Egypt now requires non-bank financial institutions above EGP 100 million ($2.2 million) in capital to disclose emissions and offset 20% through regulated carbon credits.
Compliance is tied to operating licenses, embedding climate accountability into financial supervision.
The rule is designed to scale demand for Egypt’s voluntary carbon market and strengthen sustainable finance frameworks.
Egypt’s Financial Regulatory Authority (FRA) has mandated carbon disclosure and offsetting requirements for non-bank financial institutions, marking a significant shift in how environmental risk is integrated into financial oversight. Decision No. 36 of 2026, announced on 15 February, requires firms above a defined capital threshold to measure emissions, disclose their carbon footprint annually, and offset a portion through regulated market mechanisms.
The regulation applies to non-bank financial institutions with issued capital or net equity exceeding EGP 100 million. These firms must report Scope 1 emissions from operations and vehicles and Scope 2 emissions from purchased electricity and cooling, aligning with internationally recognized accounting standards. Reports must be verified by accredited bodies and submitted by the end of June 2026, with subsequent filings aligned to fiscal year-end reporting cycles.
Failure to comply will trigger administrative penalties and may affect licensing status, elevating climate disclosure from voluntary practice to a regulatory obligation.
Offset Requirement Anchors Voluntary Carbon Market
A central pillar of the decision requires firms to offset approximately 20% of their disclosed emissions. This must be achieved through purchasing emission-reduction certificates from Egypt’s regulated voluntary carbon market within 90 days of filing.
The FRA oversees the market, which serves brokerage firms, insurers, asset managers, consumer finance providers, and other non-bank financial entities. Officials view the offset requirement as a mechanism to stimulate demand and strengthen market liquidity.
Egypt’s voluntary carbon market currently includes roughly 170,000 issued carbon certificates, 34 registered projects generating credits, and eight accredited verification bodies responsible for data integrity. By linking compliance to licensing requirements, regulators aim to ensure sustained participation and credibility.
The regulatory authority derives its enforcement power from a broader framework that authorized the FRA to oversee carbon market issuance and enabled the Egyptian Exchange to launch Africa’s first regulated voluntary carbon market.
Sustainable Finance Architecture Expands
Minister of Investment and Foreign Trade Mohamed Farid framed the regulation as part of a broader transition toward institutionalized sustainable finance. He said Egypt has moved from theoretical sustainability discussions to “a comprehensive institutional application of a sustainable financing system.”
Farid emphasized that structural reforms across banking and non-bank financial sectors, implemented through cooperation between the Central Bank of Egypt and the FRA, have created a more supportive environment for sustainable finance instruments and international investment flows.
He noted that establishing regulatory frameworks governing sustainability-linked debt instruments formed the foundation of this transition. Executive regulations to the Capital Market Law now define green bonds, transition bonds, and gender-linked bonds, enabling multiple issuances across financial institutions.
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Data Transparency As The Cornerstone
Farid described emissions data infrastructure as essential to building a sustainable finance ecosystem.
He said building an accurate emissions database served as the “cornerstone” of the system and emphasized the principle that “what cannot be measured cannot be managed,” ensuring green financing tools are directed toward real market needs and development priorities.
Disclosure rules and carbon footprint reporting, he added, reflect a clear direction to integrate environmental considerations into financial and investment decision-making.
The framework also adopts proportionality principles, with larger firms subject to more extensive disclosure aligned with international sustainability standards, including S1 and S2 requirements issued by the IFRS Foundation.
Scaling Regional Climate Finance
Egypt’s voluntary carbon credit system continues to expand, with approximately 160,000 registered credits and completed regulatory and accounting frameworks governing registration and trading processes.
Officials believe the next phase will expand sustainability practices across companies and institutions while strengthening financing channels for climate and development projects.
Farid stressed the importance of regional and international cooperation, highlighting the role of multilateral partners such as the International Finance Corporation in supporting developing economies and advancing resilient financial systems.
For financial executives and investors, the FRA decision introduces enforceable climate accountability while strengthening carbon market infrastructure. More broadly, Egypt is positioning sustainable finance as a regulatory cornerstone, aligning capital markets, disclosure frameworks, and carbon trading mechanisms to support long-term economic resilience and climate objectives.
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