The Egyptian Financial Regulatory Authority (FRA), which is in charge of supervising non-bank financial institutions and markets, including the stock exchange, issued two decrees on 5 July 2021 requiring listed companies and non-banking financial institutions (subject to a specific threshold) to make annual disclosures pertaining to environmental, social and governance practices. If the issued capital of the company or its net shareholder equity exceeds EGP 500m, the board of directors will have to make certain climate-related financial disclosures. Decree 107 relates to disclosure rules for companies in non-banking financial services. Decree 108 relates to the disclosure rules for companies that issue securities on the Egyptian Stock Exchange.
The disclosures are not expected to be in the form of narrative reports written by the companies. The FRA prepared two forms for the required disclosures and annexed them to the decrees. Each form includes a set of questions that reflect the standards that are being evaluated. The company is required to answer each question with ‘Yes’ or ‘No’, and to write a clarification or comment on its answer. For example, the company may comment that it is in the process of taking specific procedures to comply with this element and that it is expected to finalise these procedures within a specific period. In some circumstances, the FRA determines the information that is required to be clarified.
The environmental disclosures include questions related to environmental operations and supervision, carbon emissions, used energy sources, use of water and waste management. Social disclosures include questions related to gender diversity, wages, turnover rates of employees, non-discrimination, professional health and safety, children, forced labour, and labour rights. Governance related disclosures include diversity in the board of directors, anti-corruption measures, codes of ethics, and data privacy. As to climate-related financial disclosures, they include elements of governance, strategy, risk managements, metrics and targets. The FRA further requires listed companies, targeted by the two decrees, to submit to the FRA a quarterly report stating the procedures that the company has taken or will take in relation to the required disclosures from 1 January 2022.
