The Central Bank of Egypt (CBE) has instructed banks operating in the domestic market to implement an Environmental and Social Risk Management System (ESRMS), with full implementation required by January 2028, as part of its ongoing efforts to strengthen sustainable finance and embed environmental and social considerations into banks’ lending and investment activities.
In a circular addressed to the chairpersons of banks’ boards of directors, the CBE said the directive builds on its November 2022 circular on sustainable finance, which required banks to integrate sustainable finance policies into their credit and investment frameworks.
The central bank said the new requirements are designed to reinforce financial and banking sector stability by enhancing banks’ resilience through structured frameworks for managing environmental and social risks, including climate-related financial risks, in line with international best practices.
Under the directive, banks must integrate the Environmental and Social Risk Management System into their sustainable finance policies and broader enterprise risk management frameworks. They are also required to appoint their Head of Sustainability or Sustainable Finance Manager to coordinate implementation across business units, monitor progress, and submit periodic implementation reports to the CBE.
Banks must establish comprehensive implementation procedures, including clearly defined roles and responsibilities, mechanisms for classifying, assessing and monitoring projects, environmental and social due diligence processes, reporting frameworks, identification of financing and investment activities covered by the system, and regular reviews to ensure its effectiveness.
The CBE also instructed banks to make use of the accompanying implementation guidance for managing climate-related financial risks and to continue strengthening the technical capabilities of banking sector staff in climate risk management and the application of Environmental and Social Risk Management Systems.
