Middle East governments hold the keys to unlocking green investment in the region, says report
Ahmed Elbermbali introduces Jeffrey Beyer on green finance panel (Left to right: Ahmed Elbermbali, Tamara Bajic, Jeffrey Beyer, Badar Chaudhry)
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Dubai, 23 June – Governments in the Middle East and North Africa (MENA) need to adopt new tools and policies and collaborate to accelerate the shift to a low carbon economy, according to a new report published by the Mohammed bin Rashid School of Government (MBRSG) and co-authored by Jeffrey Beyer, Managing Director of Zest Associates, a UAE-based sustainability consultancy.
Beyer presented the findings of the report at a panel on green finance at The Arab Green Summit, which took place in Dubai on 21-22 June.
“The MENA region has an opportunity to capitalise on its resources, create jobs and tackle climate change, but this will require much greater investment from the private sector. There are actions governments can take now that are low-cost, relatively easy to implement and would have a big impact in making the Middle East a more attractive environment for green investment,” said Beyer.
The report, ‘Financing a Green Transition in MENA’, funded by HSBC, focuses on how the Middle East and North Africa region can finance a post-Covid green recovery. It looks at green finance activities in Bahrain, Egypt, Kuwait, Iraq, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. It puts forward a series of regional and country-level recommendations for how governments can mobilize the $230 billion annual funding needed for the Arab world to achieve the UN Sustainable Development Goals (SDGs) – a key measure in the transition to net zero.
“HSBC is playing a leading role in mobilising the transition to a global net-zero economy, not just by financing it, but by helping to shape and influence the global policy agenda. This report sets out measures the Middle East region can implement to ensure competitiveness and connectivity but also to stimulate new sectors, employment and business models to attract international investment flows,” said Sabrin Rahman, Managing Director - Head of Sustainability for Europe and the Middle East at HSBC.
Governments in the MENA region are well-positioned to shape the ways in which green finance can be raised and channelled, the report says. Government expenditure as a percentage of GDP is high in many of the countries studied, averaging 20% of GDP and reaching 28% in Saudi Arabia, compared to a global average of 17%. The MENA region is also home to some of the world’s largest sovereign wealth funds, alongside many powerful state-owned enterprises.
“There are many success stories from across the Middle East that show how government action can create the conditions for green investment to flow. For example, the UAE Sustainable Finance Working group is establishing common standards that will channel finance towards the UAE’s sustainability goals. In Saudi Arabia, the Saudi Electric Company has developed a green sukuk framework that has allowed it to tap into capital markets using a traditional Islamic finance instrument. Initiatives like these can be adapted to mobilize green finance in other countries in the region,” said Beyer.
The report says there are two main ways countries in MENA can increase green investment from the private sector:
One is by taking steps to improve the ‘enabling environment’ – conditions that affect the viability of sustainable investments, including policy and governance frameworks as well as programs or initiatives that help make finance flow. For example, countries could launch Green Investment Banks, establish entities to facilitate energy efficiency markets, and develop a common green taxonomy.
The other is by adopting specific financial and economic tools to raise and deploy capital, manage risks, and mobilise private sector investment. For example, countries could issue green bonds or green sukuk, tap into international climate finance, and use sovereign wealth funds and state-owned enterprises to finance and operate new low carbon industries.
The national recommendations respond to unique domestic circumstances and focus on areas where action is currently limited or absent, rather than suggesting that existing initiatives be strengthened or scaled up. The regional recommendations target areas where collaboration would deliver stronger returns than if the measures were implemented by each country individually.
“There are areas where collaboration among countries in MENA has the potential to be a game changer in the transition to net zero. For example, establishing a MENA carbon market would be a cost-effective way of lowering carbon emissions whilst remaining regionally competitive, and creating a standard definition or ‘taxonomy’ for what counts as ‘green’ would bring clarity to investors, unlock sustainable finance and avoid greenwashing,” said Beyer.
The report authors hope it will be a resource for governments in the MENA region as they look to attract investment into renewable energy projects, energy efficiency improvements, low carbon transport, and green buildings.
 World Bank. (2021). General government final consumption expenditure (% of GDP). https://data.worldbank.org/indicator/NE.CON.GOVT.ZS