UAE Leans In To Green Financing To Improve Socio-Economic Conditions

The report, Middle East Green Finance: A US$2 Trillion Opportunity, advises governments to focus on four priorities: enact policies that promote environmental sustainability in all industries, create a green sovereign wealth fund, strengthen capital markets, and develop standardized and transparent reporting mechanisms for environmental performance.

There are in total 6 industries that are key to the growth of the Middle East economy via Green Finance, namely power, water, construction, mobility, food, and waste management which are slated to create a cumulative GDP contribution of about US$2tn through to 2030. Thus creating lucrative opportunities for the governments to work on strategic advances in this direction.

According to Aurilien Vincent in a conversation with Arabian Business, stated, “Our analysis has found that green investments in six key GCC industries could have a profound socioeconomic impact that has the potential to create over 1 million skilled jobs and turbocharge foreign direct investment in highly sustainable industries.

Should capital markets need strengthening mechanisms there are comprehensive mechanisms in place that allow for a swift exit for investors once they have achieved their profitability goals. This could also enable investors to access GCC funds, such as those held by high-net-worth individuals and families.

In keeping with this larger picture, it has been reported that Saudi Arabia and the UAE, the two largest Arab economies are already home to some of the largest solar plants in the world and are investing heavily in clean fuels such as hydrogen. Anthony Yammine, the Principal Strategist states that, A solar-photovoltaic panel in a GCC country produces twice as much output as it would in Germany or any climatically similar European country ― 1,750 to 1,930 hours of full-load operation per year.

This further builds on the ESG story because according to Morgan Lewis, the rise in the global popularity of ESG investing presents a unique opportunity to investors, asset managers, and banks in the GCC to offer more “green” Islamic investment products to attract and obtain investment from a broader pool of potential investors that seek to invest in an ESG-compliant manner.

The intertwining of the ESG with Shari’a compliances further leverages the idea of green financing because it completes the GCC green equation.