrastructure Investment, https://doi.org/10.1787/479131b2-en.

With regards to financing climate adaption projects, one challenge identified by the Ministry of Local Development and Environment is the need to provide a clearer revenue‑generation pathway. The ministry is working to enhance the capacity of government financial systems to develop bankable adaptation projects and exploring opportunities to mobilise private sector involvement. One way the Egyptian Government is trying to fill this gap is through the creation of an operational voluntary carbon market, led by the Financial Regulatory Authority (FRA). This market is supported by the Egyptian Accreditation Council (EGAC), which serves as the official verifier of carbon credits, helping to institutionalise and mainstream carbon trading as a key tool for climate finance.

Egypt has also made progress in advancing its institutional frameworks to incorporate climate considerations into broader governance. Prime Ministerial Decree No. 2466 of 2024 has been promulgated, amending the Executive Regulations of the Environment Law. The amendment introduces “Environmental Sustainability” as a recognised specialisation that necessitates obtaining a license, accreditation, and registration in the official registry of environmental professionals as a prerequisite for practicing in this field. Furthermore, it mandates that environmental impact assessments must address the facility’s effect on climate change and include plans for mitigating such impacts. These changes aim to ensure climate‑related criteria, including greenhouse gas mitigation and energy consumption, are integrated into future projects. Currently, the EIA process categorises projects according to three classes based on their environmental impact: Class A, B and C.

Class A applies to infrastructure projects assessed to have a low or minimal environmental impact. These projects are, therefore, not required to undergo a full EIA but must complete an environmental screening to ensure compliance with the country’s sustainability criteria. Class B covers projects with moderate environmental impact. While Class B projects pose a marginal environmental impact, they require an EIA; however, the assessment they are subject to is less detailed but must adhere to the project meets specific environmental management standards. Finally, Class C classifications are assigned to projects that with significant potential for environmental harm, often involving large‑scale infrastructure developments. These projects require comprehensive EIA studies, detailed analysis, and extensive public consultation.

The Ministry of Local Development and Environment’s amendments seek to strengthen Egypt’s disclosure regime, enhancing transparency and accountability, particularly for high-impact Class C projects. These projects will now be required to publish detailed summaries, including air and water dispersion models. Executive summaries of the EIA studies are available on the Ministry’s platform, enabling public access to critical environmental data prior to community consultation sessions. This ensures that stakeholders – including local communities, environmental experts, and the public – are informed about potential environmental impacts and proposed mitigation measures. While the requirement to publish summaries was introduced in 2023, no updates have been made publicly available yet.

5.2. Environmental and social impact assessments

For large infrastructure projects in Egypt, including those following a PPP model, the government mandates the application of environmental, social and governance (ESG) considerations. These criteria are required for procurement purposes and when offering concessions, ensuring that sustainability is integrated into both public and private sector projects. For PPPs, specific social and environmental performance criteria are built into the contracts to promote responsible development.

For instance, Egypt’s legal framework for public procurement, specifically Article No. 8 of Law No. 182/2018 on Public Contracts, emphasises the integration of ESG considerations into the public contracting process. Under this regulation, entities like ministries, public authorities, and local administration units are required to prioritise sustainable development goals when entering contracts. This is achieved by evaluating not only the immediate cost and quality but also the overall life‑cycle value of the project, ensuring that sustainability standards are embedded from the outset.

In the context of PPPs, the Ministry of Finance’s PPP Central Unit incorporates ESG considerations into its project development process. Environmental consultants, who are often hired alongside financial, technical, and legal advisors, are tasked with conducting environmental and social impact assessments, which are evaluated by the Egyptian Environmental Affairs Agency (EEAA). This protocol aligns with Egypt’s Environmental Law No. 4 of 1994, as all infrastructure projects, especially those involving both public and private sector participation, are required to undergo a comprehensive environmental and social impact study. The collaboration between technical and environmental consultants has been used to ensure that sustainability criteria are integrated into project prequalification and tender documents, enhancing the ESG profile of each project from a project’s design to its procurement strategy.

Both technical and environmental advisors are required to conduct these assessments during project planning to ensure that the environmental and social implications are fully understood and integrated into the procurement strategy. Once a project is approved and before implementation begins, the private sector is obligated to submit a complete environmental impact assessment study. This study must be approved by relevant authorities before the project proceeds, and it is a condition precedent within the contract. These measures ensure that environmental standards are upheld throughout the life cycle of a project, from planning to implementation and operation.

Additionally, Egypt’s public procurement framework not only mandates that public authorities consider economic, social, and environmental factors but also promotes collaboration with private sector actors early in the project development phase. Private actors are involved from the initial feasibility studies, where advisors conduct market-sounding studies and assess community feedback through public consultations, especially regarding environmental concerns. This collaborative approach ensures that both public and private stakeholders are aligned on sustainability objectives from the outset, enhancing the overall ESG profile of infrastructure projects.

Environmental and social impact assessments are not limited to the Ministry of Finance’s PPP Central Unit, as other ministries have also implemented similar assessments. According to the Ministry of Housing, Utilities and Urban Communities, environmental impact assessments are mandatory for all water and wastewater projects, especially those with significant environmental impacts. These assessments evaluate the potential environmental effects during all phases of a project, from construction to decommissioning. Common environmental indicators include air and water quality, soil health, biodiversity, and waste generation and management. While climate related matters are not included in environmental assessments, the Ministry of Local Development and Environment indicated ongoing work to include climate into these assessments as a main pillar. The guidelines for Environmental Impact Assessment (EIA), issued in 2009, are currently being updated.

