The Impact of Green Financing In Advancing Renewable Energy and Smart Infrastructure in Oman

The Impact of Green Financing in Advancing Renewable Energy and Smart Infrastructure in Oman

Dr. Mohammed Jahangir Ali

Associate Professor, Accounting and Finance –  Department of Business Administration and Accounting, Al Buraimi University College, Al Buraimi – Sultanate of Oman

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000701

Received: 12 October 2025; Accepted: 20 October 2025; Published: 27 October 2025

ABSTRACT                                                                                                  

This research paper explores the critical role of green financing in fostering the growth of renewable energy and the development of smart infrastructure in Oman. As the Sultanate strives to diversify its economy and reduce its carbon footprint in alignment with Vision 2040 and international sustainability commitments, green finance has emerged as a strategic tool for funding environmentally friendly and technologically advanced projects. The study examines the mechanisms of green bonds, green loans, and public-private partnerships and evaluates their influence on renewable energy projects such as solar and wind farms, as well as smart infrastructure initiatives including energy-efficient buildings and intelligent transportation systems. Using a mixed-method approach that combines qualitative insights from expert interviews and quantitative analysis of green investment trends, the research highlights the progress, challenges, and policy implications of green financing in the Omani context. The findings suggest that while green finance has significantly contributed to advancing sustainability goals, further regulatory reforms, financial innovation, and capacity-building are essential to unlock its full potential in Oman.

Keywords: Green Financing, Renewable Energy, Smart Infrastructure, Oman Vision 2040, Sustainability, Green Bonds, Environmental Policy, Clean Energy Investment, Smart Cities, Sustainable Development

INTRODUCTION

In recent years, the global emphasis on sustainable development and climate resilience has prompted nations to transition toward low-carbon economies. Green financing defined as financial investments that promote environmental sustainability has emerged as a pivotal mechanism in supporting this transformation, particularly in sectors such as renewable energy and smart infrastructure. Oman, with its strategic vision outlined in Oman Vision 2040, is actively pursuing sustainable economic diversification and reduced dependence on fossil fuels. Central to this national strategy is the adoption of renewable energy technologies and smart infrastructure systems that are both environmentally responsible and economically viable.

Green financing mechanisms, including green bonds, climate funds, and sustainability-linked loans, play a crucial role in mobilizing capital for such projects. In Oman, the integration of green finance into development policies has started to gain momentum, supported by public-private partnerships and regional collaboration. Investments in solar and wind energy, as well as smart grid systems, have begun to reshape the country’s energy landscape, with significant implications for energy security, environmental protection, and economic growth.

This research paper aims to examine the impact of green financing on the advancement of renewable energy and smart infrastructure in Oman. It explores how financial instruments and policy frameworks are facilitating the development of sustainable projects, assesses the progress made so far, and identifies challenges and opportunities for further enhancement. By analyzing current initiatives, stakeholder involvement, and market trends, the study seeks to provide a comprehensive understanding of the role green finance plays in driving sustainable infrastructure and clean energy in the Sultanate.

Purpose of the Study:

The purpose of this study is to critically examine the role and impact of green financing in promoting the development of renewable energy projects and smart infrastructure initiatives in Oman. Specifically, the study aims to explore how green financing instruments, such as green bonds, climate-related investment funds, and sustainable lending practices have contributed to the financing, implementation, and scalability of environmentally sustainable energy and infrastructure projects. Furthermore, the research seeks to assess the extent to which green finance has influenced national policies, private sector engagement, and long-term environmental and economic sustainability. By focusing on the Omani context, the study intends to provide insights that can inform policymakers, investors, and stakeholders on optimizing green financing strategies to support the Sultanate’s transition toward a low-carbon and smart economy aligned with Oman Vision 2040.

Significance of the Study:

This study is significant as it explores how green financing mechanisms contribute to the development of renewable energy and smart infrastructure in Oman, aligning with the nation’s Vision 2040 goals. By evaluating the financial strategies and investments directed toward sustainable projects, the research highlights the role of green finance in accelerating the energy transition, promoting environmental sustainability, and fostering technological innovation. The findings will provide valuable insights for policymakers, investors, and stakeholders to strengthen green financing frameworks and support long-term economic and environmental resilience in Oman.

