According to a Strategy& Middle East report, Saudi Arabia, the UAE, and Oman collectively attracted $24 billion from the global green foreign direct investment (FDI) of $1 trillion between 2020 and 2024.
In the same timeframe, these three nations invested $132 billion internationally, making up 29 outbound and 10 inbound green FDI transactions, which together accounted for merely 2% of the global influx.
During the years 2020-2024, more than half of substantial cross-border investments directed their focus towards green initiatives, predominantly in hydrogen, renewable energy, and battery technologies, as indicated by the report.
The peak of this investment surge occurred in 2022-2023, although it subsided last year as capital flowed towards artificial intelligence and semiconductor projects. Nonetheless, green FDI is projected to hit $158 billion in 2024, which is three times higher than in 2020.
Saudi Arabia garnered $12.6 billion in green FDI
Saudi Arabia attracted $12.6 billion in inbound green investments, while Oman secured $8.9 billion, benefitting from two significant Indian-backed projects in the sectors of ammonia and steel production.
China, India, and the United States emerged as the leading sources of inbound deals within the GCC, while the majority of outbound initiatives were directed towards hydrogen and ammonia projects in Egypt and Mauritania.
“The GCC has a unique opportunity to capitalize on its ambitious net-zero goals and some of the most affordable clean energy resources globally. However, there is still work to be done to harness the full potential of global green investments,” stated Dr. Yahya Anouti, a partner at Strategy&.
The report highlighted that six of the ten most cost-effective solar projects globally are located in the GCC, showcasing the region’s competitive advantage. Despite this, relative to GDP, all Middle Eastern nations except Oman trail behind global counterparts in attracting climate-oriented capital.
To enhance their market share, the consultancy suggested implementing policy changes akin to the US Inflation Reduction Act or the EU Green Deal, as well as investment de-risking mechanisms like green bonds and long-term offtake agreements, alongside support for regional green industries.
GCC nations have begun to implement strategies such as Saudi Arabia’s $1.7 billion sovereign green bond, Oman’s hydrogen offtake agreements, and the UAE’s Sustainable Finance Framework.
While geopolitical uncertainties and changing capital trends may have an impact on investments, the report concluded that climate-related concerns will continue to keep green FDI a prominent issue on the global agenda.