Egypt’s AAIB Issues $500 M Sustainability Bond to Support Green Transition and MSMEs

The funds raised will be directed towards green projects and supporting the growth of micro, small, and medium-sized enterprises (MSMEs) in Egypt, contributing to the country’s broader green transition goals.

Arab African International Bank (AAIB) has successfully issued a $500 million sustainability bond, marking a significant milestone in Egypt’s green and social finance efforts. This bond, the first of its kind in Egypt and the largest issued by a private bank in Africa, has attracted investment from IFC, the European Bank for Reconstruction and Development (EBRD), and British International Investment (BII). The funds raised will be directed towards green projects and supporting the growth of micro, small, and medium-sized enterprises (MSMEs) in Egypt, contributing to the country’s broader green transition goals.

The sustainability bond allocates 75 percent of its proceeds to green financing, such as projects that enhance the industrial energy efficiency, small-scale renewable energy initiatives, and green buildings. The remaining 25 per cent will be dedicated to social assets, with a focus on inclusive finance and supporting MSMEs—critical pillars for inclusive economic growth and development.

Supporting Egypt’s Green and Economic Transition

Egypt has set ambitious climate goals, with the government aiming to reduce greenhouse gas emissions by 37 per cent by 2030. The sustainability bond is a key tool to help meet these objectives by increasing access to financing for businesses and projects that contribute to reducing emissions or promoting environmental protection. Furthermore, the bond will also address the growing need for financing MSMEs, which are vital to Egypt's economy.

Tamer Waheed, AAIB’s Vice Chairman & Managing Director, emphasized the bond’s strategic importance: “This bond is more than just a financial instrument; it is a strategic extension of our core business model, seamlessly integrating sustainability into our operations. It underscores our commitment to responsible growth and creating a sustainable future for Egypt’s economy.”

Empowering Green Finance and Financial Inclusion

The bond also reflects a broader international confidence in both AAIB’s financial strength and Egypt’s economic potential. Sérgio Pimenta, IFC’s Vice President for Africa, highlighted the bond’s role in promoting financial inclusion and sustainable finance. “As the largest investor in Egypt’s first sustainability bond, we are supporting a greener, more climate-resilient future for Egypt and aligning with the country’s climate commitments,” he said.

Similarly, Francis Malige, Managing Director for EBRD’s Financial Institutions, emphasized the bond’s potential to set a benchmark for future sustainable finance issuances in Egypt, noting that it would increase capital flows towards green and social projects while providing long-term funding for the country’s development.

British International Investment’s Role in Egypt’s Climate Transition

Sherine Shohdy, BII’s Regional Director for North Africa, underscored Egypt’s strategic importance to the institution. As of 2023, BII’s portfolio in Egypt was valued at $707.5 million, with investments in 70 companies that support over 91,000 jobs. BII’s focus in Egypt spans financial services, renewable energy, healthcare, and infrastructure. Shohdy expressed pride in BII’s investment in AAIB’s sustainability bond, saying, “This investment will provide crucial financing to help businesses take steps towards the green transition. Over the past two years, BII has committed over £1.2 billion in climate finance and will continue to support the shift to a net-zero economy.”

A Strategic Move for a Sustainable Future

This sustainability bond is a landmark financial instrument for Egypt’s green transition, offering a model for other nations in Africa and the Middle East to follow. The funds raised will support environmentally responsible projects while addressing financial inclusion and economic resilience through the empowerment of MSMEs. With the backing of leading international investors, the bond represents a collaborative effort to create a sustainable and climate-resilient economy for Egypt and its people.