Egypt’s social impact assessments evaluate the potential effects, both positive and negative, on local communities and stakeholders. The Ministry of Housing, Utilities and Urban Communities uses these assessments to examine factors such as resettlement and displacement, noise levels, access to resources, employment opportunities, gender equity, and community health and safety risks. Social indicators include the number of displaced people, level of access to basic services like water and sanitation, number of jobs created, and effects on local businesses.

With regards to gender issues, a Guideline for Gender-Responsive Planning (Government of Egypt, 2022[8]) was introduced. MPED has applied a methodology for measuring public spending directed toward women and children within the 2024-2025 plan, with approximately 10% of government investments directed toward issues concerning women and children.

As underlined by the Ministry of Transport, these assessments involve the evaluation of multiple alternatives that may be implemented during the environmental study phase. This process allows decision makers to compare different project designs or routes, selecting the option with the least environmental impact while maintaining operational efficiency. They also support the preparation of a comprehensive environmental management plan, which outlines how pollutants – expected during both the implementation and operational phases – will be managed and disposed of. The management plan ensures that emissions, waste, and other environmental risks remain within permissible limits, reducing potential harm to ecosystems and communities. Both impact assessments and subsequent management plans provide Egypt with the ability to balance development goals with sustainability considerations while ensuring that infrastructure projects contribute to long-term environmental stewardship.

While environmental and social impact assessments are in place, aligning them more closely with international ESG standards could further enhance transparency and investor confidence. While the assessments address important indicators and provide mechanisms to mitigate environmental and social risks, further clarity on their alignment with global frameworks, such as the UN Sustainable Development Goals (SDGs), the Equator Principles, or the IFC Performance Standards on Environmental and Social Sustainability, could enhance their transparency and alignment with global best practices. Strengthening this alignment would support Egypt’s efforts to attract international investment and demonstrate its commitment to sustainable development. Co‑ordination is currently underway with the African Development Bank and the World Bank to prepare guidelines for social studies and to incorporate the social dimension into the amendment of Law No. 4 of 1994, its executive regulations, and their subsequent amendments.

5.3. Egypt’s carbon market and regulatory environment

Since 2019, Egypt has pursued efforts to boost green financing through the development of a regulatory and market framework capable of supporting green infrastructure and sustainable finance, with a particular focus on ESG requirements, carbon markets, and green bonds. Regulatory amendments in 2019, as seen through executive regulations of the Capital Market Law, laid the groundwork for green bond issuance and the accreditation of third-party verifiers for green projects. This has further reduced inspection fees for green bond issuers, making the process more affordable.

In July 2021, Egypt’s Financial Regulatory Authority (FRA), the governmental entity mandated to oversee non-bank financial institutions and markets, issued two decrees, Decree No. 107, and No. 108, outlining the disclosure rules for companies in non-banking financial services and the Egyptian Stock Exchange, respectively. The two decrees require listed companies and securities-issuing financial institutions to make annual disclosures in line with ESG practices and Taskforce on Climate‑related Financial Disclosures (TCFD) reporting. The decrees stipulate that in the case when issued capital of a company or its net equity exceeds EGP 500 million, its board of directors must undertake TCFD reporting. The FRA is currently moving towards adjusting this framework to be compliant with the new IFRS S1 and S2 standard.

To operationalise the disclosure requirements, the FRA annexed standardised disclosure forms to the decrees, comprising a structured set of questions mapped to the relevant sustainability and governance standards. Responding entities are required to provide binary (“yes” or “no”) answers, supported by narrative explanations and references where applicable. Recognising the varying levels of market readiness, the FRA granted an initial grace period during which companies were able to benefit from targeted technical support and capacity-building programmes delivered by the Authority, aimed at strengthening their ability to identify, implement, and disclose environmental, social, and sustainability-related governance practices.

In 2025, the FRA took further steps toward enhancing the quality and credibility of sustainability reporting, moving beyond compliance toward performance and content-based assessment. The Authority developed a methodology for content analysis of sustainability and ESG reports, designed to systematically evaluate the substance, consistency, and decision-usefulness of disclosed information. Using this methodology, the FRA conducted a comprehensive analysis of 489 submitted reports, applying a structured assessment framework based on five core analytical criteria. The Authority has confirmed that this content analysis exercise will be conducted on an annual basis, establishing a feedback loop that supports continuous improvement in reporting quality, comparability, and market discipline.

Egypt’s Investment Law (Law No. 72 of 2017) provides a legal basis for investment incentives and guarantees that support projects with environmental and sustainability objectives, including renewable energy and green infrastructure. These incentives complement the FRA’s regulatory initiatives and help create an enabling environment for private sector investment in green infrastructure. This criterion can be seen in Table 5.1.

Box 5.5. Egypt’s carbon market

The carbon market has developed significantly in Egypt, following the below steps by the Financial Regulatory Authority (FRA). Three Validation and Verification Bodies (VVB) were accredited, including two local ones (TUV Nord Egypt and the Center for Organic Agriculture in Egypt (COAE)) and one international one (TUV Nord Cert).

Another Five VVB’s have also submitted applications to join the list, which is still pending.

During the first trading on the exchange, three trades were conducted between certificate issuers and private sector buyers.

Projects were subsequently registered with the Authority, reaching a total of 28 projects registered in the database, with a total of approximately 160 000 voluntary carbon emission reduction certificates traded in April 2025.

International voluntary carbon markets deficiencies:

• Amending the capital market executive regulations to define carbon credits as financial instruments (Decree no. 4664/2022), aligning with the EU model.

• Formation of a high-level carbon market committee (FRA Chairman Decree no. 279 for 2024) led by the FRA Chairman and including representatives from Ministry of Local Development and Environment, CBE, and private sector. This committee’s mandate is to ensure rigorous oversight and regulation, enhancing the credibility and integrity of Egypt’s carbon market. The responsibilities of this committee including the following:

• Setting the selection criteria of validation and verification bodies both the international and domestic Validation and Verification Bodies (VVBs) working in the carbon reduction projects in Egypt.

