S&P Global Report Sheds Light on Middle East's Climate Disclosure and Emission Challenges
As the global community convened in Dubai for the United Nations’ COP28 climate change conference, a joint publication by S&P Global Sustainable 1 and the Dubai Financial Market provided critical insights into the region's climate disclosure and emission trends.
Steven Bullock, Managing Director, Global Head of Research & Methodology, S&P Global Sustainable1, said, “It is always important to put data into context and understand what story that data tells us about the world. For this report, S&P Global Sustainable1 worked closely with our colleagues in Dubai and with our partners at Dubai Financial Market to put the data into context and also to provide the local market perspective.”
Rising Climate Disclosure, Yet Lagging Behind Global Standards
S&P Global Sustainable1 Trucost Environmental dataset revealed that companies in the Middle East have increased their greenhouse gas (GHG) disclosure rates over the past five years. However, despite these efforts, the region still lags behind the global average in climate disclosure. Only about 25 percent of companies headquartered in the Middle East disclosed Scope 1 and Scope 2 GHG emissions for full-year 2021, approximately 20 percentage points lower than global levels.
UAE Leading Regional Efforts in GHG Disclosure
The UAE emerged as a regional leader in GHG disclosure, with rates 20 perecent higher than the rest of the Middle East. This surge in disclosure levels can be attributed to the UAE's active efforts in enhancing its sustainability framework, including the introduction of the S&P/Hawkamah ESG UAE Index and a comprehensive sustainability guide for capital markets. The UAE's presidency of COP28 further underlines its commitment to leading the region in climate action and sustainable finance.
Emission Intensity on the Rise Amidst Economic Transformation
The report also highlighted a concerning trend: total GHG emission intensity in the Middle East increased from 650 metric tons per million US dollars in 2017 to 900 metric tons in 2021. This rise reflects the region's economic reliance on carbon-intensive industries, particularly in the energy, materials, and utilities sectors.
Saudi Arabia and the UAE are the major contributors to regional emissions, primarily due to their sizeable oil production and energy-intensive industries. In 2021, Saudi Arabia accounted for 61 percent of emissions from the Middle East, followed by Turkey at 19 percent and the UAE at 7 percent.
Challenges and Opportunities in the Road to Decarbonization
The Middle East, characterized by fast-growing economies and carbon-heavy industries, faces significant challenges in reducing emissions. However, the region also has the opportunity to redefine its pathway towards decarbonization. By setting clear emissions reduction targets, enhancing disclosure, and developing credible transition pathways, Middle Eastern countries can significantly boost their sustainability efforts.
The Way Forward
As the Middle East navigates the complexities of climate change and environmental sustainability, the role of financial markets and regulatory frameworks becomes increasingly crucial. The report underscores the need for continued efforts in enhancing climate disclosure, investing in sustainable finance, and transitioning towards less carbon-dependent economies. The insights provided by S&P Global Sustainable 1 offer a vital understanding of the region's current position and the steps needed to achieve a more sustainable future.
S&P’s Bullock added, “After being on the ground at COP28, the clear message we heard from participants was that disclosure is only the first step. There was a huge emphasis on moving from decarbonization ambitions and disclosures to implementing concrete actions to lower emissions, and this is what we expect to see more of in 2024.”
