The Middle East is seeing a surge of climate-tech innovation, from carbon removal to urban greening, sustainable agriculture, and AI-driven solutions. The UAE has been at the forefront, with Abu Dhabi’s Hub71+ ClimateTech and Dubai’s DIFC Innovation Hub creating dedicated ecosystems for startups.

“These hubs are giving founders access to capital, corporate partners, and global exposure, and they’ve signaled a strong intent to make climate-tech central to the region’s innovation agenda,” says Jaap Bastiaansen, chief operating officer at Nexus Climate, a venture capital firm and innovation platform that supports climate-tech startups in the MENA region.

Other GCC countries are ramping up infrastructure and funding to grow local sustainability ventures. Yet the money still largely flows overseas.

According to PwC Middle East’s 2024 Climate Tech report, of the $3.55 billion regional investors committed to climate tech globally last year, just $43.6 million or 1.2% went to local companies, a 52% drop from 2023.

A FUNDING SHORTFALL 

This imbalance reflects deep structural challenges. It’s most evident in electric mobility: In late 2023, Abu Dhabi-based CYVN Holdings invested $2.2 billion in China’s EV maker Nio, while the UAE fund Plynth Energy invested $129 million in US startup Zap Energy, illustrating investor preference for more mature international markets.

With the MENA region warming twice as fast as the global average and facing extreme water scarcity, the lack of local investment raises questions about missed opportunities.

Bastiaansen attributes the gap to the region’s underdeveloped green finance ecosystem.

“Investors see startups in the US and Europe as de-risked ecosystems with proven exit pathways, whereas GCC startups are still in the early stages of ecosystem maturity,” he says. 

“Climate tech often requires patient, non-dilutive, or blended capital. In the GCC, most funding is structured as venture capital, which doesn’t always suit hardware-heavy or infrastructure-focused climate innovation.”

For Salman Hussain, co-founder of UAE-based Fuse, a startup converting conventional cars into EVs to cut mechanical waste and carbon emissions, the issue is also the risk-averse investment culture.

“Historically, major funds have shown a preference for de-risked, late-stage assets and proven global technologies,” he says. “It prioritizes stability but can inadvertently create a ‘Series A gap’ for promising, local startups that need that crucial early-stage institutional support to scale.”

Hussain also sees a structural mismatch between funding structures and startup needs. “Many larger regional funds are designed for big ticket sizes, but most climate tech ventures here are looking for pre-seed to Series A. 

This creates a disconnect where capital is available, but not necessarily at the stage where companies need it most.”

Dr. Mustafa Mousa, co-founder of Saudi-based flood-mitigation startup Sadeem, links the issue to a shortage of specialized regional VCs and investor expertise in evaluating deep-tech ventures.

“Many funds lack the expertise to evaluate deep-tech climate solutions, while startups struggle to access growth capital without proven local success stories,” he says.

SIGNS OF CHANGE

Still, signs of a shift are emerging. GCC governments are implementing targeted initiatives to foster homegrown innovation, particularly in agriculture, where food security is a top priority.

“The AE’s Food Tech Valley, Saudi Arabia’s vertical farming partnerships, and Abu Dhabi’s Hub71 incentives are all designed to catalyze local climate-tech entrepreneurship,” says Richard Kohn, global head of public affairs at UAE-based agri-climate tech startup iyris.

Investor sentiment, once shaken by overinvestment in imported vertical farming models, is cautiously rebounding.

“Regional funds are backing local climate tech, but with greater selectivity,” says Kohn. “As more startups demonstrate real-world performance, like energy savings, water efficiency, and crop resilience, we expect a rebound in regional capital deployments.”

Iyris is a case in point. Incubated at Saudi Arabia’s KAUST, its greenhouse-cover additives blocking solar heat radiation are now deployed in more than 25 countries. The company has drawn support from regional investors, including Wa’ed Ventures, Dubai Future District Fund, Kanoo Ventures, and KAUST Ventures. This is evidence of rising confidence in locally developed, globally scalable solutions.

“Our Series A round, which raised $16 million in 2024, was led by Ecosystem Integrity Fund in San Francisco, but nearly half of the capital came from Middle East-based institutions. That blend of regional and international backing reflects a shift: investors are recognizing the Middle East isn’t just a market for climate tech. It’s a source of it.”

Sadeem has seen similar traction, securing over $2.5 million in funding from institutions such as KAUST, NTDP, and Wa’ed.

“Regional investors have backed us due to our alignment with Vision 2030’s sustainability goals, validated pilots, and strategic partnerships,” says Mousa. “While most support has been local, our global potential positions us to attract international funding as we scale, proving homegrown climate tech can compete worldwide.”

Fuse tells a similar story, one of lean execution and measured growth. The startup bootstrapped its early development before securing nearly $100,000 in pre-seed funding from angel investors who believed in its long-term vision. It recently converted a Nissan Patrol into an EV, rebuilding the off-road vehicle for local UAE conditions.

“While we’re in active conversations with regional VCs, our solution was designed to address a global challenge from day one. Consequently, our fundraising strategy is also global,” says Hussain.

Fuse is now in talks with international investors who have experience scaling climate tech to support its expansion into key Middle Eastern and African markets.

REVERSING THE TREND

Closing the funding gap will require bold action expanding climate-focused investment vehicles, fostering government-corporate partnerships like offtake agreements, and establishing incubators to de-risk early-stage innovation.

“Accelerating regulatory incentives and matching grants could also help funnel more capital into local climate ventures,” says Mousa.

Hussain advocates for more agile regulatory sandboxes, similar to those in fintech, so innovators can test solutions faster.

“I know businesses with an excellent product that, while following every guideline, couldn’t get approval for trials. Such stories are the quiet failures that drive away the best innovators, either through talent flight or scaling up elsewhere,” he says.

Bastiaansen believes the GCC can learn from countries like the Netherlands, where policy, academia, and funding converge.

“Governments acted as first customers, universities became innovation pipelines, and blended finance helped de-risk transformative technologies,” he says.

GCC has the capital and ambition but needs stronger ecosystem scaffolding.

“If governments embed local solutions into national projects, diversify funding beyond VC, and connect research to commercialization, then regional investors will see viable pathways to back local startups,” says Bastiaansen.

“That shift could unlock a wave of homegrown innovation, positioning the GCC not just as a funder of climate-tech abroad, but as a global exporter of solutions born from its unique climate challenges.”