• Issuing the guideline rules for the integrity and credibility of carbon credits, following the ICVCM and its 10 CORE Carbon Principles (CCP) and the assessment framework.

• Setting the selection criteria for the carbon registries that would be recognised for carbon credit trading, in the Egyptian voluntary carbon market that meets international standards and national needs, according to ICROA and IETA initiatives in this space.

• Drafting the T&D transparency and disclosures requirements.

The very high fixed cost of VVB is a key bottleneck and significantly increase fixed costs to small scale local developers not only in Egypt but also in developing countries,

• To overcome these barriers and facilitate the growth of local VVBs, Egypt brought global practice into the local context.

• Utilising Verra and Gold Standard practices of ISO accreditation but bringing the cost significantly down and basing it locally.

• By encouraging Egyptian Accreditation Council (EGAC) to accredit for the VVBs ISOs, accredit any African firms under the ISO standard.

In August 2023, the FRA issued Decree No. 163/2023 setting out the requirements for the accreditation of Validation and Verification Bodies (VVBs), applicable to both international and domestic entities.

• The decree specifies comprehensive eligibility and governance requirements for VVBs, including technical competence, independence, and the qualifications of their validation and verification teams, in line with international best practices. These requirements include accreditation under ISO 14 065 and ISO 17 029. The draft decree was subject to stakeholder consultation, including engagement with the World Bank.

• As of date, three VVBs have been approved by the FRA – two local entities and one international body – with the approval process ongoing for additional applicants.

Building on this framework, the FRA issued Decree No. 253 of 2024, which further refined the regulatory classification of VVBs by distinguishing between:

• VVBs authorised to conduct validation and verification activities for the purpose of issuing carbon credits, provided they are duly registered with recognised carbon registries; and

• Entities authorised to perform measurement and quantification of greenhouse gas emissions, supporting emissions accounting and reporting processes.

This amendment enhances regulatory clarity across the carbon market value chain, strengthens the integrity of validation, verification, and measurement activities, and supports the operationalisation of Egypt’s regulated voluntary carbon market in alignment with international standards.

In February 2024, FRA issued Decree no. 30/2024 for the requirements for domestic voluntary carbon registries that would be approved by the FRA:

• The decree detailed the requirements to approve the local carbon registries and outlines the requirements for the international voluntary carbon registries to be endorsed by the International Carbon Reduction and Offset Alliance (ICROA). Governance requirements related to the IT and cybersecurity elements ensure the full integrity of the carbon registries and the resulting carbon credits.

• The decree also detailed the other requirements that the voluntary carbon registries must abide by, which include the general requirements, validation and verification processes requirements, the minimum amount of information that must be provided by the registry, and the field inspections requirements.

• This regulation resulted in having two international registries that are communicating with the FRA to be approved according to this decree, and to operate in the local market, (1) BioCarbon Registry, (2) EcoRegisrty both operates in Latin America.

FRA issued Decree no. 31/2024 for the listing and delisting rules for voluntary carbon credits.

• The decree demonstrated the FRA’s requirements for registering the carbon reduction projects in the FRA’s database as the first step to list the carbon credits for trading in the Egyptian Exchange EGX.

• The decree also detailed the process of the listing including the reporting responsibilities of the issuers, the minimum amount of information that must be provided such as the name and the unique ID of the project, the Location of the project, the name of the project developer, the name of the carbon registry, the number of issued carbon credits, and the initial price for trading.

• Besides, the decree set one, unique requirement concerning the listing of voluntary carbon credits forward contracts that mitigate the market and political risks for the traded carbon credits.

FRA introduced the official accounting treatment for carbon credits in the accounting books:

• In March 2024, FRA approved the accounting treatment of carbon credits in the accounting books for all the market participants based on international best practices of different accounting treatments.

  • The case where the carbon credits are issued to the project developer (and being the owner of the reduction project too), thus the Carbon Credits are Intangible Asset in case that the credits will be used for offsetting and Financial Instrument if the credits are to be sold.

  • The case where the carbon credits are issued to the project developer which is a different entity of the one that owns the carbon emissions reduction project, in this case, the Carbon Credits are Financial Instrument.

  • The case where the carbon credits are bought from the market to achieve the carbon neutrality (thus the Carbon Credits are Intangible Asset)

  • The case where carbon credits are bought from the market to be traded (thus the Carbon Credits are a Financial Instrument).

The FRA issued decree no. 1732/2024 regarding Requirements for Securities Brokerage Firms to Obtain FRA Approval for Trading Carbon Credits.

• The FRA set in this decree the general requirements of the brokerage firms to obtain the FRA’s license to trade carbon credits.

In August 2024, the EGX Board issued Decree No. 75/2024, establishing the rules for trading carbon credits and related forward contracts. Additionally, in the same month, the Board of Directors of Tasweyyat approved the settlements rules for carbon credit forward contracts.

Launching Egypt’s first regulated voluntary carbon market

• On 13 August 2024, the FRA launched Egypt’s first regulated voluntary carbon market, with the participation of six ministers, the EGX chairman, and prominent market stakeholders. The market was activated with the execution of three carbon credit trading transactions. The first transaction involved ISIS Food Industries as the buyer and the Egyptian Bio-Agriculture Association (EBDA) as the seller, facilitated by Belton Securities Trading Company, with 500 voluntary carbon certificates sold at LE 1 040. The second transaction saw DATEX purchasing around 1 500 certificates at USD 18 per certificate from VNV Advisory. Lastly, SCB Environmental Markets made a purchase, which was executed by CI Capital Securities Trading.

