Narrative description of Project:
Phase I – Strategic Foundations and Institutional Readiness
On behalf of the client, CLA is supporting the National Bank of Egypt in the development and implementation of a comprehensive Climate Finance Strategy, aligned with Egypt’s national climate commitments and the evolving international regulatory landscape, particularly IFRS S2. The engagement began with an institutional gap and capacity assessment and extends to the development of an end-to-end roadmap for sustainable finance integration, climate-related disclosures, and climate product innovation. The scope includes climate risk governance, portfolio alignment strategies, and enhancing internal systems to support credible reporting under IFRS S2 and TCFD-aligned frameworks.
Phase II – Climate Risk Integration and Regulatory Alignment
Building on the foundation established in Phase I, CLA is advising NBE on the development of an integrated Climate Risk Management Framework. This includes embedding climate risk identification, measurement, monitoring, and scenario analysis into existing risk processes—particularly credit risk—while aligning with international best practices (e.g., NGFS, ISSB, and Basel guidance). Specific attention is given to translating climate risk insights into decision-useful disclosures as required under IFRS S2.
Description of actual services provided by your staff within the assignment:
Phase I – Strategy, Reporting, and Product Development
Task 1: Gap Analysis and Regulatory Benchmarking
- Conducted a gap and readiness assessment against IFRS S2 and Egypt’s national climate frameworks.
- Benchmarked NBE’s current practices against leading global banks and regional peers to inform ambition-setting and roadmap design.
Task 2: Climate Finance Strategy Development
- Developed a bank-wide Climate Finance Strategy articulating NBE’s vision, objectives, and KPIs, including sectoral prioritization aligned with Egypt’s NDC and Long-Term Strategy.
- Created an actionable roadmap covering governance, disclosure readiness, climate product development, and internal alignment across departments.
Task 3: Climate-related Financial Disclosure Design
- Drafted core elements of NBE’s first climate disclosure aligned with IFRS S2 and TCFD principles.
- Outlined data architecture and reporting systems needed for forward-looking metrics, scenario analysis, and transition plan disclosures.
Task 4: Financed Emissions and Carbon Footprint Measurement
- Designed a carbon footprint measurement framework tailored to financial institutions, applying PCAF standards and focusing initially on Scope 1 and 2 emissions, with a roadmap to Scope 3.
- Developed Excel-based tools to support data collection, calculation, and disclosure of financed emissions.
Task 5: Green Lending Framework and Product Innovation
- Strengthened NBE’s green lending framework based on EU Taxonomy principles and best-in-class climate finance taxonomies.
- Co-developed green and transition finance products tailored to Egypt’s high-impact sectors (e.g., solar, green manufacturing, and transport).
Task 6: Capacity Building and Internal Awareness
- Delivered workshops and training for board members and key departments on IFRS S2 requirements, climate finance trends, and scenario analysis.
Task 7: Stakeholder Engagement and Communications
- Supported the design of communications material to signal NBE’s climate finance leadership to external stakeholders and regulators.
Phase II – Climate Risk Management and Scenario Analysis
- Framework Design: Developed a Climate Risk Management Framework that integrates transition and physical risks into existing credit and investment risk processes.
- Scorecarding and Screening: Designed climate risk scorecards and screening tools for counterparty-level risk classification.
- Quantitative Models: Built models to estimate climate-adjusted Probability of Default (PD), and provided initial guidance on incorporating climate risk into LGD assessments.
- Scenario Analysis: Created climate scenario analysis tools aligned with NGFS scenarios to assess portfolio resilience and support stress testing exercises.
- Strategic Recommendations: Provided recommendations for embedding climate risks into ICAAP, capital planning, and risk appetite frameworks.
- Compliance and Best Practice: Ensured alignment with IFRS S2, Basel guidance on climate risk, and Egypt’s regulatory developments.
- Training and Institutionalization: Delivered technical training to risk and finance teams and developed internal guidance manuals for ongoing implementation.
