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In the period from 2020 to 2024, the Gulf Cooperation Council (GCC), comprising Saudi Arabia, the UAE, and Oman, found itself on the periphery of a global green investment wave, capturing a mere $24 billion of the staggering $1 trillion in foreign direct investment (FDI) directed toward green projects. This shortfall is particularly striking given that these nations collectively invested $132 billion in green initiatives abroad during the same timeframe.

The report from Strategy Middle East highlights that while the GCC accounted for 29 outbound and 10 inbound green FDI deals—indicative of a robust engagement in this sector—it still represented only 2% of the global green FDI flows. The region possesses undeniable competitive advantages, notably the lowest production costs for solar energy globally, with six of the ten least expensive solar projects located within its borders. These attributes position the GCC favorably to capitalize on the growing demand for sustainable investments.

Dr. Yahya Anouti, a partner at Strategy and an expert in energy resources and sustainability, noted that climate concerns and government incentives have catalyzed a surge of investment reshaping the global economy.

Despite this momentum, the GCC has yet to fully harness its potential. The region's ambitious net-zero goals and access to some of the world's cheapest clean energy sources underscore its capacity for growth in the green sector, yet a more profound policy shift is necessary to convert this potential into tangible domestic investment.

Globally, between 2020 and 2024, green sectors absorbed 53% of all large-scale FDI, with hydrogen, ammonia, renewable energy, and batteries making up 80% of this investment. The peak of this trend occurred in 2022-2023, as economies rebounded from the pandemic, but 2024 saw a cooling as investor focus shifted toward artificial intelligence and semiconductors. Nonetheless, green FDI remained robust, reaching $158 billion—triple the level of 2020.

The GCC's outbound investments predominantly targeted hydrogen and ammonia projects in Egypt and Mauritania, while inbound investments largely stemmed from China, India, and the United States, focusing on hydrogen and electric vehicles. Notably, Saudi Arabia attracted the largest share of inbound green FDI at $12.6 billion, followed closely by Oman with $8.9 billion, which includes significant Indian-backed ventures in green ammonia and steel.

Devesh Katiyar, another partner at Strategy Middle East, emphasized the need for the region not only to deploy capital but also to attract it. This requires a strategic embrace of various tools to enhance the business climate, such as risk mitigation mechanisms, clearer regulations, and incentives that actively guide capital flows.

To convert the GCC's potential into real investment, the report outlines four strategic recommendations: enacting climate-forward manufacturing laws akin to the U.S. Inflation Reduction Act; introducing long-term offtake agreements and expanding green bonds to bolster investor confidence; empowering regional industries with access to low-cost clean energy; and leveraging outbound investments to facilitate co-investment opportunities.

Encouragingly, some GCC nations are making strides in this direction. Saudi Arabia has initiated a $1.7 billion sovereign green bond issuance, Oman has secured a landmark hydrogen offtake agreement, and the UAE has established a sustainable finance framework. The report concludes that while various factors may influence investment trajectories, the enduring risks posed by climate change will ensure that green investment remains a focal point of the global agenda.