Green finance - investments, lending and insurance - that supports environmentally sustainable outcomes will play a key role in financing MENA’s net zero future. And green bonds, blended finance and the use of creative ESG strategies are already financing the transition across the region.

Egypt’s Sovereign Green Bond established in 2020, the first sovereign green bond in the MENA region, targeted $750m over five years on cleaner transportation (the Cairo metro system), renewable energy, sustainable water and wastewater management. In the UAE the Majid Al Futtaim Group issued a $600m green sukuk in 2019 to finance environmentally sustainable projects, such as green buildings and renewable energy. Also in Saudi Arabia, ACWA Power issued $866m in senior unsecured green bonds in 2023 to finance eligible green projects including solar PV and wind farms across the kingdom and other regions.

Morocco's Noor Ouarzazate solar complex is using blended finance from the climate investment funds, the African Development Bank and private capital to help finance one of the world’s largest concentrated solar power plants. Blended finance partners include the World Bank, KfW, African Development Bank and the private sector.

Jordan’s Renewable Energy Programme is using a blended finance model with public-private partnerships supported by concessional financing from international donors like USAID, IFC and the EBRD) helping it to significantly increase its renewable energy capacity and becoming a regional leader. Green Climate Fund (GCF) projects in the MENA region include support for climate-resilient water management and agriculture projects in Tunisia and Lebanon using blended finance mechanisms combining grants and concessional loans.

Turning to the use of ESG strategies in the region, Saudi Arabia’s Public Investment Fund (PIF) has a key focus on delivering social value and environmental improvement. Indeed, ESG is a central component of Vision 2030, with PIF adopting an ESG framework in its investment decision-making with a focus on  renewables (NEOM, Red Sea Project), sustainable tourism and green hydrogen.

The Abu Dhabi Investment Authority (ADIA) is also taking an ESG approach, embedding it in asset allocation, actively participating in ESG initiatives and allocating capital to climate-resilient infrastructure. In Egypt, the country’s ESG Disclosure Guidelines saw the Egyptian Financial Regulatory Authority mandate ESG and climate-related disclosures for listed companies and financial institutions to improve corporate transparency and attract ESG-minded investors.

Sovereign wealth funds and regional banks driving innovation

Sovereign wealth funds (SWFs) and regional banks are also playing critical and complementary roles in driving climate innovation in the MENA region. The Abu Dhabi Investment Authority (ADIA), the Public Investment Fund (PIF) of Saudi Arabia and the Mubadala Investment Company, are all key players in financing large-scale climate and clean tech initiatives. SWFs manage vast capital reserves, often derived from hydrocarbon revenues and are well-positioned to invest in long-term, high-impact climate technologies such as green hydrogen, carbon capture and storage (CCS) and advanced renewables. 

By funding early-stage or capital-intensive climate projects, SWFs also help to de-risk technologies that may not yet attract private investment. These funds also facilitate strategic partnerships as they SWFs frequently co-invest with global technology firms and international funds, enabling technology transfer and local capacity building.

Regional Banks are playing a role too, increasingly issuing green bonds, sustainability-linked loans and providing climate project finance to companies and municipalities. This is also driving innovation, supporting SMEs and startups by offering tailored credit lines, venture debt and incubator support, thereby helping local climate tech entrepreneurs scale innovations in areas like water desalination, energy efficiency and sustainable agriculture. These banks are also embedding environmental, social and governance (ESG) criteria into lending practices, pushing businesses to adopt greener practices and technologies. All this is helping to create an innovation-friendly ecosystem by funding R&D, enabling public-private partnerships, and stimulating demand for green products and infrastructure.

Addressing the barriers to climate investment

Innovative approaches to financing the transition are helping to address many of the barriers to climate investment in the Gulf in a region that has been historically dependent on fossil fuels. Many of the region’s economic structures are heavily reliant on oil and gas revenues and strong political and commercial ties to hydrocarbons create resistance to transitioning away. The use of energy, water and fuel subsidies also distorts the market, reducing incentives for efficiency and renewables as these subsidies can make clean energy investments less competitive.

Although progress is being made in the area of regulation, climate-related laws and policies are still under development or lack enforcement mechanisms and inconsistent policies across the Gulf states can reduce investor confidence. The green finance ecosystem is developing but the region still has relatively underdeveloped markets for green bonds, ESG funds and climate-aligned financial instruments. Institutional fragmentation, with multiple agencies with overlapping mandates may also lead to inefficiencies or lack of coordination. Also, ongoing global geopolitical risk and policy uncertainty is also a fetter on climate investment.

Fertile ground for investment

On the plus side, there are some key enablers encouraging climate investment. The region has very high solar potential, as abundant sunlight makes the region ideal for utility-scale solar projects and the falling global costs of solar PV make it increasingly economically viable too. Clearly, there is strong government ambition, vision and will to get things done. National strategies like Saudi Vision 2030, UAE’s Net Zero by 2050 and Qatar National Vision 2030 include strong climate and diversification goals. Flagship renewable and hydrogen projects (e.g. NEOM, Masdar and ACWA Power) are drawing global attention and the wealth and sovereign funds mentioned above are very capable of funding large-scale green infrastructure.

The growing private sector involvement is also a positive, with increasing participation from national and international private investors, particularly in clean energy, green hydrogen and sustainable real estate. This will facilitate access to international partnerships, such as collaboration with global climate funds, development banks (e.g. the World Bank and EIB) and foreign investors supporting project financing and capacity-building. The favourable investment climate being created is also encouraging technology and innovation initiatives, with investments in clean tech, hydrogen, smart grids and carbon capture and storage (CCS) on the rise and innovation being driven further by the establishment of research centres and innovation hubs, especially in the UAE and Saudi Arabia.

Major climate events hosted in the region like COP28 in the UAE are also accelerating international pressure and domestic reforms and doubtless the arrival of the Innovation Zero MENA Congress to the region in Riyadh this October will encourage further progress.

Innovation Zero MENA Congress takes place on 14-15 October 2025 in Misk City, Riyadh, Saudi Arabia. Find out more at www.innovationzero.com

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