Egypt’s $12bn wealth fund mobilised to lure foreign climate investors

Egypt's $12 billion sovereign wealth fund is planning to develop and roll out a host of financial and fiscal incentives to attract foreign investors to the North African country in order to accelerate the energy transition.

The CEO of The Sovereign Fund of Egypt has said his fund "plans to dominate the Middle East and North Africa's green energy investments."

Reducing risks for institutional investors to allocate capital to renewable projects and clean energy tech in Egypt is a key element of this strategy.

Chief executive Ayman Soliman said: “We are involved in discussions with the government to deliver a package of fiscal and non-fiscal incentives to encourage investors to come and invest in renewable and clean energy, such as green hydrogen and green ammonia."

While details of the announced investor incentives still have to be finalised, Soliman did point out that at last year’s COP27 summit, in the Egyptian coastal resort of Sharm-el-Sheikh, the Sovereign Fund “signed nine framework agreements and 23 memorandums of understanding with the government and local authorities, such as the Suez Canal Economic Zone, to work on frameworks to encourage investors into these industries."

IMF warning

The strategy comes only months after the International Monetary Fund warned that Egypt is "highly vulnerable" to the financial impact of climate change.

The IMF singled out water scarcity, rising sea levels and droughts as direct treats to the country's tourism and agricultural sectors, and they may push Egypt's coastal resources to the brink of collapse.

Even though the government in Cairo has not yet set any net zero targets, unlike most of its larger neighbours, it did launch a National Climate Change Strategy, in May of last year.

As part of these plans, the country's wealth fund, which was only set up in 2018, is mobilised to focus specifically on attracting international investment.

Soliman saw green hydrogen in particular as an interesting climate solution and  a lucrative commercial opportunity. He sees "one of the fund's main roles is to to ease the way for private capital to come to Egypt."

“All of the ingredients are in place for developing industries such as green hydrogen, apart from capital. As in many emerging markets, Egypt has a scarcity of capital,” he told African Business magazine.

Soliman argued that the economic benefits for investors looking to tap into green energies in the region are significant because “North Africa has the most significant untapped renewable resources in the world."

He was quick to point out that regional investor initiatives are already underway.

For example, his fund recently agreed with the Oman Investment Authority to jointly invest around $5 billion n a green hydrogen project.

Even though the government in Cairo has not yet set any net zero targets, unlike most of its larger neighbours, it did launch a National Climate Change Strategy, in May of last year.

Now as part of this plans the country's wealth fund, which was only set up in 2018, is mobilised to focus specifically on international investors and attracting their capital.

Soliman said green hydrogen in particular as an interesting climate solution as well as a lucrative commercial opportunity while he sees "one of the fund's main roles is to to ease the way for private capital to come to Egypt."

“All of the ingredients are in place for developing industries such as green hydrogen, apart from capital. As in many emerging markets, Egypt has a scarcity of capital,” he told African Business magazine.

Soliman argued that the economic benefits for investors looking to tap into green energies in the region are significant because “North Africa has the most significant untapped renewable resources in the world."

He was quick to point out that regional investor initiatives are already underway.

For example, his fund recently agreed with the Oman Investment Authority to jointly invest around $5bn in a green hydrogen project.

Regional competition

In the race to attract green investment, Soliman dismissed the notion that his sovereign wealth fund is going head to head with other government-owned capital owners in the region, most notably the wealth funds of Saudi Arabia, Jordan and Morocco.

The sovereign wealth funds of those countries have all rolled out ambitious net zero investment programs and are developing green hydrogen facilities.

“Of course, there is a healthy level of competition between the different players in the region to try and attract resources [but] the scale of the project and the volumes of green energy the world needs mean this is a regional opportunity," Soliman stressed.

"We share common goals, including localising some of the industries involved in the green hydrogen supply chain, such as component technologies. The question is: how can we all collaborate to ensure that we can house this manufacturing within the region? Scaling up benefits everybody.”

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