Green investment in GCC could unlock up to $2tr in GDP value

Investment in green projects coupled with sustainable finance could help the GCC countries to unlock up to $2 trillion (Dhs7.3 trillion) in GDP contribution by 2030, if investment opportunities are tapped across key industries, according to a recent report by Strategy& that recommends the GCC governments to open up the region’s capital markets to help accelerate investment in sustainable projects.

Today, GCC countries recycle, reuse, or recover only around 10 percent of plastic and metal waste, resulting in significant waste. Increasing recycling rates in the GCC to an achievable 40 per cent would create about 50,000 new jobs to support a $6 billion market, the report says.

Experts at the first conference on ‘Is Investing in Sustainability Economically Viable?’ said, it is not only viable and profitable, but will unlock a huge potential for the region’s economy, going forward. Organised by Dubai Stockbrokers and Investment Services Group (DSIG) and held at the Dubai Chambers, speakers at the seminar urged all industry stakeholders to work closely to unlock this huge potential that will be a game-changer for the GCC countries and help them in their transformational journey from hydrocarbon-dependent economy to a more sustainable economy.

“Increased investment in green projects, sustainable finance such as Green Bond, Green Sukuk or even Green Sovereign Wealth Funds will help the green economy to flourish and help the region to double the GDP by 2030,” Sameera Fernandes, Chairwoman of DSIG and Chief Sustainability Officer and Board Member of Century Financial, told delegates at the seminar.

“These will help accelerate the growth of the green economy and help our economies to become more climate resilient and sustainable. As DSIG Chair, I urge all stakeholders to work together to find ways to increase investment in sustainable projects and help our world become a better place to live and breathe in and we need to do this for our future generation to ensure a pollution-free and a carbon-neutral world.

“As the report suggests and I quote, the GCC governments need to continue opening up and strengthening the region’s capital markets that are relatively underdeveloped. Building up these capital markets will allow investors to exit successful investments easily. In addition, it will help investors access GCC funds, such as those held by high-net-worth individuals and families.”

Green finance represents a significant, and currently untapped, opportunity for the countries of the Middle East, in particular the GCC countries, which have well-developed capital markets. Investors around the world are pouring capital into projects with a strong environmental, social, and governance (ESG) angle, precisely the area in which the GCC countries have an advantage because of their abundant and low-cost renewable energy, according to the latest report by Strategy&, part of PriceWaterhouseCoopers (PWC).

“We looked at six major non-oil sectors in the GCC to quantify the benefits of green investing in terms of economic diversification and growth. These were agriculture and food, construction, power, transport, water, and waste management. We estimate that the cumulative GDP contribution of these sectors can reach $2 trillion through 2030. With the expansion of these sectors, we estimate the GCC countries could add over 1 million jobs by 2030,” the report says.

“To capitalise on this opportunity, and continue the process of diversifying regional economies away from fossil fuel–based industries, governments in the region need to focus on four priorities: promoting environmental sustainability; creating a green sovereign wealth fund; strengthening capital markets; and developing standard and transparent reporting mechanisms for environmental performance.”

For example, in the agriculture and food sector, governments can take steps to restructure supply chains, safeguard imports, and make the overall sector more sustainable — a critical need following the COVID-19 pandemic.

“Investors in the sector can expect healthy operating margins of above 15 per cent in various opportunities across the value chain, such as waste electrical and electronic equipment recycling, plastics and packaging recycling, secondary metal semi-finished producers, or car spare parts manufacturing,” the report says.

Green hydrogen is a clear opportunity. Production technology for green hydrogen is easily accessible, reducing the barriers to entry. According to its global supply and demand analysis, exporting countries can potentially capture a market of approximately 200 million tonnes of green hydrogen by 2050, worth $300 billion yearly. The green hydrogen export market can also create up to 400,000 operations and maintenance jobs.

The UAE has been a pioneer in sustainable finance in the GCC region, marked by the Dubai and Abu Dhabi Sustainable Finance Declarations in 2019, as well as the publication of its first guiding principles on sustainable finance in January 2020. The UAE Sustainable Finance Framework 2021-2031 has set a common national agenda for sustainable finance, while ADGM and DIFC have collaborated with global organisations to provide training programs for finance professionals.