Joel van Dusen, Group Head of Corporate & Investment Banking at Mashreq, explains why financing the “missing middle” is essential to realizing the Gulf’s long-term sustainability ambitions.
The Gulf has positioned itself as a global leader in large-scale sustainable development. Projects such as Dubai’s Mohammed bin Rashid Al Maktoum Solar Park and Saudi Arabia’s NEOM city—designed to run on renewable energy and host the world’s largest green hydrogen complex—demonstrate the region’s commitment to transformation. These initiatives are typically backed by sovereign wealth funds, state-owned utilities, and international partners, making their financing relatively straightforward. Government guarantees, long-term contracts, and experienced global developers provide confidence, while the scale and prestige of such projects attract eager investors.
Yet achieving net-zero targets will require more than headline-grabbing giga-projects. It depends equally on financing the “missing middle”: mid-sized initiatives that fall between microfinance and mega-developments. Typically valued between $30 million and $500 million, these projects are critical to sustainable transition but often struggle to secure funding because they do not fit neatly into existing financing frameworks.
Understanding the Missing Middle
Mid-sized projects include initiatives such as solar farms serving industrial zones, municipal waste-to-energy facilities, district cooling systems for growing cities, and energy-efficiency upgrades for schools and public buildings. Collectively, these ventures can significantly reduce emissions, generate local employment, and support innovation at the community level.
Despite their importance, many remain unrealized. They are too large for small-scale financing or corporate balance sheets, yet too small to attract the attention of commercial banks and institutional investors accustomed to mega-projects. This financing gap risks slowing the pace of the region’s sustainability transition.
Barriers to Scaling Mid-Sized Project Finance
Stakeholders across the Gulf recognize the opportunity these projects represent, but scaling finance for this segment requires addressing several structural challenges.
The first is scale and cost efficiency. Financing a $50 million project often requires nearly the same legal, technical, and credit work as a $500 million one. Because transaction costs are largely fixed, banks have traditionally favored larger deals where returns justify the effort. The opportunity now lies in adapting financing models so smaller projects can be assessed and funded efficiently.
Credit and revenue risk also play a significant role. Large projects typically benefit from government guarantees or state-backed offtakers. Mid-sized ventures, by contrast, are often sponsored by municipalities, smaller developers, or private companies with more limited balance sheets. Their revenues depend on local budgets or commercial performance, increasing perceived risk for lenders.
In addition, many mid-sized projects lack detailed feasibility studies or standardized environmental and social reporting. This makes it harder for lenders to assess technical performance and sustainability impact. Encouragingly, the region is moving toward more consistent ESG disclosure standards and green taxonomies, which should help improve transparency over time.
Finally, regulatory inconsistency can add complexity. While large projects follow established procurement and approval pathways, smaller ones often face varying rules around pricing, grid access, and licensing. Greater predictability and clarity would allow developers to plan more effectively and give banks greater confidence in revenue stability.
Together, these challenges create a circular problem: projects struggle to secure financing without stronger guarantees, yet those guarantees often depend on financing being in place.
Making Mid-Sized Projects Bankable
Unlocking finance for the missing middle requires a coordinated public–private approach. Three priorities stand out: public-sector support to establish revenue certainty and share risk, aggregation to achieve scale, and consistent data to build investor confidence.
Public-sector involvement is critical in the early stages. Predictable revenue streams—often through long-term purchase agreements with creditworthy counterparties such as utilities, large corporates, or government-backed entities—are the foundation of bankability. Government facilitation or guarantees frequently play a role in making these arrangements viable.
Risk-sharing mechanisms can further support lender confidence. Tools such as partial credit guarantees, political risk insurance, co-investment, or limited first-loss protection can significantly reduce exposure for private financiers, helping projects transition toward fully commercial funding models.
Achieving scale is equally important. Financing individual mid-sized projects can be costly, but bundling multiple initiatives into a single portfolio allows risks and transaction costs to be spread. For example, aggregating several solar installations or energy-efficiency upgrades under one structure can create an investment of sufficient scale to attract banks and capital markets.
Consistency and transparency complete the equation. Investors need clear benchmarks to evaluate opportunities. Reliable financial data and standardized ESG disclosures from developers, combined with unified regional definitions of what qualifies as “green,” would position mid-sized projects as a credible and investable asset class.
Why the Missing Middle Matters
The success of the Gulf’s sustainability agenda will depend on how effectively it mobilizes capital beyond flagship projects. Experiences from other regions illustrate the potential impact of mid-sized ventures. In Djibouti, for example, a wind farm valued at just over $120 million has become a cornerstone of the country’s clean energy supply, demonstrating how projects of this scale can drive meaningful change in energy access, employment, and industrial development.
The Gulf has both the capital and institutional maturity to lead this shift. Large-scale and mid-sized projects are equally essential to achieving net-zero goals. By supporting both ends of the spectrum, the region can ensure its sustainability transformation reaches industries, cities, and communities—setting a global benchmark for balanced, partnership-driven climate finance.
