Effective funding to help countries shrink their carbon footprints hinges on enabling the financial services ecosystem to support the sustainability transition, not only to protect value but to create it.
The past year saw progress toward nature-positive finance, including the Baku to Belem Roadmap to 1.3T, a COP29 agreement to mobilise resources for low-carbon, climate-resilient development. Yet, the final $300 billion-a-year pledge by 2035 is far below the $1 trillion economists estimate is needed. Clearly, there’s a long way to go.
This article focuses on the financial services sector, a bellwether for market shifts, with two priorities: shift discourse from talk to action and outline how stakeholders can support the transition to both protect and create value.
Why: setting the agenda
Don’t underestimate the scale of the problem
Extreme weather events are on the rise, and the costs of climate change are accelerating. Globally, the World Economic Forum estimates companies are projected to face approximately $600 billion in annual fixed asset losses by 2035. In the Middle East and North Africa region alone, climate-driven water scarcity alone could shrink the region’s GDP by an estimated 6–14% by 2050.
Banks recognise this and are taking action. For example, JPMorgan Chase committed $2.5 trillion over 10 years for climate and development solutions, while UAE banks pledged $270 billion to mobilise sustainable finance as announced during COP28 in Dubai.
While shifts in global priorities may influence the agenda in the short term, staying the course on climate commitments remains essential. Despite the major shifts in the global agenda, commitment to sustainability investment endures. Given the shift in the US policy stance on ESG, major banks left the Net-Zero Banking Alliance. Still, firms like JPMorgan maintain focus on low-carbon technology and energy security. Moreover, Kearney has recently conducted the study “Staying in the course: chief financial officers and the green transition,” which shows that 92% of CFOs will increase sustainability investments, with over half planning significant increases.
In the GCC, countries are increasingly integrating climate priorities into their long-term strategies, signalling resilience of commitment. For example, both Saudi Arabia and the UAE have set net-zero emission targets (2060 and 2050, respectively), in tandem with the need to navigate oil market dynamics.
Frame climate finance as value creation, not value protection
While ESG branding may be quieter, organisations are reframing sustainability as modernisation, pivoting from fossil fuels to renewables. The business case is strong: GCA estimates $1.7 trillion in adaptation investments could yield $7.1 trillion in returns. 93% of CFOs see a clear business case for sustainability.
A striking regional example is the growth of UAE-based Masdar, a renewable energy developer. Only in 2023, Masdar expanded its clean energy portfolio by over 50% to 31.5 GW of capacity (up from 20 GW in 2022).
What: mobilising finance
Invest in both mitigation and adaptation
Mitigation and adaptation are not competing priorities; they are connected pieces of the climate puzzle. Mitigation, which focuses on reducing greenhouse gas emissions and halting the progression of climate change, is essential for addressing the causes. Adaptation, on the other hand, addresses the consequences, building resilience to rising temperatures, extreme weather events, floods, droughts, and rising sea levels.
Both are essential, but finance is heavily skewed. According to the Climate Policy Initiative, over 90% of tracked flows ($570 billion annually) go to mitigation, while adaptation receives less than 10%, mainly from the public sector. Such an imbalance is also present in the MENA region, where over 70% of international climate finance to the area from 2003 to 2021 went to mitigation projects, such as energy and transport, while less than 15% supported adaptation needs like water and sanitation.
There are several reasons for this. For one, unlike mitigation, adaptation projects typically lack clear revenue models and cash flows, influencing the level of private-sector investment. For another, there’s limited information about physical climate risks. What’s more, long investment horizons mean it’s often the public sector doing the heavy lifting on adaptation finance. One way to attract more private capital is to make adaptation more bankable by deploying innovative financing mechanisms.
Double down on innovative finance mechanisms
Blended finance, public–private partnerships, feed-in tariffs, feebates, insurance, and risk-sharing tools help de-risk projects in emerging economies. Blended finance alone mobilises about $15 billion annually.
One tool gaining traction in the GCC is green bonds and sukuk issued by regional entities. Saudi Electric Company launched green sukuk, raising two $650 million tranches to finance renewable power and grid upgrades. Even Gulf commercial banks have joined in. For example, Qatar National Bank issued a $600 million green bond, the largest from a regional bank so far.
Focus on improving your carbon footprint
Alongside innovating on sustainable products and services offered to accelerate their profit engines, financial institutions should integrate sustainability into operations, risk frameworks, and governance. Many already have net-zero targets and climate transition plans. In fact, in a South Pole survey of 350 financial institutions across 13 countries, nearly three-quarters of organisations had set net-zero targets for their operations.
Citi’s 2025 Sustainable Progress Strategy aims to be a leader in low-carbon transition by financing solutions, managing portfolio climate risk, and reducing its own footprint. In the region, First Abu Dhabi Bank (FAB) – the UAE’s largest bank – became the first Gulf institution to join the Net-Zero Banking Alliance and has committed to net-zero emissions across its operations and portfolio by 2050.
How: making it happen
Get the right decision-makers in the room
COP29 was billed as the “finance COP,” yet finance-sector engagement was limited, leading to underwhelming commitments. For COP30, countries must involve senior decision-makers empowered to set priorities, commit resources, and drive action.
Collaborate across the ecosystem
Mobilising the needed climate finance will require coordinated public–private action, shifting funds away from environmentally harmful activities toward sustainable models. Partnerships will be vital to address both funding and execution challenges. For example, one innovative coalition is the Regional Voluntary Carbon Market launched by Saudi Arabia’s PIF and the Saudi stock exchange, which held in 2023 the world’s largest-ever carbon credit auction, selling 2.2 million tonnes of CO₂ credits to 16 regional companies.
Improve on climate finance risk management
Accurate, transparent sustainability data is critical to developing sustainable products and managing risks. AI can help track and manage emissions globally, supporting more scalable, effective models.
It’s time to collaborate and listen
With climate costs rising, geopolitical distractions, and sustainability increasingly seen as value creation, the case is clear. Financial services must mobilise adaptation finance, innovate hybrid mechanisms, and improve internal sustainability, achieved by cross-sector collaboration and empowering the right decision-makers with the right data.
