Investing in the future: finance focus group

Arab region context: The Arab region faces significant challenges, including a lack of economic diversification, high dependence on fossil fuels, and unchecked demand growth leading to air pollution and a growing carbon footprint. The region attracts one of the lowest shares of investments in renewable energy globally, with only 1% of renewable energy funding in 2020 coming from concessional financing. 

The Survey results: Over 420 respondents across the 21 Arab member states revealed major challenges such as insufficient long-term planning, lack of government support, and high costs of training and education. There are also significant barriers for women and youth in gaining education and employment in sustainable energy. There is a need for better government support, clear policies, and adequate financing to enable the energy transition, particularly in less developed and conflict-affected areas.

The discussion underscored the pivotal role of financial institutions in mitigating human capital constraints to facilitate the energy transition. It was noted that there is a significant gap between the skills provided by educational systems and the demands of the renewable energy industry. Financial institutions are increasingly recognising the need to invest in human capital by supporting continuous professional development and vocational training programmes. An example was provided by Jordan's successful implementation of solar projects, where capacity-building efforts and partnerships with organisations like EBRD and IFC played a crucial role.

The panel highlighted the importance of tailored programmes that address the specific needs of different countries, as seen in various initiatives across the Arab region. For instance, the Islamic Development Bank's scholarship and reverse linkage programmes were cited as effective tools for capacity development, enabling countries to share expertise and address specific gaps. Additionally, there was a discussion on the high cost of capital in renewable energy projects, which remains a significant barrier. Innovative solutions, such as the introduction of green bonds and sustainability-linked loans, were suggested as ways to overcome these financial hurdles. The need for robust partnerships and collaborations to ensure the sustainability of these initiatives was a recurring theme, emphasising the collective effort required for a successful energy transition.