In December 2025, the FRA further advanced market transparency and market activation by launching the first interactive dashboard dedicated to the Egyptian carbon market, providing real-time, publicly accessible information on registered carbon projects, issued credits, validation and verification status, and participating market entities. The dashboard is designed to enhance market integrity, support data-driven supervision, and facilitate access for regulators, investors, project developers, and other stakeholders.

In parallel with the launch event, the FRA issued a letter of interest addressed to the demand side of the market, as well as to carbon projects registered within the database, signaling the operational readiness of the market and encouraging participation. The letter explicitly invited interested entities to engage with listed projects and utilise verified carbon credits available on the platform for the purpose of offsetting their greenhouse gas emissions, thereby supporting demand creation, market liquidity, and the effective use of carbon credits within Egypt’s regulatory framework.

FRA is aiming at the following in the near future:

1. Carbon credit rating agencies regulation: Ensuring that carbon credits are properly evaluated for both environmental impact and financial value, fostering greater market transparency and reliable assessments of credit quality.

2. Carbon projects and credits issuance insurance: To address the risks associated with carbon project failures, particularly focussing on non-delivery, under-delivery, or delays in carbon credit issuance.

3. Mandating carbon emissions offsetting using carbon credit by financial institutions: To raise awareness and encourage climate action among Egyptian corporates while supporting SDG-aligned projects

Source: Financial Regulatory Authority of Egypt

Table 5.1. Sustainability reporting for listed companies

Type of Disclosure	Type of Activity	Selection Criteria
ESG Reporting	Listed Companies	All listed companies must comply
	Capital Market	Companies with an issued capital or net equity of EGP 100 million or more.
	Insurance Companies
	Financial Sector including: Mortgage Finance Financial Leasing Consumer Finance Factoring Companies Microfinance
TCFD Reporting	All companies regulated by the Authority (e.g. non-bank financial intermediaries or NBFIs) whether listed or unlisted	Companies with an issued capital or net equity of EGP 500 million or more.

Source: Financial Regulatory Authority of Egypt.

Although the FRA does not grant direct incentives such as subsidies or tax exemptions targeting green infrastructure, its broader efforts in establishing a voluntary carbon market (VCM) play a pivotal role in stimulating investment in environmental projects. This platform for carbon credit trading encourages investment in carbon reduction projects, many of which involve green infrastructure, as developers seek to generate carbon credits for trading.

The development of green finance in Egypt has been closely tied to the country’s commitment to climate action, exemplified by its issuance of the first sovereign green bond in the Middle East and North Africa in September 2020. While the FRA focusses on regulating corporate finance and debt instruments, the Ministry of Finance handles sovereign debt, including green bonds. Nevertheless, the FRA has worked to create a supportive environment for the issuance of sustainable financial instruments, issuing several decrees in recent years.

Notably, the 2022 Prime Minister Decree No. 3456/2022 introduced six new financial instruments, including Green Bonds, Social Impact Bonds (SIBs), and Sustainability-Linked Bonds (SLBs). These innovations aim to expand the range of investment opportunities available in sustainable sectors. Corporate issuances, such as CIB’s green bonds in 2021 and Tasaheel’s social bonds in 2023‑2024, are reflective of this progress. The FRA’s regulatory framework, including the creation of a local market for verifiers, is designed to reduce costs and enhance market efficiency, signalling the government’s commitment to creating a robust green finance market.

Box 5.6. Egypt’s sustainable finance instruments

FRA Green Bonds Regulations (Board of Directors Decrees):

In 2022, Prime Minister Decree No. 3456/2022 on Amending Provisions of the Executive Regulations of the Capital Market Law. The amendment entails the introduction of six new financial instruments, namely Sustainable Development Bonds (SDBs), Sustainability-Linked Bonds (SLBs), Social Impact Bonds (SIB), Women Empowerment Bonds, Climate Bonds, and Transition Bonds (Brown Bonds):

• The Board approved a 50% discount on current examination fees for the three funds upon issuing investment certificates whose proceeds are pumped into such projects.

• In 2019: amendments of executive regulation of the capital market law to regulate and facilitate the issuance of green instruments including green bonds and green sukuk.

• No.113 of 2019: Regarding the list of international third-party verifiers for green projects that included the most prominent institutions in the global market with the possibility to add additional institutions to the list.

• No.127 of 2019: Regarding registration requirements for local third-party verifiers registry in FRA for local experts and consulting institutions who may carry out the evaluation and testing of green and sustainable projects. It is worth mentioning that the aim of this decree is to develop the local market and create a list of efficient verifiers on the local basis to facilitate and support the green bond issuance.

• No.141 of 2019: Regarding reducing Green Bonds Issuers from total cost of FRA inspection services.

As per these regulations, the following issuances took place:

• In 2021: one green bonds issuance by CIB valued USD 100 000

• In 2024: three sustainability bonds by TASAHEEL company valued EGP 11 556 000 000

• In 2025: sustainable development bonds by the Arabic African bank valued USD 499 000 000.

Source: Egypt FRA.

As Egypt takes steps to develop its carbon market, the FRA has sought to integrate carbon credits into the country’s financial system. The regulatory framework for carbon trading was significantly enhanced with Decree No. 4664/2022, which classified carbon credits as financial instruments, aligning with EU practices. The creation of a high-level carbon market committee comprising representatives from the CBE, FRA, the Egyptian Exchange (EGX), the Ministry of Local Development and Environment, and private sector participants is designed to ensure that the market is well-governed and aligned with international best practices.

To further support the market, the FRA has introduced rules for the trading and settlement of carbon credits, as well as board decrees for carbon registries and carbon credit validation and verification bodies (VVBs) (see Box 5.5). These initiatives, along with the establishment of local VVBs and carbon credit listing on the EGX, provide a comprehensive infrastructure for trading voluntary carbon credits. This effort has enhanced market transparency, improved investor confidence, and positioned Egypt as a regional leader in the carbon credit market, particularly after its designation as an African carbon credit hub during COP27 (see Box 5.7 for an example of cap-and-trade, showcasing Tokyo’s emissions trading system and its approach to covering carbon emissions).