Definition of Terms

1. Green Financing; Refers to financial investments and instruments that support projects and initiatives with environmental benefits, including renewable energy, energy efficiency, sustainable transport, and pollution prevention. In the Omani context, green financing is instrumental in funding sustainable infrastructure and energy transformation.
2. Renewable Energy: Energy derived from natural processes that are replenished constantly, such as solar, wind, hydro, and geothermal energy. In Oman, renewable energy focuses primarily on solar and wind power as alternatives to fossil fuels.
3. Smart Infrastructure: Infrastructure systems enhanced by digital technologies, sensors, data analytics, and automation to improve efficiency, sustainability, and responsiveness. This includes smart grids, intelligent transportation systems, and energy-efficient buildings in Oman’s urban development.
4. Sustainable Development: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs. In this research, sustainable development emphasizes balancing economic growth, environmental preservation, and social inclusion.
5. Green Bonds: Debt securities issued to raise capital specifically for environmental and climate-related projects. These instruments are part of green financing mechanisms used globally and increasingly in Oman to fund clean energy and infrastructure projects.
6. Green Loans: Green Loans are financial products offered by banks and lending institutions specifically designed to fund projects that generate positive environmental outcomes. These loans support initiatives such as renewable energy development, energy efficiency enhancements, pollution control, and sustainable infrastructure. Borrowers are typically required to allocate the funds solely for environmentally beneficial activities and adhere to monitoring or reporting standards to ensure alignment with sustainability goals and climate change mitigation.
7. Green Technology: Green technology refers to technologies that reduce environmental impacts through energy efficiency, emissions reductions, and resource conservation. This includes solar panels, electric vehicles, smart grids, and waste-to-energy systems.
8. Energy Transition: The shift from fossil-based energy production and consumption toward renewable sources and low-carbon alternatives. In Oman, this transition is driven by both environmental commitments and the need for energy diversification.
9. Climate Finance: Financial flows—both public and private—that aim to support mitigation and adaptation activities to address climate change. This term overlaps with green financing but specifically focuses on climate-related goals.
10. Public-Private Partnership (PPP): A collaborative agreement between government entities and private sector companies to finance, build, and operate projects such as smart infrastructure or renewable energy plants. PPPs play a vital role in advancing green investments in Oman.
11. Environmental, Social, and Governance (ESG) Criteria: A set of standards for a company’s operations that socially conscious investors use to screen potential investments. Green financing decisions are often based on ESG performance, particularly in infrastructure and energy projects.
12. Decarbonization: The process of reducing carbon dioxide emissions from energy production and consumption. In the context of Oman, it involves integrating renewable energy and cleaner technologies into the national energy mix.
13. Environmental, Social, and Governance (ESG) Criteria: ESG criteria are a set of standards used by investors to evaluate a company’s operations in terms of sustainability and ethical impact, which often influence green investment decisions.
14. Green Investment: Any investment that contributes to environmental sustainability, including projects related to renewable energy, clean technology, resource efficiency, and pollution reduction.
15. Smart Cities: Urban areas that incorporate digital technologies to enhance performance and well-being, reduce costs and resource consumption, and engage more effectively with citizens, often powered by green infrastructure and renewable energy systems.
16. Carbon Neutrality: Carbon neutrality is a state in which an entity’s carbon emissions are balanced by equivalent carbon savings through reduction or offset strategies, often pursued through investments in renewable energy and green technologies.
17. Smart Grids: Smart grids are electricity networks that use digital communication and automation to monitor and manage the transport of electricity efficiently, reliably, and sustainably, enabling better integration of renewable energy sources.
18. Green Infrastructure: Green infrastructure refers to natural or semi-natural systems that provide environmental, economic, and social benefits, such as green roofs, permeable pavements, urban forests, and renewable energy facilities.
19. Energy Efficiency: Energy efficiency refers to using less energy to perform the same task or produce the same outcome, thereby reducing energy waste and minimizing environmental impacts while maintaining or improving performance.
20. Climate Change Mitigation: Climate change mitigation involves efforts to reduce or prevent the emission of greenhouse gases (GHGs) in order to limit the magnitude or rate of global warming. This includes adopting renewable energy, enhancing energy efficiency, and implementing carbon capture technologies.
21. Oman Vision 2040: A national development strategy aimed at diversifying the Omani economy and promoting sustainability, innovation, and environmental stewardship.

LITERATURE REVIEW

Green financing has emerged as a crucial tool in addressing environmental and sustainability challenges, particularly in the context of promoting renewable energy and smart infrastructure. In the Gulf region, Oman has shown growing interest in incorporating green finance to support its Vision 2040 goals, which emphasize sustainability and economic diversification. Several studies underscore the role of green financing in driving renewable energy development.

