In little over a month, thousands of delegates, businessmen and climate activists will descend on Dubai’s Expo City for COP28, the culmination of the UAE’s intense efforts during its Year of Sustainability. There has been no shortage of ambition; national oil firm ADNOC is aiming for Net-zero by 2045, the entire country by 2050, while Dubai is aiming for a 100% renewable grid in that same period.
Between Dh150-200 billion have been allocated to support these ambitions in the next seven years alone, while leading Emirati firms such as ADNOC, Mubadala and Masdar have invested aggressively in the field, from landmark renewable energy projects abroad to Brazilian biofuels and electrolyser manufacturing.
Amid this flurry of activity and high-level investment lies an unexploited opportunity — one we cannot afford to ignore if we are serious about securing our place as an energy titan in a post-oil world. The entire category of growth stage clean-technology companies, ranging from university spin-offs and start-ups, to ‘ready-to-go’ firms on the cusp of commercialisation, has so far been neglected.
Massive amount of innovation
The IEA estimates that 50% of the carbon reductions needed to achieve net zero by 2050 will come from emerging technologies in this field. Those with the courage and foresight to invest into emerging clean technologies stand to control the energy and decarbonisation sector in coming decades, while a failure to do this amounts to forfeiting a race at its very beginning, and putting yourself at the mercy of the victors. Our nation’s prosperity and international position are intimately linked to its status as an energy exporter, and if we wish to protect this, we cannot afford to fall into the latter group.
It was this realisation which drove me and fellow Cambridge graduate Hassan to found our firm, Tajaddud Advisory, with the express aim of bringing UAE-relevant clean-tech firms to the fore, and increasing Emirati investment into this field.
Our founding thesis was simple: there is a massive amount of innovation happening in this sector abroad, and much of this is directly relevant to the UAE’s energy and decarbonisation needs, if not globally. Early stage firms are predominantly responsible for this innovation; while technology ventures carry significant risk, they also require much less capital, with a few million dollars typically enough to make a difference.
This constitutes a drop in the ocean compared to typical sovereign wealth fund tickets, which start in the hundreds of millions, but also lays the ground for a much deeper relationship these firms: even with small sums committed, many of these firms are happy and willing to commit to local partnerships, partially or wholly onshore them, or even build UAE facilities at later stages. Indeed, there is much greater scope for our country to forge ties with leading firms across the field, converting a venture capital bet into a strategic energy security play, and contributing to the UAE’s industrial development and technology sector.
Utilising our in-depth knowledge of the field and extensive network in the United Kingdom, a veritable clean-tech innovation hub, we identified leading growth-stage firms that aligned with the UAE’s requirements, and sought to connect them to Emirati investment. We noted that UAE funds and entities typically neglected this class of investment, but we hoped our focus on strategic fit and start-ups closer to their ‘boundary’ might tempt their hands.
There were also a few global factors working in our favour: Namely, the UAE’s selection as COP28’s host, which generated enormous attention but also heightened expectations, mixing to create what we saw as the ideal opportunity to break out of the mould of our typical investment strategy.
Furthermore, the dual crises of energy and inflation have hampered leading economies and restricted firms’ access to capital; the Gulf States’ economies have been better shielded from this (by fossil fuel revenues, no less), and are better positioned to make these investments. Because of this, cash-strapped tech start-ups are more receptive to UAE investment than ever, and there is a real, but temporary opportunity to get much more bang for our buck.
Almost a full year down the line, we have made considerable progress, but are yet to see the crucial UAE breakthrough we’ve been waiting for. Our thesis has been well received: Abroad, we’ve had excellent engagement with clean-tech start-ups, covering sectors as diverse as green hydrogen to biofuels and energy storage, almost all of whom are open to strategic partnerships with the UAE. On the Emirati side, we’ve been able to discuss our rationale and the opportunities at hand with major stakeholders, meeting with senior figures at Masdar, MoIAT, Mubadala and other funds; Indeed, many investment officials had been thinking along the same lines for a while.
Willingness to take risks
Unfortunately, these words of support are yet to become tangible commitments. Time and time again, we’ve been told these start-ups are ‘too early’ or the ticket sizes ‘too small’; even when they’ve acknowledged obvious strategic fit; even with funds and subsidiaries whose mandates explicitly cover climate-tech and ventures investment. We expected an uphill battle at home; we instead found ourselves traversing an icy mountain range, clinging to the hope that the mythical breakthrough we were waiting on was somewhere on the other side.
We had set out to accelerate the UAE’s own clean-tech efforts, but in a bittersweet twist, may net our first victories abroad: we’ve had strong engagement with VCs and funds further afield, and are actively fund-raising for the start-ups we’ve partnered with. We’ve selected credible firms, and the market has borne this out: Indeed, one innovative Green H2 electrolyser start-up we hoped to bring over to the UAE, ultimately raised $70 million, and received backing from SWFs in comparable states.
Across the board, Corporate VCs and the venture arms of major fossil fuel firms such as Shell, BP and even Aramco have invested into emerging clean-tech aggressively; despite the UAE's substantial investments in the broader sector, the state is yet to embrace this approach to emerging technologies, and risks unwittingly giving up its place in the post-oil energy order without immediate, decisive action.
This outcome would be unthinkable, but it is also easily avoidable: as we have seen, our nation has every incentive — economic, environmental and geopolitical — to step into the world of clean-tech, and invest aggressively. Crucially, we already have the capital and expertise, financial and technical, to do this successfully, and give our external competition a run for their money in record time.
As we count the days to COP28, and the spotlight on our homeland grows more intense, there is no better time to showcase the UAE’s leadership in emerging clean technology. But this requires a willingness to take these risks, make tangible commitments, and show the world we mean business.
Khaleefa AlDhaheri is the Co-founder for Abu Dhabi-based Tajaddud Advisory. He has degrees in Political Science and Management from the University of Cambridge.