The GCC’s Western renewables acquisitions trend is poised to continue in 2023: Among the key trends we noted in 2022’s MENA climate investment landscape was the push by sovereign wealth funds (SWFs) to snap up renewables assets outside the region — notably in Europe and the US. A report published on Sunday by data platform Global SWF — which tracks over 400 SWFs and public pension funds — predicts the trend will carry on into 2023, with GCC SWFs set to accelerate their interest and investments towards renewables and Western assets.

Green investment by SWFs saw a substantial boost in 2022: Globally, state-owned investment (SOI) in renewables assets stood at USD 18.7 bn in 2022, the Global SWF report notes. Although this comes in at just below 2021 figures, if we were to exclude a 2021 USD 6 bn investment by Abu Dhabi’s ADQ and Kazakhstan’s SWF Samruk-Kazyna in building wind farms, 2022 “would have been a record high for green investing,” the report notes. SOI vehicles upped their investment in European renewables by 45% to USD 8.4 bn in 2022, it adds.

GCC SWFs played a big role here: GCC investment funds put forward 29% of the total SOI capital poured into renewables in 2022 — making them one of three major contributors (Canadian funds contributed 33% and Singapore contributed 26%). The UAE’s Mubadala was the second-largest single SWF investor in renewables in 2022, the report adds.

Green investment is a major trend that’s “here to stay,” and GCC SWFs will seek to capitalize on this, the report tells us. “The transition to low-carbon energy sources is at the top of the agenda of GCC SWFs as they seek to diversify domestic and regional economies and gain exposure to progress towards the Paris Agreement’s net zero goals,” it adds. Renewable energy investment is highly attractive for SOIs in general, as renewables assets are largely stable, can withstand inflation, and investing in them supports net-zero goals, the report argues.

GCC SWFs’ pivot to Western assets set to continue: GCC SWFs more than doubled their investments in Western economies in 2022 to USD 51.6 bn from USD 21.8 bn in 2021, the Global SWF report notes. Out of 60 “mega” investments (with ticket sizes of at least USD 1 bn), 26 were undertaken by GCC SWFs — 17 of which were in US or European assets, it tells us. “In 2023 and beyond, Middle Eastern sovereign investors will likely continue to be very active in Europe and North America,” the report adds.

GCC SWFs are also in a much stronger position than their peers: “In the global context of geopolitical, economic, and financial uncertainty, Middle Eastern funds are shining more than ever,” the Global SWF report notes. MENA oil and gas producers are set to benefit from additional revenues of USD 1.3 tn over the coming four years, thanks to the energy crisis spurred by the Ukraine war, the Financial Times notes, citing IMF forecasts. Much of that extra wealth will be funneled into the region’s SWFs, the FT adds.

And they’ll likely retain this advantage in 2023: High oil prices and currency stability in the GCC mean that large, liquid funds like Abu Dhabi’s ADIA, Kuwait’s KIA and Qatar’s QIA are set to receive substantial capital inflows this year. Meanwhile, funds like Abu Dhabi’s Mubadala and ADQ, Dubai’s ICD and Bahrain’s Mumtalakat may not see large amounts of new capital but also won’t suffer major losses, because of their limited exposure to traditional stocks and bonds, the Global SWF report adds. “Investors from the region will emerge even stronger from the current economic scenario,” it predicts.