While Egypt does not yet have a dedicated financial instrument for climate‑resilient infrastructure, the FRA is laying the groundwork for the introduction of ESG funds through the amendment of the Executive Regulations of the Capital Market Law (Decree No. 3045/2023). These funds are envisioned to provide an avenue for financing infrastructure projects that promote resilience to climate change, with a focus on long‑term sustainability and a decree is envisaged to be issued in Q1 2026.

Additionally, the market for sustainability-linked instruments and ESG investment funds is expected to grow, providing new capital inflows into climate‑resilient infrastructure projects. As Egypt continues to develop its regulatory framework, including for ESG funds, the potential for using specialised funds to finance such infrastructure will likely increase, enhancing the country’s ability to address climate challenges through sustainable investment.

Egypt’s regulatory framework for sustainable finance, including the voluntary carbon market and the growing green bond market, is setting the stage for significant private sector investment in green infrastructure. The FRA’s ongoing efforts to create a transparent and efficient carbon trading market, coupled with the development of new financial instruments like green and sustainability bonds, will play a crucial role in meeting the country’s green infrastructure goals. Moreover, as Egypt develops sustainable financing mechanisms for climate‑resilient infrastructure, the continued evolution of its sustainable bond market, along with the introduction of ESG funds and carbon credit trading, will be key to supporting long‑term sustainability and resilience.

To address long-term sustainability and resilience, consolidation of the various ministries’ efforts could be helpful.

Box 5.7. Covering indirect emissions: Tokyo’s emissions trading system

The Tokyo municipal emissions trading system covers both direct and indirect emissions. Indirect emissions are included in the emissions trading system specifically to cover emissions from electricity consumption in commercial buildings. In Tokyo, electricity represents 40% of energy consumed, but 90% of this electricity is produced outside of the geographic boundaries of the city. A fixed emissions factor is therefore used to calculate CO₂ emissions from electricity use, to separate out efforts made to reduce electricity demand from fluctuations in the CO₂ emission factor on the supply side. Since 2006, facilities have been required to calculate and report their emissions to the national government, including CO₂ emissions related to fuel usage, and the use of electricity and heat. This mandatory data collection in the years before the emissions trading system is recognised as a key to the success of the programme, allowing facility-level understanding of indirect emissions through electricity and heat use.

Source: OECD (2021[6]), OECD Implementation Handbook for Quality Infrastructure Investment, https://doi.org/10.1787/479131b2-en.

5.4. Sustainable finance and green bonds

Egypt has made progress in sustainable finance, beginning with the issuance of sovereign green bonds in 2020. This issuance set a benchmark for the private sector and led to subsequent green issuances by one of the largest private banks in the country, Commercial International Bank (CIB). Building on this success, Egypt transitioned from a Sovereign Green Framework to a Sovereign Sustainable Financing Framework, enabling the country to expand its ability to issue labelled bonds. This framework not only supports the country’s green investment plans but also positions Egypt as a leader in sustainable finance in the region. In addition, Egypt’s Integrated National Financing Strategy provides a roadmap that aims at closing the financing gap, increasing resource flows to key sectors, fostering innovative financing mechanisms, and strengthening private sector engagement in sustainable development.

Egypt’s entry into international sustainable finance markets continued with the issuance of a sustainable Panda bond in the Chinese market, marking a first for both Egypt and the African continent. Despite its non-investment-grade credit rating, the successful issuance demonstrated Egypt’s growing capacity to access diverse international markets for ESG financing. Moving forward, the government plans to direct more financing toward social investments, signalling an ongoing commitment to integrating sustainability and social responsibility into its broader financial strategy.

Since the issuance in 2020 of a Green Bond, to publishing the Sustainable Framework and issuing the Panda Sustainable Bond in 2023, the Green/Sustainable Finance Committee (Working Groups from different Ministries) have achieved a number of milestones:

• the Ministry of Finance contributed to the Sustainable Development Strategy 2030, through the formulation of the Sovereign Green Financing Framework in 2020

• The Sovereign Green financing framework to Sovereign Sustainable Financing Framework was upgraded in 2022

• Sovereign Sustainable Financing Framework acquired a high sustainable quality score by SPO Moody’s Investor Service

• October 2023 First Sustainable Panda Bond Issuance in Africa.

Sovereign Sustainable Allocation and Impact reports acquired “Aligned to the commitments set forth in its Sovereign Sustainable Financing Framework, & positive Disclosure of Proceeds allocation and soundness of reporting indicators” review from ISS Corporate early 2025.3

In November 2024, Arab African International Bank (AAIB) issued a USD 500 million sustainability bond to accelerate Egypt’s green transition and provide crucial financing to micro, small, and medium enterprises (MSMEs).

Looking ahead, the FRA remains focussed on advancing Egypt’s sustainable bond market. The introduction of a variety of green and sustainability-linked bonds has been a key element in attracting private sector investment for green infrastructure projects. The market’s development, facilitated by regulatory changes and incentives such as reduced examination fees for related projects, has laid the foundation for the growth of sustainable bonds in Egypt.

The FRA’s commitment to GSS+ bonds is particularly important as it seeks to create a robust market for green infrastructure. These bonds are seen as a mechanism to finance projects aimed at achieving Egypt’s green infrastructure goals, especially as the country seeks to address climate change and sustainable development needs. Moving forward, it is anticipated that the issuance of sustainable bonds will increasingly be used as a financing tool for infrastructure projects, including those focussed on resilience and climate adaptation.

