A notable shift is underway across Gulf economies: capital once concentrated on domestic and Western-led project is increasingly flowing into Asian markets. From clean energy infrastructure to green technology, the sharpening of focus of environment, social and governance (ESG) investors is backed by a mix of climate ambition and economic diversification considerations amid new geopolitical shifts.
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Asia, meanwhile, faces an enormous challenge in funding its net zero transition. Public coffers are strained and regulatory regimes remain uneven. Gulf investors – particularly sovereign wealth funds and banks aligning their portfolios with ESG priorities – are hence seen as well placed to help plug these gaps.
But whether this capital shift translates into long-term impact will depend on how Asian markets prepare to receive it.
Top-down policy
ESG momentum in the Gulf is being led from the top. Saudi Arabia’s Vision 2030 includes an ambitious target: generating 50 per cent of electricity from renewable sources by the end of the decade. The United Arab Emirate, meanwhile, aims to double the size of its economy to 3 trillion dirham (US$820 billion) by 2031, with its Nationally Determined Contribution (NDC) forecasting green economic growth at around 7 per cent per year.
Both Saudi Arabia and Bahrain have committed to achieving net zero emissions by 2060, while Oman and the UAE aim to reach this goal by 2050.
Beyond the Gulf Cooperation Council (GCC), the bloc of countries including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, countries such as Jordan and Iraq are also seeing progress in the ESG sphere. Jordan has adopted a government-directed renewable energy strategy that targets 50 per cent renewables by 2030. Iraq has introduced ESG reporting frameworks for its financial institutions, laying the groundwork for broader sustainability governance.
Dr Han Phoumin from ERIA. The think tank’s study on mobilising ESG-aligned capital in Asia found that governments need to adopt de-risking mechanisms to enhance green project viability. Image: ERIA
Dr Han Phoumin, senior energy economist at Indonesia-headquartered think tank, the Economic Research Institute for Asean and East Asia (ERIA), told Eco-Business that the Gulf’s growing emphasis on ESG and sustainability aligns well with Asia Pacific’s energy transition and net zero ambitions.
ERIA’s 2023 Asia Transition Finance Study Group report outlines practical enablers for mobilising ESG-aligned capital – emphasising the need for clear national roadmaps, financial de-risking tools such as blended finance and credit guarantees, and tailored support for small and medium-sized enterprises (SMEs) to foster low-carbon, resilient growth across the region.
The report sets out three foundational measures for mobilising ESG capital: governments should develop credible national and sectoral transition pathways; adopt de-risking mechanisms such as blended finance and credit guarantees to enhance project viability; and support SMEs with tailored guidance and access to decision-useful data. Together, these tools are designed to make low-carbon investments more attractive to both domestic and cross-border capital.
For Asian economies, including Asean members, Gulf capital presents an opportunity not only to support infrastructure development but to strengthen regional ESG taxonomies, improve transparency in reporting, and boost investor confidence, said ERIA. When underpinned by credible ESG frameworks, such investment can mitigate project risks, accelerate innovation, and facilitate regional integration through green value chains.
Asian partnerships gaining ground
The Gulf’s sustainability ambitions are becoming entwined with Asia’s, as evidenced by a growing number of bilateral agreements.
Initiatives such as the Japan–Saudi Vision 2030, which centres on decarbonisation and energy collaboration, the UAE–South Korea Comprehensive Strategic Partnership, and China–Egypt cooperation under the Belt and Road Initiative illustrate expanding investment and technology exchanges.
They reflect a broader Gulf strategy to attract Asian capital and expertise aligned with national development objectives.
Saudi Arabia and Japan signed more than 30 memoranda of understanding (MoUs) in energy and finance on the sidelines of the Saudi-Japan Vision 2030 Business Forum held in May 2024. Image: METI Japan
The forum, which took place in Tokyo, aimed to deepen trade, investment, and cultural ties between both countries.
One illustrative example is the Vietnam–Oman Investment Fund (VOI), established in 2008 to foster bilateral investment. Initially a vehicle for Omani capital into Vietnam, the fund now supports Vietnamese ventures entering Gulf markets. In 2024, Vietnamese electric vehicle (EV) manufacturer VinFast opened its first showroom in Oman – the first Southeast Asian EV brand officially cleared for sale in the Middle East.
