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The Disclosures of Environmental Practices

Resolution No.107/ 108 of 2021

In recent years, the Egyptian government has placed emphasis on the importance of holding both individuals and companies accountable with regard to their environmental impact. The result of this is the ‘2050 climate change strategy, aimed at implementing constructive change in Egypt at all levels. This comes after the Financial Regulatory Authority’s success in issuing green bonds in the Egyptian capital market, worth $ 100 million, to benefit certain companies listed in the Egyptian Stock Exchange, allowing it to finance environmental projects in order to use clean energy and mitigate factors leading to the rise in global temperature. This is a result of Egyptian society’s increased awareness of the dangers of climate change, particularly after the tangible impact of the irreversible environmental damage witnessed across the globe.

In light of the Egyptian capital market being at the forefront of the changing legislative scene wherein laws and standards for disclosure of the financial impact of climate change are being implemented, (second only to the European Union), it has become crucial to address the management of environmental risks facing the public and private sector.

Pursuant to this, the Financial Regulatory Authority issued Resolution No. (107, 108) of 2021 regarding the regulations of disclosing environmental, social, and governance practices related to sustainability and the financial effects of climate change by companies operating in the non-banking financial activities and listed companies in the Egyptian Stock Exchange.

According to these two resolutions, Companies of non-banking financial activities whose issued capital or net ownership equity is not less than 100 million pounds and the listed companies listed in the Egyptian Stock Exchange whose issued capital or net equity is not less than EGP 500 million are required by fulfilling disclosures related to the financial effects of climate change in its annual report prepared by the Board of Directors and attached to the annual financial statements.

The above-mentioned disclosures include, but are not limited to; the percentage of carbon emission, waste management, and recycling in the environmental aspect, the diversity between both sexes and their percentage in the workplace, wage ratio, the compliance with criminalizing sexual harassment, non-discrimination, criminalization of child and forced labor policies and the compliance with labor law regulations regarding employees’ rights in the social aspect; as well as disclosing anti-bribery decisions and complying with the rules of the Personal Data Protection and Consumer Protection Law in the part of corporate governance.

Moreover, each individual decision gives the companies in question a grace period to comply with the performance indicator standards for those disclosures by complying with the performance measurement indicators of the standards of environmental, social, and corporate governance practices and climate-related financial disclosure, until the end of 2022.

To conclude, this article aims to highlight the state’s endeavor to build bridges, not barriers by adopting sustainability and climate change disclosure reports, which will reveal the extent of the sustainability of these institutions, hence, confidence will be generated among investors from making informed investment decisions by identifying risks and opportunities which hasn’t been monitored by traditional financial reports.

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Written By

Lena Hamdi - Legal Partner / Noor Mahdy - Attorney at Law

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