Regional Summary: Middle East

28 Jun 2023


With COP28 taking place in the Middle East in December 2023, there has been a sharp increase in climate-related commitments in the region. A key priority is to diversify the local economy to reduce reliance on oil and gas. Start-ups and family-owned businesses are benefitting with many choosing to go public to access finance – a move which is accompanied by increased ESG reporting requirements and new responsibilities for board directors.

Introduction: Emerging climate commitments

Climate action is increasingly moving up the political and business agenda in the Middle East fuelled by two parallel factors. Firstly, the region is increasingly experiencing the impacts of climate change, leading to concerns about water scarcity and food security. Local production only meets 15% of the region’s food needs. Secondly, COP28 took place in Dubai in December 2023. Coming on the back of COP27 in Egypt, this has brought climate negotiations closer to home, Cintia Külzer-Sacilotto, Assistant Professor at the United Arab Emirates University  told delegates.

Consequently, there has been a sharp increase in the number of climate-related commitments. Countries across the region, including Bahrain, Oman, Saudi Arabia and the UAE, have set net zero goals. In just one year, from 2021 to 2022, there was a 1,300% increase in the amount of green bonds available from USD$0.6bn to USD $8.5bn. Meanwhile, Külzer-Sacilotto noted that in a 2023 PwC report, the proportion of companies indicating that they had implemented ESG strategies jumped from 18% to 64% between 2022 and 2023.

Mohamed Kayal, Academic Coordinator at the Sorbonne University UAE Campus acknowledged the upward trend in commitments. However, he cautioned that it was still too early to know whether COP28 had been a catalyst for change and whether action would be sustained after the event.

The need for economic diversification

The region has a lot of catching up to do, according to Külzer-Sacilotto. The countries of the Gulf Cooperation Council (GCC) have some of the highest emissions per capita in the world, up to 80% higher carbon intensity than the OECD average.

Reducing emissions requires a substantial diversification of the economy, moving away from dependence on oil and gas production. Without such diversification, the region will persist in relying on oil and gas exports for its revenues, making it vulnerable to consumer pressures. Additionally, up to 50% of the region’s assets could risk becoming stranded.

Most countries in the region now have a national strategy for economic diversification, highlighting the growth industries – such as renewable energy, tourism, real estate, and agri-tech which are expected to take the place of oil and gas. The availability of land and high levels of sunlight give the region a natural competitive advantage in the production of solar energy. However, Kayal noted that some of these developments such as the boom in tourism-related construction or the creation of artificial islands potentially come with their own climate impacts.

As a result of diversification, between 2010-2022, all countries in the region saw an increase in the proportion of GDP coming from sectors other oil and gas. In Kuwait, non-oil-related sectors accounted for 52% of GDP compared with 41% just over a decade earlier, while in Qatar the contribution from non-oil sectors had risen from 47% to 63%.

Külzer-Sacilotto noted that start-ups and family-owned businesses were benefitting from economic diversification away from oil and gas in the UAE and Saudi Arabia. There has also been a marked rise in initial public offerings (IPOs) in the country as businesses make the transition to public ownership in order to access additional finance.

Reporting requirements

Compared with other parts of the globe, climate reporting requirements are still relatively under-developed in the Middle East. However, Külzer-Sacilotto told delegates that requirements for listed organisations are becoming mandatory in the UAE and impacting a larger number of companies due to the rise in numbers of businesses going public. The country also requires all companies listed on UAE stock exchanges to appoint at least one woman to the board.

Up to 70% of business managers in UAE disclose that they are now reporting on sustainability actions – perhaps not to the same standard required of businesses in countries such as Singapore. However, it is a clear signal for companies to start taking action.

Kayal agreed, saying that this was putting increasing demands on company directors in the region, many of whom do not have the skills or experience of dealing with climate issues. Board directors have a duty to set the ground rules, ask questions and encourage the right behaviours across the company. There is a need for greater board-level education on climate issues to enable directors to fulfil these requirements.

Kayal also cautioned directors to be alert to cultural issues that may hamper a company achieving full transparency in its disclosures. For example, junior staff may be tempted to paint climate action in a more favourable light if they feel that it is what the board wants to hear. Again, directors have a duty to set the right tone and ask the right questions.

Dual accountability

Companies in the Middle East may be better placed to incorporate ESG issues than those in other regions. Külzer-Sacilotto noted that these organisations already have to contend with the dual reporting requirements resulting from Islamic law sitting alongside international finance standards and regulations.

There is also a significant overlap between the principles of ESG and Islamic finance. For example, both have a requirement to limit or avoid harm in investment decisions. They also require accountability, transparency and long-term vision. However, the rise of ESG has been accompanied by much greater stakeholder activism, which may be new for businesses in the Middle East and an area that they need to pay attention to in the future.


The impacts of climate change, coupled with the stimulus from hosting COP28 in Dubai, have pushed the Middle East into the climate conversation. Companies are facing increasing requirements to report on their climate action, which presents a challenge for board directors. However, established principles relating to Islamic finance mean that companies in the region are well-placed to act on ESG requirements. Board directors need to educate themselves about climate issues, emerging reporting regulations and ESG processes to enable the businesses they represent to thrive.


This summary is based on expert contributions to the International Conference on ESG and Climate Governance from:

  • Fay Abdulla Al Khalifa, Associate Professor in Urban Sustainability and Cultural Change at the University of Bahrain
  • Sherwat Elwan Ibrahim, Associate Professor of Operations Management at The American University in Cairo
  • Mohamed Kayal, Academic Coordinator at the Sorbonne University UAE Campus
  • Cintia Külzer-Sacilotto, Assistant Professor at the United Arab Emirates University