$2 trillion green finance opportunity awaits GCC nations
The Gulf Cooperation Council (GCC) has a promising opportunity to emerge as a major destination for climate-aligned foreign direct investment (FDI). That is according to new analysis from Strategy& that unveils more than $1 trillion in global green FDI between 2020 and 2024.
Despite this huge amount of investment in green initiatives around the world, only $24 billion of the global total was destined to Saudi Arabia, the UAE, and Oman. But that does not mean these countries are not involved in sustainable financing: Together they invested around $132 billion in green projects abroad.
Attracting more green FDI
From hydrogen and ammonia to renewable energy and batteries, global investment into the green transition is clearly on the rise. Since 2020, more than half of all large-scale global FDI was destined for the green sectors.
Saudi Arabia, the UAE, and Oman together made 29 outbound and 10 inbound green FDI deals since 2020, but despite that, these GCC countries only received about 2% of global green FDI. There is a huge potential for the region to attract far more in the years to come, thanks to several competitive advantages.
For one, the GCC region has some of the lowest costs for energy in the world, with six out of ten of the lowest-cost solar projects globally. Beyond that, megaprojects like NEOM in Saudi Arabia make ambitious promises for new green energy production sites.
“The green transition is redefining how and where industries grow,” said Devesh Katiyar, partner at Strategy&.
“As climate capital remains a fixture in global markets, the region must play a greater role in not only deploying capital but attracting it. This means embracing a range of tools to strengthen the business climate, from de-risking mechanisms and clearer regulations to incentives that actively shape capital flows.”
Policy to promote climate financing
Bringing in more green FDI has been top of the agenda for many countries for years now, with international net-zero goals like the Paris Agreement putting pressure on both the public and private sector to act.
The Inflation Reduction Act (IRA) in the US, for instance, has boosted climate-aligned investments across sectors like batteries, electric vehicles, renewable power, and carbon capture. The EU, for their part, have made some major regulatory changes with the EU Green Deal, which increased emissions reporting and product standards.
The Strategy& report notes that the GCC can do more to attract additional capital inflows. That can include things like big changes in policy, investment in de-risking, green industrial development, and strategic outbound investment.
“Climate concerns and government incentives have created an investment surge that is reshaping the global economy,” notes Yahya Anouti, partner at Strategy& and leader of the firm’s Energy, Resources and Sustainability practice in the Middle East.
“The GCC is uniquely positioned to benefit, possessing bold net-zero ambitions and some of the world’s cheapest clean energy sources. Yet, more can be done to fully capture the momentum of global green investment. What’s needed now is a stronger policy shift to transform the region into a thriving hub for domestic investment.”
GCC could become a global green hub
There is great potential for the GCC region to become a hub for green investment, with countries like Saudi Arabia, Oman, and the UAE making significant strides in sustainable finance and renewable energy.
But to attract more international capital and capitalize on their industrial and geographical advantages, the region must make bold policy choices and provide regulatory clarity. While global trends and geopolitical tensions may present challenges, the long-term focus on green investment remains clear.
