Middle East green finance: A US$2 trillion opportunity

GCC countries have already begun the transformation to sustainability. The question now is how they can support these initiatives in a differentiated manner and capture the largest share of the economic prize. Four strategic priorities should be on the agenda of all governments in the region.

Governments should enact policies that promote environmental sustainability in all industries, including incentives, market mechanisms, and standards. Market mechanisms such as fees on carbon, plastic, and other materials with harmful environmental impacts provide a true cost of a company or industry’s activities. Incentives in areas such as renewable energy usage and electric vehicles can boost adoption.

Governments also need to continually update regulatory standards for emissions, recycling, and building codes to ensure the economy is keeping pace with advances in innovation and technology. Furthermore, governments can phase out existing inefficient subsidies for electricity, fossil fuels, and water. When such subsidies are poorly targeted, as has often been the case, they promote wasteful consumption of resources, economic distortion, and harmful environmental outcomes.

Each GCC government should create a green sovereign wealth fund. This organization should have the credibility and capabilities to engage with, and attract, international investors. The green sovereign wealth fund should not be beholden to the region’s legacy mindset regarding sustainability, which treats it as a cost burden, rather than an opportunity. Establishing a green sovereign wealth fund will unlock substantial benefits to all stakeholders, including the public sector, investors, developers, and the general public.