Gulf Climate Finance and Investment in Green Economic Growth Across Central Asia and the Caucasus

Executive Summary

Economic engagements between the Gulf Cooperation Council (GCC) states and the countries of Central Asia and the Caucasus (CAC) have expanded rapidly in recent years, with green investment emerging as a central theme. This convergence is shaped by shared development trajectories: the GCC is seeking to diversify its economies for a post-hydrocarbon era, while CAC governments are working to modernise infrastructure, harness renewable resources, and secure sustainable growth. Both regions also recognise the strategic value of diversifying partnerships and positioning themselves in future global markets for hydrogen, critical minerals, and renewable energy exports.

This policy brief examines the drivers, opportunities, and risks of GCC-CAC green investment cooperation and highlights sectoral priorities where targeted action is needed. While momentum is strong, current engagement remains fragmented and overly reliant on bilateral deals that may not deliver the structural transformation required. Financing gaps, outdated grids, institutional weaknesses, and uneven social protection in CAC countries further constrain impact, underscoring the need for a more coordinated and inclusive approach.

Sectoral priorities highlight both opportunities and risks. In renewable energy, most projects target generation capacity, while transmission systems and regional integration remain underfunded. Tariff reforms can strengthen sustainability but risk social backlash if not accompanied by protection for vulnerable groups. In water and agriculture, climate-smart solutions such as solar irrigation, hydroponics, and wastewater reuse offer significant potential, yet weak capacity and fragmented governance limit their scaling. Infrastructure and industrialisation remain critical enablers, though current projects often bypass local firms and rely heavily on external expertise, limiting technology transfer and domestic value creation.

The broader dynamics involve both synergies and trade-offs. Synergies include GCC capital and expertise aligning with CAC’s abundant renewable resources, opportunities for data-sharing and regional integration, and the potential to strengthen both regions’ positions in global green value chains. Trade-offs remain: geopolitical competition could weaken cooperation, strict local content rules could deter investment, tariff reforms could exacerbate inequality, and agricultural expansion may heighten water stress.

Moving beyond a transactional, bilateral model toward a strategic, region-wide framework could unlock the transformative potential of green investment. By embedding inclusivity, local capacity-building, and long-term sustainability into GCC-CAC cooperation, both regions stand to gain resilience, diversification, and stronger global positioning in the green economy.

Principal Author: Shakhlo Kamaladinova

October 2025