The sustainability bond will support projects that reduce emissions or protect the environment. Credit: Natapon khantiwong / Shutterstock.

Arab African International Bank (AAIB) has launched a $500m sustainability bond, marking a step towards supporting climate finance and bolstering micro, small, and medium-sized enterprises (MSMEs) in Egypt.

The bond, which has attracted investments from the International Finance Corporation (IFC), the European Bank for Reconstruction and Development (EBRD), and British International Investment (BII), is set to channel 75% of its proceeds into green projects.

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These projects include industrial energy efficiency, small-scale renewable energy, and green building initiatives.

The remaining 25% is earmarked for social assets, with a focus on inclusive finance and MSMEs.

EBRD and BII subscribed to the bond with $100m each alongside $300m from IFC.

IFC Africa vice-president Sérgio Pimenta said: “This investment is a milestone in extending more financial inclusion while unlocking the potential of sustainable finance in Egypt.

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“As the largest investor in the country’s first sustainability bond issued by AAIB, we are empowering a greener, more climate-resilient future for Egypt and contributing to the country’s climate commitments.”

Last year, the Egyptian Government set a target to reduce greenhouse gas emissions by 37% by 2030.

The sustainability bond will support this effort by funding businesses and projects that reduce emissions or protect the environment, as well as help meet the growing financial needs of MSMEs in the country.

EBRD financial institutions managing director Francis Malige said: “This landmark investment will increase capital market flows towards green and social projects and demonstrates the importance of ingraining green and social criteria in capital markets transactions.

“Moreover, this project contributes to the resilience of the economy by providing long-term hard currency funding.”