1. Abdul Aziz Abdul Rahman & Nishad Navaz (2025) conducted that study on “Fintech and Green Finance: Driving Renewable Energy Growth in GCC”. This study explore that the research probes the influence of Financial Technology (Fintech) and green finance (GF) on the Gulf Cooperation Council (GCC) countries’ progress toward Sustainable Development Goal 7 (SDG 7) in access to affordable, reliable, sustainable, and modern energy for all. It looks at the strategic visions of each GCC nation concerning this goal and how they might use Fintech and GF to keep pace with the much faster-to-publish strategic plans of the leading nations in renewable energy.
2. Ahmed Aboudouh (2025), conducted the study on “Green finance is picking up in the GCC, but its challenges may restrain the transition across MENA”. This study explained that this Chatham House analysis highlights Oman’s target of 30 % renewable energy by 2030, its 2050 net zero carbon goal, and discusses the critical need for a green taxonomy, coherent regulation, and potentially a dedicated green-infrastructure finance body in Oman and GCC.
3. Yarub Khalfan Marhoun Al Senani & Dr. Reason Masengu (2025), conducted the study on “Evaluating Factors Influencing the Integration of Intelligent Technologies in Oman’s Renewable Energy Projects”. The study emphasizes the importance of public-private partnerships (PPPs) in accelerating innovation and improving technological capabilities by sharing resources and knowledge. It also provides empirical data aimed at helping policymakers and industry leaders propel Oman toward becoming a leader in renewable energy within the Middle East.
4. Sufian Eltayeb Mohamed Abdel Gadir & Mwahib Gasmelsied Ahmed Mohammed (2024), conducted the study on “Oman’s Green Horizon: Steering Towards Sustainability through Decarbonisation and Energy Transition”. This study to show that: financial development, urbanization, economic growth, and energy use significantly drive CO₂ emissions. Recommends targeted green investment policies and regulatory incentives to shift toward sustainable infrastructure finance.
5. Abdel Gadir, S., & Mohammed, M. (2024), conducted the study on “Oman’s Green Horizon: Steering towards Sustainability through Decarbonisation and Energy Transition”. This study is determinant of CO2 emissions in Oman from 1990 to 2024, focusing on the impacts of energy consumption, economic growth, urbanization, financial development, and foreign direct investment.
6. Mishrif, N., & Khan (2024), conducted the study on “Evaluating factors influencing the integration of intelligent technologies in Oman’s renewable energy projects”. This study was analysis explores the integration of IoT, AI, and blockchain (smart infrastructure) to enhance grid stability and energy efficiency in Omani renewable projects. It identifies barriers including regulatory ambiguity, elevated costs, and limited local technical capacity. It stresses the importance of public–private collaboration and workforce training to support smart infrastructure in green energy systems.
7. Al Hatmi (2024), conducted the study on “Simulation and feasibility assessment of a green hydrogen supply chain: a case study in Oman”. This study simulates a 7 GW solar-driven green hydrogen facility in Duqm, projecting annual hydrogen output and energy yields. It demonstrates how large-scale renewable energy investments enabled by financing mechanisms and special economic zone advantages can support smart infrastructure and contribute to Vision 2040 goals of 35% renewable energy penetration by 2040.
8. Al Shanfari, A., & Al Rawahi, K. (2024), conducted the study on “Institutional barriers to green finance adoption in the Sultanate of Oman”. This study argue that a lack of standardized green financing instruments and limited awareness among financial institutions remain barriers. Furthermore, the legal and regulatory environment in Oman needs strengthening to attract sustained green investment.
9. Alharbi, S. S., Al Mamun, M., Boubaker, S., & Rizvi, S. K. A. (2023), conducted the study on “Green finance and renewable energy: A worldwide evidence”. This econometric study finds that green finance instruments, especially green bonds have a significant positive effect on renewable energy output. Effects are stronger in countries with higher emissions intensity, developed credit markets, and clear net zero targets conditions that resonate with middle income hydrocarbon exporting states like Oman.
10. Ahmed Samour, Omar Ikbal Tawfik , Magdalena Radulescu and Cristina Florentina Baldan (2023), conducted study on “Do Oil Price, Renewable Energy, and Financial Development Matter for Environmental Quality in Oman? Novel Insights from Augmented ARDL Approach”. This study evaluated the impacts of the price of oil, financial development, economic growth, and non-renewable energy on the environmental quality in Oman. Hence, an increase in oil prices presents good news for oil-exporting countries such as Oman to increase the country’s revenues, which in turn will promote economic development.
11. Alsmadi, A. A., Al Okaily, M., Alrawashdeh, N., Al Gasaymeh, A., Moh’d Al hazimeh, A., & Zakari, A. (2023), conducted the study on “ A bibliometric analysis of green bonds and sustainable green energy: Evidence from the last fifteen years (2007–2022)”. The study on bibliometric review outlines global scholarly trends on green bonds and renewable energy investment. It underscores rapid growth in research after 2020 and identifies key thematic areas including policy frameworks, infrastructure financing, and smart energy systems deployment.