Egypt’s experience with green and sustainable bond issuances has also served as a model for integrating ESG criteria into other financial strategies and instruments. In July 2021, the Central Bank of Egypt (CBE) introduced the Sustainable Finance Guiding Principles to set the general framework for sustainable finance within The Egyptian Banking Sector. There are six principles aimed to prime the banking sector for a steady transition to more sustainable practices, where one of these principles (Principle 5) designed to apply the principles of sustainability into the banking’s internal activities and operations. They also encourage the use of digital financial services to reduce carbon footprints and emphasise the identification and classification of climate‑related risks.

The Sustainable Finance Guiding Principles are in line with international practices/standards and focus on six core principles:

1. Building the Necessary Capabilities and Knowledge

2. Enhancing Sustainable Finance

3. Involvement of the Stakeholders

4. Managing Climate Change Risks

5. Applying the Principles of Sustainability to the Bank’s Internal Activities and Operations

6. Reporting Framework

The CBE’s primary objective was to raise awareness within the banking sector and prepare financial institutions for Sustainable Finance Binding Regulations which went into effect in November 2022. Under these regulations, banks are required to establish independent sustainability and sustainable finance departments staffed with credit and risk experts reporting directly to their Chief Executive Officers or their Deputies. Additionally, Banks are mandated to integrate sustainability and sustainable finance in their policies and procedures. Banks also must consult with Ministry of Local Development and Environment-accredited environmental experts to assess environmental risks associated with large corporate projects financed by the bank.

The Sustainable Financing Binding Regulations issued in November 2022 introduced new reporting requirements for banks in the Egyptian Banking Sector which is also in line with Principle 6 of the Sustainable Finance Guiding Principles. Banks are now mandated to provide a status report on the implementation of the Sustainable Finance Guiding Principles on a semi‑annual basis, a quantitative report on banks’ sustainable financing activities within their credit portfolios on a quarterly basis and an annual sustainability report in adherence to the standards set by the Global Reporting Initiative (GRI), starting in 2023.

Given the expected impact of the EU-Carbon Border Adjustment Mechanism (CBAM) on the profits of banks exporting clients in the targeted sectors, the costs of complying with its standards, and its effect on potential risks in banks. CBE issued binding regulations on 15 June 2025 mandating all banks to examine their credit portfolios to identify exporting clients in the targeted sectors and collect data related to their export activities. Moreover, banks are mandated to submit the collected data to the CBE semi‑annually. This is part of CBE’s efforts to further mitigate related risks and ensure the alignment with international developments.

The establishment of the framework for integrating ESG factors provides an important structural basis and presents an important milestone in the CBE’s and the banking sector sustainable finance journey. However, the full impact on investor preferences and demand patterns is still unfolding.

Although the entry into force of the regulations in 2023 marked a significant structural shift that embedded sustainability considerations into banks’ reporting and classification processes, the data available from banks and the CBE are not yet comprehensive enough to draw definitive conclusions. This reflects the current state of data availability and accuracy which is a global challenge. However, classification processes continue to be developed and aligned across the banking sector.

In this context, banks share their sustainable finance reports to CBE for review and feedback prior to final summation. This process contributes to enhancing banks capacity along with improving data quality and consistency across the sector. Banks are still in the process of refining their methods for classifying green sectors according to the new regulations given that CBE is leading an extensive Capacity building efforts within the sector with number of national and international partners.

While the foundational regulatory measures and operational building blocks for sustainable finance are in place, the quality of data and the observable shifts in investors behaviour are still evolving. As data quality improves, these foundations are expected to translate into clearer market signals towards changing investors behaviour, and clearer trends in sustainable infrastructure financing

Although the framework for integrating ESG factors has been established, it is still early to gauge its full impact on investor preferences and demand for sustainable infrastructure projects. Since the regulations came into effect in 2023, the data available from banks and the CBE are not yet comprehensive enough to draw definitive conclusions. Furthermore, banks are still in the process of refining their methods for classifying green sectors according to the new regulations. As a result, while the initial steps towards sustainable finance are in place, the quality of data and the observable shifts in investor behaviour are still evolving.

The implementation of the CBE’s guiding principles and regulations is expected to significantly influence the infrastructure financing market. The CBE’s framework, which aligns with national strategies for sustainable development, like Egypt Vision 2030, and the transition to a low-carbon economy, is anticipated to direct more funds towards sustainable infrastructure projects. This shift is further supported by the sustainable mandates of international financial institutions operating in Egypt.

As highlighted by the Ministry of Finance, public-private partnerships in Egypt are increasingly integrating these sustainability considerations, as demonstrated by the success of recent sovereign green bonds and the growing emphasis on social investments. The framework for sustainable finance, combined with strong environmental assessments, provides a pathway for aligning infrastructure financing with ESG goals while promoting long-term, sustainable development (see Box 5.8 on how sustainable bonds are used to finance climate‑resilient infrastructure and address environmental challenges).

Box 5.8. Sustainable bonds: Case studies in financing climate‑resilient infrastructure

Green and sustainable bonds have become popular instruments in financing climate‑resilient infrastructure, enabling issuers to fund projects that address environmental challenges while promoting sustainable developments. Successful applications of green and other sustainable bonds can be observed in the following case studies:

Green municipal bonds, Commonwealth of Massachusetts, the United States

In June 2013, the Commonwealth of Massachusetts issued its first green municipal bonds, raising USD 100 million to finance environmental and sustainability-focussed projects. The bond proceeds were allocated to projects related to improving the energy efficiency of state buildings, river revitalisation, habitat restoration, and clean drinking water. Before issuing the green bonds, the Commonwealth assessed its green infrastructure needs and evaluated whether green bonds could effectively support these goals. Discussions with socially responsible investment (SRI) firms and other relevant stakeholders confirmed strong market interest.

