EquitiesFirst and Alternative Lenders Could Fill Funding Gap for Middle East Climate Tech

Middle Eastern climate technology startups raised just $114 million in 2024, a 41% decline from the previous year’s $193 million, according to PwC’s latest regional climate tech report.

The decline marks a stark reversal from 2022′s peak of $895 million and highlights what some consider a funding crisis that could threaten the region’s ambitious climate goals just as extreme heat and water scarcity reach critical levels.

According to an extensive Washington Post report, Dubai faces the prospect of experiencing more than 80 days of extreme heat annually, conditions where less than 15 minutes of outdoor exposure would pose health risks for healthy adults. Meanwhile, the World Bank projects the region’s population is expected to double by 2050, exposing millions more to rising temperatures and resource constraints.

Alternative capital providers, including equity-backed financing specialist EquitiesFirst, are positioned to step in to provide the flexible funding that climate tech startups need to develop solutions for these mounting challenges.

The Sovereign Wealth Fund Paradox

There is a disconnect between regional capital deployment and local investment in climate tech. Middle Eastern sovereign wealth funds invested $3.6 billion in climate tech globally in 2024, yet allocated only $43.6 million to startups within their own region, according to PwC data.Strategic climate technology financing specialists have recognized this significant gap in regional investment flows.

Abu Dhabi’s CYVN Holdings poured $2.2 billion into Chinese electric vehicle manufacturer Nio, while Saudi Arabia’s Public Investment Fund subsidiary invested $750 million into U.S.-based Lucid Motors.

Regional investors provided less than 2% of the climate tech funding within their own markets in 2024, according to Trescon Global analysis. This minimal local investment stands in sharp contrast to the enormous capital these institutions control: Gulf sovereign wealth funds collectively manage approximately $4 trillion today, with projections reaching $8 trillion by 2030.

The preference for international investments reflects several factors. Sovereign wealth funds often seek proven technologies and established companies that offer lower risk profiles. Local startups, particularly those developing hardware-intensive solutions for water recovery or carbon capture, require patient capital and face uncertain commercialization timelines that don’t necessarily align with traditional investment metrics.

Alternative Financing Bridges the Gap

The funding squeeze could prompt climate tech entrepreneurs to explore alternative financing mechanisms. Companies which specialize in equity-backed financing, have emerged as critical sources of non-dilutive capital for founders seeking to maintain control while extending their runway.Investment advisory services have noted the growing importance of these alternative financing solutions in the climate tech sector.

Equity-based financing allows entrepreneurs to secure liquid capital financed against their existing shareholdings without selling equity at depressed valuations. For climate tech startups facing lengthy development cycles, this approach can potentially provide working capital to continue R&D and pilot programs without waiting for the next venture capital cycle.

Promising Technologies Seek Scale

Despite funding challenges, Middle Eastern climate tech companies continue advancing solutions in three critical areas: water security, cooling efficiency, and decarbonization.

Tunisia’s Kumulus Water exemplifies the region’s innovation potential. The startup’s atmospheric water generators extract drinking water from air humidity, producing 20-30 liters daily even in arid conditions. The technology aims to address a global crisis: UNICEF projects half the world’s population will face water stress by 2030, and the climate of the Middle East is particularly susceptible to drought.Global climate technology financing solutions have become increasingly important for companies developing these water security technologies.

District cooling systems represent another growth area attracting significant capital. These centralized plants, which deliver chilled water through insulated pipelines to multiple buildings, can dramatically reduce energy consumption compared to individual air conditioning units. A major Abu Dhabi district cooling provider attracted bids from global asset managers including KKR and Investcorp in a deal valued around $1 billion.

The UAE’s new climate law, which took effect in May 2025, adds regulatory urgency to these innovations. The legislation mandates all companies to measure and report greenhouse gas emissions, with non-compliance penalties ranging from $13,600 to $545,000.

Structural Challenges Persist

Several factors continue to hamper the regional climate tech ecosystem beyond pure funding availability. Partnerships with large corporations, often state-linked entities, can move slowly through bureaucratic approval processes. The fragmented regulatory environment across Gulf Cooperation Council countries complicates cross-border expansion. Talent shortages in specialized fields like battery chemistry and AI for energy optimization could further constrain growth.

Alternative equity-backed financing providers have positioned themselves to address these structural gaps by offering flexible terms that align with the longer development timelines typical of climate technologies.

The Road Ahead

The Middle East’s extreme climate conditions paradoxically position it as an ideal testing ground for technologies the world will desperately need. Solutions proven in 50-degree Celsius heat and near-zero humidity will find ready markets globally as climate change intensifies.

For this potential to materialize, however, the region must resolve its funding paradox. While government initiatives like Abu Dhabi’s $30 billion Alterra climate fund signal serious intent, more capital needs to flow to early-stage local innovators rather than established international players.

The stakes extend beyond regional concerns. Technologies that enable human habitation in extreme heat, extract water from air, and dramatically reduce cooling energy consumption will determine quality of life for billions as global temperatures rise. The Middle East’s ability to nurture these innovations—through whatever financing mechanisms prove effective—matters for the planet’s future.