12. Al-Mawali, N. (2023), conducted the study on “Green Bonds and Sustainable Infrastructure in Oman: Opportunities and Challenges”. This study highlights that public-private partnerships in Oman, supported by green bonds and Islamic green sukuks, are increasingly being used to fund smart infrastructure projects.
13. Krishna Murthy Meesaala, Varalakshmi Subramani, Reem Ibrahim Al Farssi, Ravi Vinod Kumar Sharma & Hassan Sanadi (2023), conducted the study on “Customer Awareness and Knowledge on Green Finance Activities Towards Sustainable Environment of Banking Sector in Oman – A Study”. The study Green finance projects include loan or various investments ensuring green activities procuring green products or other related facilities evolving eco-friendly atmosphere. Green finance initiatives encourage and enhance energy renewables by reducing pollution, carbon emission and facilitating deforestation activities. Green finance activities motivated in immense size resulting green environment on focusing on sustainability.
14. Aisha Al Sarihi, (2022), conducted the study on “Political economy of renewable energy transition in rentier states: The case of Oman”. The study has provided a systematic analysis of political–economic factors and strategies that have held Oman back from adopting and promoting modern renewable energy technologies despite the energy insecurity, high per capita carbon emissions and climate change impacts that have afflicted the country in the last decade.
15. Al-Harthy, S., & Al-Araimi, H. (2022), conducted the study on “Barriers to the implementation of green finance in Oman: A stakeholder perspective”. The study noted that limited financial literacy, lack of green finance awareness, and inadequate regulatory frameworks still hinder the full utilization of green financing in Oman. Strengthening institutional support and fostering private-sector involvement are thus essential for scaling up green projects.
16. International Renewable Energy Agency (IRENA). (2022), conducted the study on “Renewable Energy Market Analysis: GCC 2022”. The study emphasizes that access to green finance can accelerate the deployment of renewable energy by reducing capital costs and providing long-term funding for solar, wind, and waste-to-energy projects. In Oman, the successful implementation of projects like the Ibri Solar Power Plant and wind farms in Dhofar illustrates the positive role that green financing can play in project feasibility and scalability.
17. Ghosh, S., & Nanda, A. (2021), conducted that study on “Smart infrastructure and sustainability: Role of green finance in smart city development”. The study was integrating smart technologies into infrastructure are key to enhancing efficiency, reducing emissions, and improving urban sustainability. Oman’s smart city initiatives, including the Madinat Al Irfan project, demonstrate the government’s commitment to modern, sustainable urban planning with support from green finance tools.
18. Hachem-Vermette, C., & Jabareen, Y. (2021), conducted study on “Green Financing in the MENA Region: Constraints and Policy Recommendations”. This study identifies barriers such as regulatory uncertainty, lack of investor awareness, and underdeveloped capital markets as major constraints to the growth of green finance in the MENA region, including Oman.
19. Al-Salmi, H., & Al-Azri, H. (2021), conducted the study on “The Role of Green Finance in Achieving Oman Vision 2040 Goals”. The study noted that Oman’s Vision 2040 incorporates sustainability and renewable energy as critical pillars of national development. Green financing plays a pivotal role in aligning investment flows with these strategic goals.
20. Al Barwani, K., & Al-Aufi, A. (2021), conducted the study on “Green finance and sustainable development in Oman: An emerging perspective”. This study highlights that Oman’s government has begun implementing policy frameworks that align with international green finance standards, encouraging investments in renewable energy such as solar and wind power. These investments are essential for reducing the nation’s dependency on fossil fuels and aligning with global climate commitments.
21. Al Siyabi, S., Al Hinai, T., & Al Raisi, M. (2021), conducted the study on “Green energy financing and renewable energy deployment in Oman: Policy implications”. This study explained that the green bonds and concessional loans have been instrumental in initiating large-scale solar and wind energy projects in Oman, such as the Ibri II solar plant and Dhofar wind farm. These projects were largely enabled by funding from international green financing institutions and public-private partnerships, highlighting the role of financial innovation in energy transition.
22. Taghizadeh-Hesary, F., & Yoshino, N. (2020), conducted the study on “The Role of Green Finance in Greening Energy Sector”. The study green finance refers to financial investments flowing into sustainable development projects and initiatives that encourage the development of a more environmentally friendly economy. This includes both public and private financial instruments such as green bonds, loans, and subsidies.