After issuing the green bonds, the Commonwealth found that marketing the green bond offering was easier than traditional municipal bonds due to the persuasive story about their impact and the types of projects the proceeds were going to fund. Additionally, local residents and retail investors who had not previously considered municipal bonds were drawn in by the sustainability focus as primary beneficiaries of these projects. As a result, demand far exceeded supply as the green bond issuance was oversubscribed by 30%. The bonds, rated AA+ by S&P, also priced favourably.

Following the success of the 2013 issuance, the Commonwealth launched a larger USD 350 million green bond offering in 2014 which maintained the same credit rating and saw greater investor demand – three times oversubscribed. The proceeds from the second round were earmarked for water infrastructure projects, offshore wind port facilities, energy-efficient buildings, and environmental restoration efforts.

Green bonds and the city of Cape Town, South Africa

Between 2015 and 2017, Cape Town faced a severe drought, prompting the city to issue its first green bond in 2017. Valued at ZAR 1 billion (South African Rand) (approximately USD 75.2 million that year), the bond aimed to finance projects aligned with the city’s sustainability development goals and address the downstream effects posed by climate change. Proceeds from Cape Town’s green bond, which was accredited by the Climate Bonds Initiative (CBI), were allocated to refinance green projects pertaining to water security, water sanitation and treatment, coastal protection and rehabilitation, and energy efficiency, including the introduction of electric buses.

In addition to the CBI accreditation, Cape Town’s green bond became the first bond in South Africa to receive a Moody’s certification, earning a GB1 (excellent) rating. This recognition, alongside its listing on the Johannesburg Stock Exchange (JSE) and Cape Town’s commitment to provide regular reporting to bondholders regarding the use of the bond’s proceeds, strengthened investor confidence by ensuring transparency and alignment with environmental standards. The JSE listing provided an opportunity for issuers to meet investor demand for ESG-aligned investments.

Blue bonds in the Seychelles

In 2018, Seychelles launched the world’s first sovereign blue bond, raising USD 15 million to support marine conservation and sustainable fisheries. The blue bond was structured with assistance from the World Bank, which provided a USD 5 million guarantee, alongside a USD 5 million concessional loan from the Global Environment Facility (GEF) to partially cover interest payments.

The bond proceeds were directed towards projects and initiatives expanding marine protected areas, improving the governance of priority fisheries, and developing Seychelles’ blue economy strategy. Under the South West Indian Ocean Fisheries Governance and Shared Growth Project (SWIOFish3), the Seychelles has planned to use the blue bond’s proceeds as grants and loans through the Seychelles Conservation and Climate Adaptation Trust (SeyCCAT) and the country’s development bank. The funds would later be distributed to support investments in scientific research, logistical support services, eco-labelling, value‑added processing, and skills development as well as public investment to restore fish stocks and address overfishing.

Given that the fishing sector accounts for 95% of Seychelles’ total export value and employs about 17% of the population, this investment has been pivotal to creating new commercial opportunities and ensuring sustainable economic and environmental practices.

Source: World Bank (2018[9]), Seychelles launches World’s First Sovereign Blue Bond, https://www.worldbank.org/en/news/press-release/2018/10/29/seychelles-launches-worlds-first-sovereign-blue-bond; GI Hub (2021[10]), Cape Town Green Bond, https://www.gihub.org/innovative-funding-and-financing/case-studies/cape-town-green-bond/; UNDESA (n.d.[11]), Seychelles blue bond: transitioning to sustainable artisanal fisheries and strengthening value chain benefits through innovative finance and partnerships, https://sdgs.un.org/partnerships/seychelles-blue-bond-transitioning-sustainable-artisanal-fisheries-and-strengthening; McManus (2022[12]), Case study: Green municipal bonds in Massachusetts, USA, https://lgiu.org/case-study-green-municipal-bonds-in-massachusetts-usa/; Climate Bonds Initiative (2015[13]), The Green Muni Bonds Playbook, https://www.climatebonds.net/files/files/Green%20City%20Playbook.pdf.

Table 5.2. Key challenges and policy recommendations for the sustainable infrastructure

Challenges	Recommendations
A major challenge facing financing climate adaption projects. is the need to provide clearer revenue‑generation pathways. The Ministry of Local Development and Environment is working to enhance the capacity of government financial systems to develop bankable adaptation projects and explore opportunities to mobilise private sector involvement.	X.a.) Examine every potential financing avenue that could be made available, as well as pursuing measures that mainstream climate resilience of infrastructure, like reporting requirements and inclusion of climate risk in EIA, to strengthen climate resilience of infrastructure assets. Work on voluntary carbon market could contribute, and reporting requirements should go beyond Class C projects, to ensure the mainstreaming of climate resilience.
For large infrastructure projects in Egypt, including those following a PPP model, the government mandates the application of environmental, social and governance (ESG) considerations. These criteria are required for procurement purposes, and when offering concessions, ensuring that sustainability is integrated into both public and private sector projects. However, whether these requirements are being co‑ordinated and aligned is unclear. While ESG considerations are integrated into project assessments, aligning them more closely with international standards could provide mechanisms to mitigate environmental and social risks and hence improve investor confidence.	X.b.) Take stock of the ESG requirements towards large infrastructure projects, to ensure that they are being applied in a consistent manner, at a standard that could be internationally recognised. In particular, given the export orientation that country is looking towards, the EU Taxonomy and Corporate Sustainability Due Diligence Directive (CSDDD) would be important rules to keep track of and bear in mind when developing ESG standards, especially for SOEs. This will also require developing experts who can carry out the external evaluation to certify their compliance with this as well.
Egypt does not yet have a financial instrument that can contribute to climate‑resilient infrastructure, although the FRA is laying the groundwork for the introduction of ESG funds through the amendment of the Executive Regulations of the Capital Market Law (Decree No. 3045/2023).	XI.a.) Continue to consider ways to take advantage of how green and sustainability bonds could be further leveraged in Egypt with the support of credit enhancements. XI.b.) Create diverse financing pathways for greenfield infrastructure projects including using blended finance tools to attract private capital, through assessment of approaches that could attract private capital and in particular working on improving the investment environment’s certainty and predictability, and assessing whether existing platform are performing in the way they were intended to.
The establishment of the framework for integrating ESG factors provides an important structural basis and presents an important milestone in the CBE’s and the banking sector’s sustainable finance journey. However, the full impact on investor preferences and demand patterns is still unfolding. Although the entry into force of the regulations in 2023 marked a significant structural shift that embedded sustainability considerations into banks’ reporting and classification processes, the data available from banks and the CBE are not yet comprehensive enough to draw definitive conclusions. Banks are still in the process of refining their methods for classifying green sectors according to the new regulations given that the CBE is leading extensive capacity building efforts within the sector with a number of national and international partners. The refinement of methods and completion of classification processes across the banking sector is essential to boost investor access to finance.	XI.c.) Expedite regulatory changes to allow the operation of ESG funds in the domestic market given that the market for sustainability-linked instruments is expected to grow, and it could provide new capital inflows into climate‑resilient infrastructure projects. Assessing the implementation of the framework, and adjusting as necessary, will be critical to have robust instruments which are externally recognised.

