Prime Minister Mostafa Madbouly issued a decision on Monday to amend the provisions of the executive regulations of Capital Market Law No. 95 of 1992, which included the articles regulating the work of investment funds and the development of new articles to regulate the issuance of sustainable development bonds.
This is in order to further facilitate the work of investment funds and support the state’s efforts in achieving the UN’s sustainable development goals (SDGs).
For his part, Head of the Financial Regulatory Authority (FRA) Mohamed Farid said that the PM’s decision No. 3,456 for the year 2022 to amend some provisions of the executive regulations of the Capital Market Law included the development of new types of bonds, such as sustainable development bonds, sustainable development-related bonds, social bonds, women empowerment bonds, climate bonds, and transitional brown bonds.
Farid added that given the importance of debt instruments in the financial markets and the reliance of entities and companies on them as one of the important financing mechanisms for the development of their business, the idea came to offer new financing tools to meet the challenges of climate change and the transition towards a green economy.
He also pointed out that many investment institutions strive to strike a balance between achieving their financial goals and environmental and societal values, which is called “sustainable investment” — a form of investment discipline that takes into account environmental, social, and corporate governance standards, which leads to a positive impact in society or the environment or the economy as a whole.
Furthermore, Farid stressed the importance of the PM’s decision to amend the executive regulations of the Capital Market Law at this time, as Egypt prepares to host the 27th UN Conference of Parties on Climate Change (COP27) on behalf of Africa, given that the issuance of the legislation means the issuance of bonds that allocate their proceeds to finance environmentally friendly projects in order to reduce emissions and mitigate the effects of climate change and global warming, and to finance those who wish to move and develop their activities to have less impact on the environment.
Additionally, he revealed that the amendments to the executive regulations of the Capital Market Law also included providing some facilities in the work of investment funds to activate their performance, as it was stipulated that the minimum capital of the investment fund company be 2% of its size and a maximum of EGP 5m or its equivalent in foreign currencies.
He also said that an option should be given to the fund to increase its capital beyond the mentioned EGP 5m if it so desires, leading to the possibility of increasing the size of the fund without being restricted to increasing its capital if this capital amounts to EGP 5m, which is what gives it great flexibility in the work of investment funds and removes what was hindering the continuation of its activity easily.
In light of the rules that were in force before the amendment, it was stipulated that the value of the investment documents issued by the fund should not exceed 50 times the capital, as it was required that every time the fund wanted to issue documents exceeding that amount, it had to increase the capital in order to accommodate the desired investment documents issued.
The amendments also included assigning the task of preparing the financial statements of the investment fund company to the management services company instead of the investment manager, given that this is consistent with the nature of the work of the management services company, as it is responsible for evaluating the net assets of the fund and preparing a daily statement of the number of existing documents to be disclosed periodically.