This aligns with Oman’s national strategy to electrify transport and reduce fossil fuel dependence. VinFast’s entry, potentially backed by the fund and Oman’s national EV programmes, could catalyse infrastructure development such as charging stations and service centres.
In May, Vietnamese Prime Minister Pham Minh Chin proposed expanding the VOI to US$1 billion, targeting investments in clean energy, infrastructure and sustainable agriculture. This example showcases how Gulf capital is not only flowing eastward, but also supporting the expansion of Asian clean tech firms into the Middle East, shared observers.
Innovation incentives and business relocation
Asian tech firms, particularly those focused on clean energy and sustainable manufacturing, are being welcomed by Gulf states as key partners in their sustainability push.
As Saudi Arabia’s Minister of Industry and Mineral Resources, Bandar al‑Khorayef, told the South China Morning Post in January, the kingdom “would like to see investments from Chinese companies bringing know‑how, technology, and also capturing the value that we have in Saudi Arabia.”
In Saudi Arabia’s NEOM and other Special Economic Zones (SEZs), authorities are offering a compelling incentive package. This includes a 5 per cent corporate tax for 20 years, zero VAT on intra-zone trade, and full foreign ownership to attract such firms
These incentives are now often tied to ESG performance. For example, in 2023, NEOM’s investment arm committed US$100 million to Chinese autonomous driving startup Pony.ai, contingent on establishing a local research and development and manufacturing base and aligning with NEOM’s sustainability standards. More recently, Chinese battery makers BYD and CATL have become key suppliers for Gulf renewable projects – such as a 2.6 gigawatt/hour (GWh) energy storage system in Saudi Arabia and a 19 GWh solar-plus-storage initiative in the UAE.
Moreover, Gulf governments are actively encouraging foreign firms – especially in sustainable sectors – to relocate regional operations by offering structured grants, tax relief, and infrastructure support.
Saudi Arabia has launched a Regional Headquarters (RHQ) programme, in effect from early 2024, providing eligible multinationals (including those in clean tech) with a 30-year, zero-per-cent corporate income and withholding tax package, alongside simplified licensing and office setup requirements. In return, companies relocating their RHQs gain priority in government contracts – supporting both scale-up and alignment with national sustainability goals.
In the UAE, the Abu Dhabi Investment Office (ADIO) and Hub71 in Dubai offer dedicated incentives for sustainable tech firms. ADIO’s Industrial Programme provides preferential energy rates and funding for firms in advanced manufacturing, including green and somatic-tech sectors. Meanwhile, Hub71 under the Ghadan 21 initiative offers equity-free grants, subsidised coworking space (up to US$200,000), and fast-track residency, specifically targeting tech startups – many focused on clean tech or sustainability.
ESG reporting and investor scrutiny
While momentum is building, ESG frameworks across the Gulf remain uneven. In some markets, disclosure requirements are still voluntary, and the absence of standardised reporting protocols makes it difficult to benchmark progress. These gaps in transparency and data reliability are a concern for institutional investors, particularly those accustomed to more rigorous ESG regimes in other parts of the world.
However, David Howell, ESG and sustainability advisor at UAE-based consultancy Sustainable Square, notes that the Gulf has made substantial strides in aligning its ESG investment landscape with global standards. Speaking to Eco-Business, he highlighted the surge in both green bonds and Shariah-compliant sukuk, with Saudi Arabia leading the region in 2024 by raising US$79.5 billion through 79 issuances.
According to Howell, this structured approach to sustainable finance is resonating with Asian investors who are increasingly seeking credible and ethically aligned opportunities.
Luma Saqqaf, CEO of Ajmal Sustainability Consulting. Image: Luma Saqqaf
Luma Saqqaf, CEO of Ajyal Sustainability Consulting, observes that Saudi Arabia and the UAE remain the most influential players in the region when it comes to ESG. She notes that both are making deliberate efforts to embed sustainability into national development models, which is helping to reposition the Gulf as a credible hub for sustainable finance.
