EY | Climate leadership in the Middle East by Jessica Robinson

Calls for a just and fair net-zero transition

The Middle East plays a critical role in our global climate transition. As it carves its own pathway to net-zero, it becomes increasingly important to ask two questions: How can the benefits of this radical transition toward net zero be widely shared across the region? How can the transition be not just fast but also just and fair, with the assurance that no one is left behind?

As we reflect on the outcomes of the 28th Conference of the Parties (COP28), these questions take on greater significance, and our focus must shift from “what” to “who.” Capital allocators are unquestionably important participants in this complex game, notably the financial sector. Financial institutions play a vital role in achieving net zero, which benefits everyone and so, it is important to emphasize both a quick and fair transition.

While the significance of decarbonization is well-known, it could be argued that the financial industry in the Middle East is not quite ready to play this mission-critical role. Many of the region’s financial institutions remain overly focused on decarbonization at all costs but are not considering the broader social dimension of the transition. The very real risk of leaving marginalized communities behind and, in some cases, further deepening existing inequalities is still a challenge.

To achieve this objective, financial institutions should not limit their focus to achieving net-zero emissions in their transition plans. Instead, they should also carefully consider and address the social risks and opportunities that arise during the transition. This means looking beyond binary net-zero targets and taking into account the implications for people, communities and society as a whole.

The financial industry must also consider and reflect the sectoral nuances and needs that different industries play in the transition. This is critical because different sectors and industries have very different transition pathways, and these are intrinsically linked to the communities they support and how these communities adjust and recover.

At the same time, governments and regulators must play their part in creating the right incentives, expectations and structures to support the financial industry in driving a just and fair transition. National policy frameworks, market regulations, as well as governments’ approaches to climate diplomacy and international cooperation, are some of the ways governments can help facilitate this transition in collaboration with the financial sector.

COP28 highlighted the momentum gathering in the Middle East on reducing emissions. But emissions reductions is not the only goal. At COP28, we also witnessed the importance of considering the needs of all people in society and to put these the heart of our transition to a more just, brighter and sustainable future.