Morocco has once again succeeded in placing itself at the head of the Maghreb countries in terms of preparing financial systems to support climate action, according to the “Climate Finance Readiness Index” report covering the Middle East region, from North Africa and Turkey (MENAT).
Published recently by the consulting firm Green For South based in Toronto and Casablanca, the report points out that the Kingdom, in its sub-region which also includes Algeria and Tunisia, is the first to have adopted “regulations and guidelines appropriate guidelines (mostly voluntary at this stage), an interesting volume of climate finance activity (dealing with international funds and issuing green bonds) and effective outreach mechanisms”.
The report also reviewed Morocco’s efforts to improve its climate resilience, particularly in terms of mitigation, which requires significant investment, recalling in this regard the total cost of climate mitigation and adaptation actions included in the NDC. (Nationally Determined Contribution) as published in June 2022 and estimated at 78 billion USD (38 for mitigation measures and 40 billion USD for warning measures).
Tunisia also has appropriate regulation (on a voluntary basis), a good volume of climate finance activity, the report adds, noting that there has been no issuance of green bonds or of “Sukuk” and outreach provisions are still limited.
On the other hand, Algeria “has no regulations in the financial sector to support climate action and climate finance activity is still limited”, Green For South said, estimating that overall, the North Africa region is at an early stage of implementing these actions.
For this firm specializing in sustainable, green and climate finance, Morocco and Tunisia are called upon to further strengthen their regulations (and make them compulsory) and encourage green emissions and launch more awareness-raising and training initiatives.
Regarding the MENA region, Egypt is leading the way by making all regulations relating to ESG and climate risks mandatory in the different financial sectors (banking, insurance and capital markets) unlike countries such as Jordan, Morocco, Tunisia and Turkey which generally have voluntary reporting requirements.
The report, in its assessment, takes into account the differences between sub-regions such as North Africa, the Middle East, the Gulf Cooperation Council (GCC) and Turkey, in order to reflect a fair view of each country according to its local challenges and constraints.
Indeed, 14 financial systems are assessed on the basis of a variety of criteria to determine the progress made by each country in implementing climate finance mechanisms and instruments. These are Morocco, Algeria, Tunisia, Egypt, Jordan, Lebanon, Iraq, Kuwait, Qatar, Bahrain, Saudi Arabia, Emirates Arab States, Oman and Turkey.
Thus, Climate Finance Readiness Index gives the North Africa sub-region a score of 31.33%, against 40.23% for the Middle East sub-region (Egypt, Iraq, Jordan, Lebanon), 17.53% for the Gulf Cooperation Council (GCC) sub-region and 46.84% for Turkey.
Regarding the GCC sub-region (excluding Oman), the authors of the report noted that these countries would rely on their own resources to support climate action, noting that most of them have the reporting requirement. ESG for public companies and guidelines on green bonds/Sukuk.
For its part, Turkey has a comprehensive set of regulations covering climate and ESG risk requirements. In addition, the Green Bond Guidelines are made mandatory.
Furthermore, Ankara has already issued green bonds and mobilized more than USD 1 billion in global green funds.
For green financial activity, Morocco features alongside Egypt, Lebanon and Turkey in the first subgroup of countries mobilizing resources from both global green funds and green bond issuances/“ Sukuk”.
Addressing the awareness component, the text notes that Morocco is positioned with Turkey and Jordan in the first sub-group which is distinguished by special training programs in the field of green and climate finance with a volume of publications. academics in addition to press articles.
Ultimately, Green For South issued in its report a series of recommendations to stakeholders, including regulators and financial institutions, to implement or strengthen the initiatives necessary to contribute to the mitigation of climate risks and the adaptation efforts
These include establishing a regulatory framework for financial institutions to manage climate risks, strengthening market incentives to stimulate both supply and demand for climate finance through investments in green initiatives, and to increase knowledge and awareness in this area.