Sustainable growth in the desert and Saudi Arabia’s green financing framework

With COP29 in Baku emphasizing the importance of sustainable finance in global climate response, Saudi Arabia’s recent advances in green financing provide a relevant case study. In line with COP29’s focus on mobilizing capital for climate objectives, Saudi Arabia’s Ministry of Finance introduced a Green Financing Framework in 2024.

This framework is part of the Kingdom’s Vision 2030 strategy for economic diversification and sustainable development, aimed at increasing private sector investment alongside public funding for green projects. By embedding transparency and accountability standards, the GFF aligns with COP29’s agenda on credibility in sustainable finance.

Saudi Arabia’s sustainable finance initiatives reflect the growing trend of aligning economic strategies with Environmental, Social and Governance standards. Vision 2030 has already delivered progress in sustainable finance led by the Saudi stock exchange, the Public Investment Fund, and key Saudi banks. Tadawul introduced ESG disclosure guidelines for listed companies in 2018, while PIF launched its Green Finance Framework in 2022, supporting the issuance of green financial instruments.

Building on these efforts, the Ministry of Finance’s GFF aims to establish structured criteria for green finance allocation that adhere to the International Capital Market Association’s Green Bond Principles. This alignment enhances transparency and seeks to mitigate greenwashing risks, which are critical for credibility in ESG markets.

The GFF prioritizes projects in sectors such as renewable energy, carbon capture, energy efficiency and climate adaptation. Funding through this framework is tied to sustainability metrics, requiring annual reporting on project impacts verified by third-party assurance providers. Additionally, the GFF has undergone a second-party pinion evaluation, reinforcing its alignment with internationally accepted standards and increasing its appeal among ESG-focused investors.

In a broader context, the financial requirements for a low-carbon global economy are significant, with estimates suggesting a need for $4 trillion to $8 trillion annually by mid-century. The Saudi Public Investment Fund’s green project investment plan has exceeded $19.4 billion, supporting major Vision 2030 projects such as NEOM and the Red Sea development. By formalizing the GFF, the Saudi government has expanded its role in sustainable finance, aiming to provide structured guidance for green and low-carbon investment opportunities that invite broader private sector participation.

Looking forward, Saudi Arabia’s continued progress in sustainable finance will rely on its capacity to align domestic infrastructure with global best practices while addressing local requirements. The GFF establishes a foundation, but further steps toward a comprehensive system will be necessary to support international competitiveness and facilitate access to emerging capital markets for sustainable finance.