Bolstering Climate Entrepreneurship in the MENA Region
Oman has some of the world’s best diving sites, with sea turtles, rare corals, and 22 species of whales and dolphins. But just five nautical miles out to sea, the waters are totally devoid of life. Warming oceans and pollution have deprived the sea of oxygen, creating the world’s largest dead zone. Karan Khimji grew up in Oman and witnessed the impact of environmental damage firsthand. He left his job in Europe and returned to Oman to contribute to efforts to find a healthier balance with nature. He learned about peridotites, a special type of rock found in Oman that can mineralize CO2, permanently removing it from the atmosphere. He and an Omani venture capitalist, Talal Hasan, went on to cofound 44.01, a carbon removal company that became the first Middle Eastern winner of the prestigious Earthshot Prize in 2022.
Entrepreneurs in the Middle East and North Africa (MENA) can create solutions to climate change. Many of the region’s governments face growing populations, overburdened budgets, lingering unemployment, and have few resources to mitigate or adapt to the changing climate. Making matters worse, the region’s governments have received only a sliver of overall global climate finance. With few alternatives, entrepreneurs in the region will have to play an even bigger role in building and scaling climate tech solutions.
The MENA region is warming as much as twice as fast as the rest of the world; it is home to 12 of the 15 most water-stressed countries in the world; and conflict, displacement, and resource mismanagement have sharply exacerbated the consequences of climate change. However, climate crises are growing faster than finance is coming into the region. From 2019 to 2020, the MENA region received just $16 billion for climate initiatives, in comparison to $293 billion for East Asia and the Pacific Islands. Chronic instability, weak regulatory environments, and underdeveloped private sectors have deterred public and private sector financing, both domestically and from abroad.
With limited climate finance coming into the region, and MENA governments contending with myriad non-climate challenges, entrepreneurs are even more important in advancing innovative climate solutions. Over the past decade, the region’s startup ecosystem has grown considerably. In 2022, entrepreneurs in the MENA region raised nearly $4 billion, a 16-fold increase over 2015’s $232 million. Last year saw 57 exits via mergers and acquisitions, a 30 percent increase from 2021. The region is also home to a growing number of unicorns. These entrepreneurs have found ways to navigate the region’s complex political and economic obstacles and have created successful companies. Perhaps most importantly, they have laid a foundation from which others can build.
However, to date there has been minimal startup activity focusing on climate in the Middle East. Regional entrepreneurs are critical to finding local solutions to the unique ways in which countries in the Middle East are experiencing climate change. While climate tech investment is booming globally, virtually none of that has made its way into the region. Globally, the vast majority of the $70 billion in climate venture capital in 2022 went to the United States, the European Union, and China. Climate technology transfer, particularly to the most vulnerable countries, has historically been easier said than done. The World Bank suggests that most low-carbon technologies tend to be built and deployed in wealthy countries. Customizing these solutions requires local expertise and entrepreneurs.
The MENA region saw investments in clean-tech and agrotechnology companies last year, but nearly 90 percent of overall funding went to two companies alone. A similar situation holds true for the region’s investment and accelerator communities. Catalyst Investment Management is the only long-tenured private fund focusing on climate in the region, while groups like Flat6Labs have run several cohorts of climate tech startups. Beyond these, and a few other recent efforts, organizations with dedicated support for climate tech entrepreneurs are rare in the MENA region.
Climate entrepreneurs in the MENA region come in many shapes and sizes, but there are several areas where more support can help. The region is home to some of the lowest research and development (R&D) levels of any region, which affects innovation writ large. Often, climate tech startups require a lot of time for testing products and services, so more R&D support can go a long way. Additionally, climate technologies are often heavily reliant on scientific and technical talent and finding the right combination of skills can be difficult, especially when considering the region’s history of mismatched education systems and brain drain. Although public awareness about the impact of climate change in the region is growing, more work is needed to educate the MENA population of the full climate tech solution set. Entrepreneurs are often early movers in new sectors and can struggle with a lack of public receptivity to alter their social and economic habits in response to environmental changes. The MENA region is no exception here.
International actors are critical to supporting climate entrepreneurship in the MENA region. 44.01 has achieved significant attention from abroad, including funding from Bill Gates’s Breakthrough Energy, and it has begun to collaborate with major regional companies like ADNOC, the UAE’s state-owned oil company, to pilot and scale up their solution. The 44.01 story shows that the Middle East is home to climate innovators who can help accelerate net-zero efforts both regionally and globally, and it also demonstrates that international support can accelerate their impact.
In the run up to the 27th UN Conference of the Parties (COP27) in Sharm El Sheikh, the U.S. Agency for International Development collaborated with the Egyptian government on a competition for climate entrepreneurs around the world, giving the winner $100,000. The U.S. government has also run programs to empower women entrepreneurs to manage climate risks. There are other nascent initiatives here and there, but so far, international support for climate tech entrepreneurship in MENA is still in its infancy.
With COP in the MENA region for a second consecutive year, international aid agencies and investors have a window to support climate innovation more intentionally in the region. These actors can think of their involvement in two ways: Long-term engagement to grow the region’s climate tech ecosystem and short-term strategies to spark climate tech activity.
In the long term, investors and governments from abroad can support in capitalizing funds, accelerators, and research programs to build the ecosystem around climate innovators. This longer undertaking hinges on relationship-building with universities, corporations, and family offices, capacity-building in the region, bringing in consortiums of investors and experts from abroad, and actively identifying the most compelling climate investment opportunities in MENA. Building ecosystems is not cheap, and leveraging the success and know-how from the region’s larger startup ecosystem within the climate tech sector will require substantially more funding and resource mobilization.
In the short term, startup ecosystems can benefit from small competitions and accelerator programs, investor trainings, hackathons, university seminars, etc. Years ago, when MENA was just beginning to build its first generation of accelerators and funds, these short-term initiatives were numerous. Collectively these events signified that there is talent, interest, and potential. International funders and agencies can convene and promote these types of initiatives and can also bring in expertise from abroad to add tailwind.
Globally, no consensus exists about how best to support climate entrepreneurs, and we are far from defining the perfect climate solution set for any given country. However, entrepreneurs in the region have proven their ability to build innovative businesses in challenging circumstances. With limited government capacity to drive climate action and insufficient flows of climate financing to the region, international actors should harness entrepreneurs’ creativity and their knowledge of the needs and constraints of the local context. Greater international support can allow entrepreneurs to lead the search for innovative and realistic solutions to the MENA region’s mounting environmental crisis.
Will Todman is deputy director and senior fellow in the Middle East Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Jamil Wyne is the founder of the Climate Tech Bootcamp and an adjunct professor at the George Washington University.