The Gulf Cooperation Council (GCC) has a compelling opportunity to emerge as a major destination for climate-aligned foreign direct investment (FDI) with the region offering the lowest production cost for solar energy in the world. Six of the ten lowest-cost solar projects globally being based in the GCC, says a report.
A new analysis by Strategy& Middle East reveals that more than $1 trillion in global green FDI flowed between 2020 and 2024. However, just $24 billion of that total reached Saudi Arabia, the UAE, and Oman, even as these countries invested $132 billion in green projects abroad.
Between 2020 and 2024, Saudi Arabia, the UAE, and Oman together accounted for 29 outbound and 10 inbound green FDI deals - representing the bulk of large-scale activity in the GCC - but attracting just 2% of global green FDI. Despite this, the region possesses notable competitive advantages.
The analysis, which examines more than 100 global deals, is based on Strategy&’s proprietary “Green Seven” taxonomy – which categorises green FDI into seven sectors including hydrogen and ammonia, renewable power, green industrials and chemicals, batteries, electric and hydrogen vehicles, sustainable construction, and carbon capture. The analysis is based on large-scale global FDI deals exceeding $1 billion between 2020 and 2024, mapped using fDi Markets data.
Dr Yahya Anouti, Partner with Strategy& and the leader of the firm’s Energy, Resources and Sustainability practice in the Middle East said: “Climate concerns and government incentives have created an investment surge that is reshaping the global economy. The GCC is uniquely positioned to benefit, possessing bold net-zero ambitions and some of the world’s cheapest clean energy sources. Yet, more can be done to fully capture the momentum of global green investment. What’s needed now is a stronger policy shift to transform the region into a thriving hub for domestic investment.”
A trillion-dollar global trend
Between 2020 and 2024, 53 percent of all large-scale global FDI went into green sectors. Hydrogen and ammonia, renewable power, and batteries alone accounted for 80 percent of this green investment. The momentum peaked in 2022–2023, as the world rebounded from the COVID-19 pandemic and capital surged toward sustainability-linked projects. While 2024 saw a relative cooling as investment attention shifted toward AI and semiconductors - green FDI continued to remain robust, reaching US$158 billion - triple the level in 2020.
Most outbound investments from the GCC targeted hydrogen and ammonia projects in Egypt and Mauritania, while inbound deals largely emerged from China, India, and the United States, targeting investments in hydrogen and electric vehicles. Saudi Arabia received the lion’s share of investments at US$12.6 billion – closely followed by Oman with $8.9 billion, including two major Indian-backed projects in green ammonia and green steel.
Devesh Katiyar, Partner at Strategy& Middle East, added: “The green transition is redefining how and where industries grow. As climate capital remains a fixture in global markets, the region must play a greater role in not only deploying capital but attracting it. This means embracing a range of tools to strengthen the business climate, from de-risking mechanisms and clearer regulations to incentives that actively shape capital flows.”
The Green Advantage
In the United States, the Inflation Reduction Act (IRA) has driven a sharp rise in climate-aligned investments across sectors like batteries, electric and hydrogen vehicles, renewable power, green industrials, and carbon capture. By comparison, green FDI inflows into the GCC remain modest. When the size of inflows is put in proportion to the size of each country’s GDP, all Middle East countries - except for Oman - trail behind their global peers.
To convert the GCC's potential into real capital inflows, the report outlines four strategic recommendations:
1. Landmark policy moves: Enact climate-forward manufacturing laws, emissions reporting, and enforceable product standards, mirroring global efforts like the US’ IRA or EU Green Deal.
2. Investment de-risking: Introduce long-term offtake agreements, expand green bonds, and create dedicated funds to support clean infrastructure and early-stage technologies that bolster investor confidence.
3. Green industrial development: Empower regional industries like green hydrogen, low-carbon materials, and circular economy ventures with access to low-cost clean energy and skilled talent.
4. Strategic outbound investment: Use outbound investments in global clean-tech ecosystems to bring back capabilities and co-investment into the region.
Transforming GCC to a Green Investment Hub
Several GCC nations have already made promising progress. Saudi Arabia’s Green Financing Framework and $1.7 billion sovereign green bond issuance, Oman’s green hydrogen offtake agreement, and the UAE’s Sustainable Finance Framework all represent momentum. As international capital increasingly seeks climate-aligned opportunities, unlocking the potential of GCC’s industrial capacity, geographic location, and renewable resources will depend on bold policy choices and regulatory clarity.
While the report identifies tangible actions for the region, progress will not be linear. Shifting capital trends — such as the 2024 pivot toward data center investments — along with tariffs, trade tensions, and geopolitical uncertainty may reshape green FDI flows. Nonetheless, climate risks are certain to keep green investment firmly on the global agenda, the report said. - TradeArabia News Service
