As Corporate America Makes Green Retreat, GCC Firms Should Hold the Line
Corporate America is undergoing a “great green retreat,” undermining the momentum that climate finance has built in recent years. Concurrently, President Donald Trump’s administration had dealt a final blow to America’s global climate finance ambitions. The dismantling of public US entities, such as USAID—which collaborates with private American firms on global climate initiatives—has further dampened private sector interest in the field. As a result, several American multinational enterprises have begun deprioritising their climate goals, including scaling back on ESG commitments and other climate-related initiatives.
In contrast, climate finance has been gaining traction in the Gulf region, with the United Arab Emirates (UAE), Saudi Arabia, and Qatar emerging as regional leaders. They have been investing in climate finance not just domestically but also internationally, particularly in the Global South. Consequently, US firms have been among the main drivers and partners in GCC climate initiatives until now.
The GCC states have long maintained longstanding relationships with American entities, including in areas such as renewable energy and climate-smart agriculture—an approach that boosts agriculture while considering climate adaptation and mitigation. US-GCC collaboration in the climate sphere is consistently developing, with the US being recognised as a key supporter. This partnership has not only helped GCC states meet their climate goals but has also opened markets for US-based firms. However, shifts in US policy will potentially offset the GCC’s plans and ambitions in the field.
Additionally, GCC countries have issued various green bonds, which are essentially fixed-income financial instruments that raise funds for climate-beneficial projects. The green bond market has experienced a recent boom, increasing from $600 million in 2021 to $8.5 billion in 2022. This surge highlights the sudden rise in interest and demand for sustainable finance in the Gulf.
With the US retreat, there will be a gap in climate financing which will need to be filled, ideally by those countries whose interests are most threatened by this prospect. In this context, the GCC states should prioritise diversifying their climate finance partnerships, especially in emerging markets, to expand their presence, and influence in the global climate finance landscape. The GCC countries, particularly the Gulf 3—UAE, Saudi Arabia, and Qatar—must also look inward, focusing on their own climate finance policies, and implementing new approaches to attract private ESG investors. By doing this, they should ultimately make the climate finance atmosphere in the region more resilient and impactful in the long-term.
In recent years, GCC countries have demonstrated their strength in fostering partnerships with countries around the world across various sectors. Now, as one partner retreats, another steps forward. Other global powers may see the American withdrawal as an opportunity to capitalise on and establish themselves as more prominent leaders in the industry. For instance, China, which is not far behind the US in terms of climate finance, has already been actively forming partnerships with GCC countries in this space.
Examples include ACWA Power’s collaboration with Chinese manufacturers to supply wind turbines for the Bash and Dzhankeldy projects in Uzbekistan. Additionally, UAE-based Mensha Ventures has partnered with Chinese companies to invest $1 billion in clean technologies in Asia. This trend indicates the growing opportunities for cooperation between the GCC and China in the realm of upcoming climate finance plans.
At the same time, the GCC is also expanding its partnerships with the European Union. While the EU is also very focused on climate initiatives, it has been more limited compared to the US. Despite the EU’s ongoing collaborations with the GCC, the depth of their relationships are not equal. With climate change being less politicised in the EU than in the US, increased EU-GCC partnerships could provide more stable and reliable avenues of investment and growth.
In November 2024, during the first EU-GCC Summit in Brussels, there were calls from leaders on both sides for stronger collaboration in climate finance and investments, identifying many potential areas for knowledge sharing and collaboration. GCC countries stand to benefit from the expertise of institutions such as the European Bank for Reconstruction and Development in financing renewable energy projects. Furthermore, the EU is well-positioned in carbon market cooperation, as a global leader in this field, to pave the way for the GCC who is also interested in mobilising funds for climate finance in emerging economies.
Presently, the GCC has invested in climate finance initiatives and projects globally, from Bangladesh to Central Asia, from North to Sub-Saharan Africa, and beyond. However, it could be argued that the GCC could better leverage its platform for economic integration to better support climate finance. For instance, Saudi Arabia has invested over $25.6 billion in Sub-Saharan Africa alone over the past decade, building a strong foundation to incentivise expansion in climate finance in the region. Additionally, the UAE has invested over $3 billion in India during the 2023-2024 fiscal year, making it the largest Middle Eastern investor in South Asia. GCC investments in Asia also extend to ASEAN countries, with $13.4 billion invested between 2016 and 2021, and recent discussions on an ASEAN-GCC trade agreement further cementing GCC investment in the region.
Although these investments may not explicitly fall within the realm of climate finance, they can serve as a stepping stone. If ongoing GCC economic investments and partnerships are redirected toward climate-related initiatives, they could make impactful contributions to the industry. Economic cooperation through strategic partnerships and financial mechanisms can mobilise great resources for climate action. For the GCC, this foundation is already in place, as discussions have consistently highlighted that financial policies aligned with climate goals can foster sustainable economic growth alongside climate resilience. To address the gap left by the United States, GCC states must align their collaborations across the Global South with clear climate objectives.
GCC climate investments across the Global South create a win-win situation for both parties. They present an opportunity for GCC countries to support their economic diversification efforts as climate related projects in emerging markets can result in monetary gains, such as through investments in renewable energy and the energy transition. These investments can also help GCC states fulfil their own climate goals, such as their investment in Africa’s agricultural sector, which supports the GCC’s own climate resilience and food security objectives.
In tandem to external action, GCC countries must leverage to their domestic resources to compensate for the loss of American green investments and foster regional climate finance initiatives. Across the Gulf, there is a need for more private green investments. While sovereign wealth funds have been successful in attracting investment for climate finance and accelerating climate action, reliance on a primarily state-driven approach acts as a limitation. Integrating private investment in the field attracts capital with proven cash flow potential and innovations, resulting in a synergistic approach that leverages the strengths of both private and public sectors to contribute to the field.
A key way for governments to attract more green private investment is by establishing clear regulations. This clarity, in turn, increases investor confidence and attracts further investment. Although various ESG frameworks have been implemented, issues such as regulatory uncertainty persist. Organisations in Saudi Arabia, the UAE, and Qatar lack harmonised, standardised reporting frameworks, which has hindered the attraction of more private green investment. For the GCC, this means that the development of a GCC-wide framework focused on climate finance, incorporating a unified and comprehensive set of guidelines, standards, and best practices would be paramount.
For GCC climate finance, the US withdrawal can be seen as a setback due to America’s prominent influence in the field. However, both inward and outward strategies present an opportunity for the GCC to capitalise on this moment. GCC states must create more accommodating conditions for climate related initiatives, and leverage their economic and political influence in the Global South to expand their climate finance reach. Such measures in the industry present a critical opportunity for the GCC states—the actions they take now will determine their future standing in global climate finance.
Photo: ACWA Power
