Dr. Omran: The Authority’s annual sustainability report recommends integrating climate risk into investment decision-making process
• Dr. Omran: FRA’s Sustainability Report 2019 is issued in accordance with the Global Reporting Initiative (GRI) standards
• Dr. Omran: Women fill 57% of the senior leadership roles inside FRA and 65% of new trainees
Dr. Mohammed Omran – FRA’s Chairman announces the issuance of FRA’s Annual Sustainability Report 2019 for the second year in a row and it is published on the Authority’s website, stressing in the first lines that the Authority has assumed responsibility for supporting, promoting and developing markets under its control. Also, he emphasizes the importance of sustainable finance as one of the most important tools for growth in the near future. Dr. Omran asserts that the current international developments in the field of sustainability impose strong supervision on organizing the gradual transition towards a sustainable financing system and sustainable markets.
Dr. Omran calls upon all companies operating in non-banking financial activities to – voluntarily – support the concept of sustainability in this vital sector where the volume of securities issuances in the first market is approximately 220.4 billion pounds in 2019, and the total investment of insurance companies amounted to 102 billion pounds by the end of June 2019. In this respect, this qualifies the non-banking financial sector to adopt responsible investment and disclosure practices in accordance with environmental and societal standards and corporate governance rules. That is besides integrating climate changes as market risks and complying with future regulations related to sustainability. Also, he notes that FRA is focusing on managing the present challenges that may hinder the shift towards sustainability, adding that FRA will take the responsibility towards preparing the market for a new reality.
FRA’s Chairman says that the ten sections of the Report show that the Authority is totally convinced of importance of sustainable development as a path to reach a new global economic, social and environmental reality, which prompted it to take upon itself the responsibility to launch a proactive work program that strengthens policies, regulations and practices related to sustainability.
The Report is of great importance to the non-banking financial sector as it identifies the outcome of the Authority’s efforts to uncover sustainability practices and associated regulatory decisions. The Report stresses on FRA’s overall efforts at the Authority’s level as an institution and at the external level directed to stakeholders in non-banking financial markets. In addition, the Report documents all activities that occur in 2019, including some of the information provided in the Authority’s annual sustainability report issued in 2018, which is necessary and relevant to the context of this year’s report.
The “Annual Sustainability Report 2019” clarifies in details the approach taken by the Authority to achieve sustainability and its plan to achieve its strategic goal of producing, sharing and disseminating knowledge about sustainable development and green financing. It is worth mentioning that FRA’s strategy is consistent with the sustainable development strategy of the Ministry of Planning “Egypt Vision 2030” as a reference of domestic sustainable development.
According to Dr. Omran, the Report highlights in one of its sections the overall performance of the Authority and its main achievements as a regulator. It reveals a set of motivations that FRA relies on to develop the market, foremost of which is empowering the private sector and support its expansion. The Report sheds light on the first issuance of corporate bonds since 2015 after FRA approved the first program of offering short-term bonds amounted by 2 billion pounds for one of the brokerage companies , noting that such step will provide the necessary finance to practice its activities. The second motivation is capacity building and its consistency with governance rules that are disseminated by the Egyptian Institute of Directors (EIoD) through its 75 training programs specialized in governance. In addition to creating financial awareness to enable players in non-banking financial markets to comply with the rules, legislations and procedures that FRA prepares. The third motivation is to invent unconventional financial solutions and services that facilitate the access of investors and small and medium-sized companies to finance and this was clearly shown upon launching a new financial product in the microfinance sector, called Nano Finance. This new product requires mobile phones and financial technology applications with a maximum of 3,000 EGP for each transaction and a maximum repayment period of 90 days.
Dr. Omran points out that FRA’s Annual Sustainability Report includes FRA’s business plan to define the pillars that best implement its vision to integrate sustainability practices in the Authority and the entities operating in the non-banking financial market. The Report presents the experience of Sustainable Development Department inside FRA , its endeavor to set the priorities of the sustainable development goals and the detailed procedural steps that were followed to choose four sustainable development goals that become priority goals for the Authority. These four Goals are as follows : climate action (goal 13), gender equality (goal 5), Decent Work and Economic Growth (Goal 8) and responsible consumption and production (Goal 12). Also, Sustainable Development Dep. defines the substantive issues of relative importance for 2019 which are compatible with the interests of stakeholders who were identified in accordance with the priority, namely, green financing tools, then women leadership in the non-banking financial sector, then encouraging consumption and institutional production.
FRA’s Chairman adds that the seventh chapter entitled “Key aspects of Sustainability” of the second sustainability report highlights the progress occurs in introducing green financial instruments and the issuance of three influential decisions to regulate the first issuance in the capital market, starting with identifying the initial list of international environmental auditors to verify the green projects, it was followed by establishing a register for local environmental auditors who meet the standards set by the Authority and who are qualified to conduct a green audit in order to facilitate the issuance of green bonds in Egypt. That is besides creating a local market from independent environmental auditors aiming at exempting green bond issuers from 50% of the total in exchange for the services provided by the Authority. Moreover, a national strategy for sustainable insurance, which is the first of its kind in the Arab region and Africa, has been started to set a road map for that activity in order to include the principles of sustainable insurance in the insurance industry.
Also, in order to empower women leaders in the non-banking financial sector, the Authority obligated listed companies on the Stock Exchange as well as companies operating in non-banking financial activities to grant women at least one seat in their boards of directors. At the internal level, FRA tries to maintain gender equality within the Authority . The current situation revealed that 25% of women fill the position of Heads of Central Departments, 37% as General Directors, 34% as Managers who are considered middle management in the organizational structure and 65% as new trainees.
To enhance sustainable consumption and production, the Authority installed a water saving system in smart village headquarters, where this system provided about 50% of the total volume of water consumed. Also, FRA starts studying how to improve energy efficiency of lighting and other building appliances (IEEL&A).
Dr. Omran says that in its second year, the annual sustainability report tracks the Authority’s performance in enhancing financial inclusion by supporting small, medium and micro-enterprises in the microfinance sector, which also serves the first goal of the Authority’s strategy by targeting to enhance inclusive growth rates. On the other hand, the Authority adopted digital transformation to be its main approach to achieve the ten goals of its comprehensive strategy for non-banking financial services (2022-2018). That is besides stimulating sustainable growth of the non-banking financial sector by integrating Fintech financial technology and accelerating its use in all non-banking financial activities and combating money laundering to reduce corruption in the non-banking financial sector and increasing levels of transparency and disclosure.
It is worth noting that the Authority’s “Annual Sustainability 2019” report – this year – was issued in compliance with the Global Reporting Initiative (GRI) standards. This initiative sets standards to educate, promote and enhance the adoption of those standards by market players in the non-banking financial sector. Furthermore, the Authority has been keen to establish a unique sustainability framework that is in line with the United Nations Sustainable Development Goals and the GRI Standards.