Why sustainability isn’t unlocking capital — yet
Efforts to finance sustainability initiatives face structural headwinds globally, including growing resistance to Environmental, Social and Governance (ESG) and tighter market conditions reshaping how investors interpret sustainability. Emerging frameworks aim to align sustainability with investment decision-making but are often conflated with legacy reporting focused on corporate impacts. While both matter, capital is ultimately allocated based on risk, return and growth. The challenge is clearly articulating sustainability’s contribution to long-term value.
For asset owners and developers, this means embedding environmental and social considerations into project design from the outset.
Leveraging ESG as a signal for value creation
For investors, ESG is most useful when it provides insight into a project or company’s capacity to deliver resilient, long‑term value. It supports identification of how sustainability‑related risks and opportunities are likely to affect future performance.
When these factors are clearly articulated, they become indicators of strategic positioning and adaptability, demonstrating how projects can manage downside risk while capturing emerging opportunities. Approaches such as the Task Force on Climate-related Financial Disclosures (TCFD), which underpins International Financial Reporting Standard for climate-related disclosures (IFRS S2), support this by encouraging scenario‑based analysis to identify investments that remain robust across a range of future states, strengthening the case for investment‑ready propositions.
From principle to practice: Green sukuk and risk‑aligned finance
In practice, translating sustainability into decision‑relevant, investable value requires financing structures that align capital with how value is created and risk is managed under uncertainty.
In the Gulf Cooperation Council (GCC), where large-scale infrastructure and development programs compete for capital under ambitious national transformation agendas, access to flexible, risk-aligned financing is becoming a critical differentiator.
Rooted in the Middle East, green sukuk is an Islamic finance innovation particularly relevant to early-stage and transition finance. Structured as asset-linked investment certificates rather than conventional debt, sukuk align capital with project performance by tying funding to ring-fenced assets. Investors are repaid from generated profits rather than fixed debt service.
This structure embeds risk sharing instead of rigid repayment, helping to manage uncertain cash flows, long timelines, policy risk and revenue volatility. Linking returns to performance strengthens the investment case by aligning capital repayment with project cash flow realities.
Securing capital for sustainable, long‑term growth
While still niche globally, green sukuk is scaling faster than conventional green bond issuance in the GCC, led by Saudi Arabia and the United Arab Emirates. As issuance grows, market liquidity increases, attracting institutional capital and intensifying competition for a finite pool of high-quality, performance-credible assets.
The growth of green sukuk globally and across the GCC highlights increasing investor appetite for sustainable finance and a growing pool of capital for climate and transition projects.
ESG as a financial framework
With deepening liquidity and a shift from labels to delivery, developers supported by strong technical partners are best positioned to secure this flexible, risk-aligned financing.
Unlike advocacy, ESG provides a practical framework for understanding risk and capturing opportunity in a changing investment environment. As GCC banks increasingly underwrite sustainability labeled instruments that attract international investors, developers have a unique opportunity to position infrastructure projects for these expanding pools of capital.
However, as the growth of green sukuk illustrates, unlocking this capital is more than a matter of scale — it’s also about structure. These instruments demonstrate how aligning financing terms with underlying asset performance through risk sharing and flexibility can better reflect project realities. Companies that can shape assets and financing approaches to attract patient, long-term capital will be better positioned to fund the operational shifts and technological advances required in a rapidly evolving economy.
Ultimately, scaling sustainable finance will increasingly depend on stronger financial design — structuring projects to perform across transition scenarios and allocating risk to those best able to manage it, while translating sustainability into financeable, growth-oriented assets.
In this context, ESG becomes a gateway to capital. Infrastructure that aligns environmental and social performance with value creation will be best positioned to unlock investment, strengthen resilience and deliver long‑term outcomes for the natural environment, as well as communities and economies across the GCC.
