Financing a green transition in the Middle East

Green finance is expected to play a significant role in achieving the Sustainable Development Goals (SDGs) and the Paris Agreement. While most of the finance required for a green transition will come from the private sector, this report by the Mohammed Bin Rashid School of Government focuses on opportunities for governments and quasi-government agencies to shape the ways in which green finance can be mobilised in eight Middle East countries: Bahrain, Egypt, Kuwait, Iraq, Oman, Qatar, Saudi Arabia, and the United Arab Emirates.

The report provides national recommendations that respond to unique domestic circumstances and focus on areas where action is currently limited or absent, rather than suggesting that existing initiatives be strengthened or scaled up. The regional recommendations target areas where collaboration would deliver stronger returns than if the measures were pursued by each country individually.

The instruments explored in this report include inclusive loans, guarantees and risk insurance, international climate finance, debt instruments such as green bonds, green sukuk and debt-for-environment swaps, and carbon pricing instruments. The report also considers the role of state-owned enterprises (SOEs) and sovereign wealth funds because of their investment power and centrality to economic transformation in several countries.

The report shows that all countries studied are taking steps to facilitate finance by strengthening the enabling environment and deploying financial mechanisms that encourage climate-compatible development. There remain, however, untapped opportunities in each country to capitalise on new tools or policies that shift finance towards investments that support a green and fair transition.

The recommendations of this report extend the findings of a related study titled “Aligning Policies with Green, Resilient and Just Recoveries in the Middle East”. Taken together, governments in the GCC countries plus Egypt and Iraq have an opportunity to mobilise finance and implement policies that reduce risks and capitalise on the opportunities afforded by a fair and environmentally sustainable transition. These opportunities must be taken to strengthen social, economic and ecological resilience, and achieve sustainable development.