Note: The numbering in the recommendation column reflects the numbering applied in list of policy recommendations in Section 1.6.

References

[13] Climate Bonds Initiative (2015), The Green Muni Bonds Playbook, https://www.climatebonds.net/files/files/Green%20City%20Playbook.pdf.

[10] GI Hub (2021), Cape Town Green Bond, https://www.gihub.org/innovative-funding-and-financing/case-studies/cape-town-green-bond/.

[3] Government of Egypt, Ministry of Planning and Economic Development (2025), International cooperation and partnerships for growth and employment, https://mped.gov.eg/adminpanel/NationalNarrative/NationalNarrativeNew/pdfs/Partnerships.pdf.

[8] Government of Egypt, M. (2022), Conceptual Manual for a gender-responsive sustainable development plan, https://mped.gov.eg/DynamicPage?id=104&lang=en&Gender-Responsive-Planning.

[7] Green Climate Fund (n.d.), Enhancing climate change adaptation in the North coast and Nile Delta Regions in Egypt, Green Climate Fund, https://www.greenclimate.fund/project/fp053 (accessed on 13 December 2024).

[1] IEA (2025), Egypt’s Second Updated Nationally Determined Contribution (2023 Update), https://www.iea.org/policies/25031-egypts-second-updated-nationally-determined-contribution-2023-update.

[4] McDougall, M. (2025), Pensions minister says schemes must invest more in UK, https://www.ft.com/content/d21c92e6-ab82-471d-aaac-400c5c278520.

[12] McManus, K. (2022), Case study: Green municipal bonds in Massachusetts, USA, https://lgiu.org/case-study-green-municipal-bonds-in-massachusetts-usa/.

[2] MPED (2021), Egypt’s 2021 Voluntary National Review, Ministry of Planning and Economic Development, Cairo.

[6] OECD (2021), OECD Implementation Handbook for Quality Infrastructure Investment, OECD Publishing, Paris, https://doi.org/10.1787/479131b2-en.

[5] Reuters (2025), Saudi’s PIF to anchor new Gulf-focused funds from Goldman Sachs, https://www.reuters.com/business/finance/saudis-pif-anchor-new-gulf-focused-funds-goldman-sachs-2025-03-03/.

[11] UNDESA (n.d.), Seychelles blue bond: transitioning to sustainable artisanal fisheries and strengthening value chain benefits through innovative finance and partnerships, https://sdgs.un.org/partnerships/seychelles-blue-bond-transitioning-sustainable-artisanal-fisheries-and-strengthening.

[9] World Bank (2018), Seychelles launches World’s First Sovereign Blue Bond, https://www.worldbank.org/en/news/press-release/2018/10/29/seychelles-launches-worlds-first-sovereign-blue-bond.

Notes

← 1.  The sand engine or sand motor is a type of beach nourishment where a large volume of sediment is added to a coast. The natural forces of wind, waves and tides then distribute the sand along the coast over many years, preventing the need for repetitive beach nourishment. The method is expected to be more cost effective and also reduces the repeated ecological disturbances caused by replenishment.

← 2.  Through a Cabinet change in February 2026, the Ministry of Local Development and Environment has been merged with the Ministry of Local Development to become the Ministry of Local Development and Environment.

← 3.  For Sovereign Green and Sustainable Reporting led by MOF in co‑operation with (SFWG and GFWG) “Ascendingly”:

• Most Recent Green Bond Allocation & Impact Report that was published in 2022

• SPB Sustainable Panda Bond 2023, [Allocation & Impact Reports Review -ISS Corporate- 2025]

• SPB Sustainable Panda Bond 2023, [First Impact Report 2024]

• SPB Sustainable Panda Bond 2023, [First Allocation Report 2024]

• SSFW Sovereign Sustainable Financing Framework SPO [2022]:

• SSFW sovereign Sustainable Financing Framework [2022]:

• Green Bond 2020 issuance [Impact and Allocation Report 2021 Independent Review]:

• Green Bond 2020 issuance [Impact and Allocation report 2021]:

• Green Loan 2021 obtained [Impact and Allocation report 2022]

• Green Bond 2020 issuance [Impact and Allocation report 2020]:

• SGFF Sovereign Green Financing Framework SPO [2020]:

• SGFF Sovereign Green Financing Framework [2020]