GCC’s ‘green finance’ sector has potential to unlock $2 trillion in GDP and over 1 million jobs – News
According to new research from TheCityUK and BNP Paribas, global borrowing through the issuance of green bonds and loans, and equity financing through initial public offerings targeting green projects, increased from $5.2 billion in 2012 to $540.6 billion in 2021.
The GCC countries, which have some of the highest solar exposures in the world, also have the solar advantage. A solar photovoltaic panel in a GCC country produces twice as much as in Germany or any European country with a similar climate – 1,750 to 1,930 hours of full-load operation per year. — File photo
GCC governments have the potential to unlock $2 trillion in cumulative contribution to GDP (gross domestic product) and over a million jobs in addition to foreign direct investment in sustainable industries through green finance, said experts.
Although there is no commonly accepted definition, “green finance” is essentially used to refer to the two-way interaction between finance and the environment. The aim is to use investment to mitigate and manage environmental risks, while facilitating the transition to a sustainable, low-carbon global economy, according to green finance experts.
“While all GCC countries have already begun their respective sustainability journeys, policymakers must act in a decisive and differentiated way to capture the biggest share of the economic price,” said Strategy&, Middle East, which is part of of the PwC network.
Global green financing, for environmentally friendly projects around the world, has increased more than 100 times over the past decade. According to new research from TheCityUK and BNP Paribas, global borrowing through the issuance of green bonds and loans, and equity financing through initial public offerings targeting green projects, increased from $5.2 billion in 2012 to $540.6 billion in 2021.
China and the United States accounted for 13.6% and 11.6% of green bond issuance between 2012 and 2021, the data shows.
They were followed by France and Germany, with around 10% each of green bond issuance during the period. The share of green finance in the total financial market was around 4.0% in 2021, compared to around 0.1% in 2012.
ESG angle for investing
Aurélien Vincent, Partner at Strategy& Middle East, said that investors around the world are investing capital in projects with a strong environmental, social and governance (ESG) dimension.
“Our analysis found that green investments in six key GCC industries could have a profound socio-economic impact that could create more than one million skilled jobs and spur foreign direct investment in highly sustainable industries.”
The GCC countries, which have some of the highest solar exposures in the world, also have the solar advantage. A solar photovoltaic panel in a GCC country produces twice as much as in Germany or any European country with a similar climate – 1,750 to 1,930 hours of full-load operation per year.
In addition, there are clear opportunities in green hydrogen where production technologies are easily accessible, reducing barriers to entry, according to Strategy& Middle East’s report titled “Middle East green finance: A $2 trillion potential “.
“Based on our analysis of global supply and demand, exporting countries have the potential to capture a market of around 200 million tonnes of green hydrogen by 2050, worth $300 billion. The green hydrogen export market can also create 400,000 operations and maintenance jobs,” said Anthony Yammine, director of Strategy & Middle East.
The consultancy advises governments to focus on four priorities. These include adopting policies that promote environmental sustainability across all industries; the creation of a green sovereign fund; strengthen capital markets and develop standardized and transparent reporting mechanisms on environmental performance.
With more than $130 trillion (or 40% of global financial assets) now committed by financial institutions to align with the climate goals of the Paris Agreement, it is expected that “green” financial products soon become more standardized as the market, through increased consumer demand, settles on an agreed framework of principles required for ‘green’ finance.