ESG increasingly integrated into Saudi Arabia’s urban development roadmap
The current construction boom in Saudi Arabia is making the Kingdom a major global hub for urban developers and investors. From megaprojects to new residential neighbourhoods, urban transformation is increasingly integrating ESG principles, unlocking $38 billion in new investment opportunities.
Saudi Arabia is now emerging as a global leader in sustainable development. The ambitious Vision 2030 program has laid the groundwork for a sort of ‘Saudi ESG model’ in real estate, which has helped create unprecedented opportunities for global investors. That is according to a report from PwC.
Over $1 trillion has been allocated for innovative infrastructure investments in Saudi Arabia and there is a projected 30% growth in the real estate market by the end of this year. This increase in investment shows how economic diversification has been a success in Saudi Arabia and positions the kingdom as a leading hub for sustainable urban living and a key player in the global real estate market.
“The substantial investments go beyond city development, they represent a commitment to creating sustainable urban environments that drive economic growth and improve the quality of life for all residents,” said Imad Shahrouri, Cities Sector Lead Partner at PwC in the Middle East.
“By integrating innovative technologies and sustainable practices, Saudi Arabia is not only enhancing its appeal to global investors but also setting a benchmark for future urban development in the Middle East.”
Sustainable housing and ESG
A cornerstone of Saudi Arabia’s drive to build a modern, inclusive society is its ambitious housing program. The Kingdom’s transformative Vision 2030 roadmap seeks to create a sustainable approach to housing development, adhering to ESG principles. This commitment is already yielding results, with Saudi homeownership rising from 47% in 2018 to 60% in 2022, and is on track to reach its Vision 2030 target of 70% by the end of the decade.
While these mega urban development projects have already attracted significant foreign capital, the PwC report urges developers to ensure every stage – from initial planning to completion – meets the highest international ESG standards. This is not only an ethical imperative aligned with Vision 2030’s commitment to enhance the quality of life for all Saudi citizens, but also a commercial imperative.
PwC’s report, drawing on interviews with local and international investors, shows that Saudi urban projects should incorporate international best practices in urban development and sustainable finance.
Saudi Arabia has a rapidly growing population and urbanization is increasing rapidly in the Kingdom’s major cities. There is growing demand for residential, commercial, and mixed-use developments across the Kingdom.
The report notes that sustainable planning has been a major part of the planning in high-profile developments such as smart cities and sustainable housing projects. These initiatives mark a robust move towards diversification and modernization to meet the rising demand for innovative and sustainable housing solutions.
“Integrating ESG principles is set to unlock large scale investment opportunities within Saudi Arabia’s real estate market,” said Christiane Conrads, Partner and Global Real Estate ESG Leader at PwC.
“This shift not only promises a more sustainable urban future but also supports responsible resource management and social equity. It positions Saudi Arabia as a leader in responsible real estate development, paving the way for a sustainable long-term living environment.”
As the urban landscape expands, Saudi Arabia is not only committed to developing smart, resilient communities that cater to the needs of a diverse society, but it’s also actively diversifying its economy away from oil, with significant investments in sectors like real estate.