Financial markets in the Gulf are beginning to incorporate ESG into mainstream capital-raising efforts. In the past year, both sovereign and corporate issuers – particularly in the UAE and Saudi Arabia – have started exploring green bonds and sustainability-linked loans. While uptake remains limited compared to Asia or Europe, these instruments are expected to gain traction as regulatory expectations rise.
Saqqaf also points to recent regulatory developments underpinning sustainable finance growth. She notes that both the UAE and Saudi Arabia have issued ESG bond regulations – in 2023 and 2025 respectively – demonstrating a clear focus on developing ESG capital markets. In the UAE, financial institutions have pledged 1 billion dirham (US$270 million) in sustainable finance by 2030, accompanied by a rise in green consumer financial products.
Toward regional ESG maturity
Shyam Yadav, managing partner at UAE-based Clenergize Consultants, told Eco-Business that ESG investment in the Gulf has moved beyond compliance to become an integral part of financial decision-making.
He explained that regional banks are embedding ESG into credit risk models, launching sustainability-linked products and green sukuks, and aligning with global taxonomies to attract European Union and Asian capital. This shift is catalysing a broader market transition – sovereign funds, family offices and IPO candidates are actively pursuing credible ESG ratings, climate strategies and impact-linked disclosures.
As a result, international investors are beginning to view the Gulf not just as an energy exporter, but as an emerging hub for sustainable finance and resilience-driven growth.
Mohab Ali Al Hinai, co-founder, Sustainable Investments. Image: Sustainable Investments
Oman-based Mohab Ali Al Hinai, co-founder of Sustainable Investments, noted that ESG is becoming a strategic driver for investors in the Gulf. Speaking to Eco-Business, he observed that ESG-linked capital is increasingly targeting scalable opportunities in areas such as the circular economy, sustainable logistics and resource efficiency – particularly where measurable environmental and social returns align.
He added that Oman, in particular, is positioning itself as a regional hub for such investments, with growing interest from both Gulf-based and Asia-Pacific investors.
The momentum is encouraging, though risks remain. ESG standardisation is uneven, and political dynamics can affect transparency. The region’s reliance on hydrocarbons also presents challenges to its net zero ambitions.
For Asian investors with long-term sustainability goals, the Gulf presents both opportunities and complications. While regulatory approaches differ and ESG frameworks are still evolving across countries, the region is taking concrete steps to create more investible conditions. Green bond markets are growing, sustainability-linked finance is expanding, and targeted incentives are being introduced to attract innovation – all supported by substantial state capital and a rising generation of tech-driven entrepreneurs.
Gulf taxonomies take shape
In 2023, the UAE Sustainable Finance Working Group (SFWG) issued design principles for its national taxonomy, following initial sustainability disclosure frameworks from 2021 and debt regulations in 2023. The taxonomy aims to align with international standards, such as those from the International Sustainability Standards Board (ISSD) and the Organiation for Economic Cooperation and Development (OECD), while addressing domestic priorities including water scarcity and energy transition.
Saudi Arabia is also planning its own green finance taxonomy, which regional regulators see as key for scaling investment in transition-heavy sectors like blue hydrogen and carbon capture. Meanwhile, in early 2023, the GCC Exchanges Committee introduced cross-border ESG disclosure metrics – 27 indicators spanning environmental, social and governance pillars – suggesting early moves toward a harmonised regional framework.
Luma Saqqaf suggested that a Gulf-wide taxonomy, modelled on Asean, would be a game-changer. “Taxonomies aligned with national net-zero goals are essential to guide markets, reduce greenwashing and unlock investment in transitional economies,” she told Eco-Business. T
The UAE has begun developing such a taxonomy, she pointed out, but a Gulf-wide taxonomy – much like Asean’s – would greatly enhance regional investment while respecting each country’s decarbonisation path.
The Gulf, once synonymous with oil, is redefining itself for the renewables era – and increasingly looking east to do so. As Gulf investors seek sustainable, high-impact opportunities, Asia’s energy transition presents a compelling frontier, said observers.
