UAE Likely To Require Dh2.5 Trn (US$681 Bn) In Investment To Finance Its Transition To A Net-Zero Economy

"The UAE is well-positioned to capitalize on the major economic opportunities offered by the path to net-zero. Reaching this objective would require a strong focus on ensuring economic prosperity throughout the transition process in addition to a great deal of investment," said Rola Manneh, chief executive of Standard Chartered UAE.

UAE regulators and exchanges have pledged their allegiance to sustainable finance to advance the region’s net-zero goal.

"The public and financial sectors need to come together to help facilitate the flow of investment into net-zero. Failure to deliver transition finance could mean climate goals are missed, therefore triggering an environmental catastrophe.”

Aggressive efforts are being made to reduce the carbon footprint and in 2022 the UAE became the first country in the Middle East to set a net-zero target. The Emirates seeks to go completely carbon neutral by 2050 and plans to invest $160bn on clean and renewable energy sources in under 30 years.

If emerging markets are capable enough to fund their own transition without developed markets, the total household consumption in these markets could fall by 5 percent annually.

Rola Manneh, chief executive of Standard Chartered UAE

Private investors can contribute more than Dh300tn of the Dh350tn that is required for the energy transition — "underscoring the urgent need for financial institutions to fulfill green and transition finance pledges", the bank said.

The task of getting capital into emerging markets is a difficult task, and "to transition in the fairest way possible, greater collaboration is required in strategy, policy and financing", the report said.

"More importantly, banks need to live up to the pledges made during Cop26 if ordinary households are to avoid bearing the costs of their market’s transition to net zero."

The world united behind a deal to tackle climate change after a tense climax to the Cop26 summit in Glasgow in November last year.

The bank's report looked at two pathways to closing the emerging market transition finance gap: self-financing by emerging markets and developed market financing, where capital is provided through grants and loans.

Should emerging markets be self-financed it would lead to higher taxes and an increase in government borrowing, which by extension means that families in emerging markets, including the UAE, will need to reduce their expenditures.

"Emerging markets being able to reach net-zero without hampering their growth or prosperity would represent a just transition," the report said.