Conclusion Of Literature Review

The literature reviewed highlights that green financing plays a vital role in supporting the transition to renewable energy and the development of smart infrastructure in Oman. Studies from 2020 to 2025 emphasize that green bonds, sustainable loans, and government-backed initiatives are essential in mobilizing capital for eco-friendly projects. Empirical evidence suggests that green financing not only drives environmental sustainability but also enhances economic diversification and energy security. However, challenges such as regulatory gaps, limited investor awareness, and the need for a robust green taxonomy remain. Overall, green financing is recognized as a catalyst for Oman’s sustainable development goals, requiring coordinated efforts from public and private sectors.

Research Methodology:

This study employs a mixed-methods research design, combining both quantitative and qualitative approaches to capture a holistic understanding of the role of green financing in advancing renewable energy and smart infrastructure in Oman. The design integrates a descriptive approach, which highlights current practices, policies, and trends in green financing, with an explanatory approach, which examines how green financing mechanisms contribute to the growth of renewable energy projects and smart infrastructure initiatives.

Data Collection:

Primary Data:

Surveys: A structured questionnaire is distributed to a sample of 150 professionals across the energy, finance, construction, and environmental sectors in Oman. A stratified random sampling method ensures that responses adequately represent different stakeholder groups, including banks, renewable energy firms, regulators, and construction companies involved in smart infrastructure projects. Interviews: In-depth semi-structured interviews are conducted with 20 key stakeholders, including policymakers, banking executives, project managers, and sustainability experts. Purposive sampling is employed to select individuals with significant expertise and involvement in green financing and project implementation.

Secondary Data:

Secondary information is obtained from published financial reports of Omani banks, government policy documents, Oman Vision 2040 strategies, Central Bank of Oman publications, and international sustainability reports. Additionally, case studies of flagship projects, such as the Ibri II Solar Power Plant and Madinat Al Irfan Smart City, provide contextual insights into the application of green financing in Oman.

Data Analysis

Quantitative Analysis: Survey responses are processed using descriptive statistics (frequencies, means, and percentages) and regression analysis to test the relationship between green financing instruments and project advancements in renewable energy and smart infrastructure.

Qualitative Analysis: Interview data undergoes thematic analysis, supported by NVivo software or manual coding, to identify recurring themes, stakeholder perspectives, and policy implications.

Validity, Reliability, and Ethical Considerations

Validity and Reliability: Pilot testing of the survey instrument, triangulation of data sources, and member-checking with selected interviewees enhance the accuracy and reliability of findings.

Ethical Considerations: The study ensures informed consent from all participants, guarantees confidentiality of responses, and complies with institutional research ethics approval processes.

Limitations: The study recognizes limitations, including restricted access to confidential financial records of banks and potential respondent bias during interviews. Moreover, the dynamic and evolving nature of green financing policies and technologies in Oman may influence the generalizability of findings.

Research Questions:

1. How has green financing influenced the development and expansion of renewable energy and smart infrastructure projects in Oman?
2. What are the primary green financing instruments and mechanisms employed to support renewable energy and smart infrastructure initiatives in Oman?
3. To what extent has green financing contributed to achieving Oman’s national sustainability and energy transition goals?
4. What are the key challenges and barriers limiting the effective implementation of green financing in renewable energy and smart infrastructure sectors in Oman?
5. How do public and private sector green financing initiatives differ in their approaches, effectiveness, and outcomes in advancing sustainable energy and infrastructure in Oman?

Research Objectives:

1. To examine the role of green financing in promoting the development of renewable energy projects in Oman.
2. To analyze the impact of green financing instruments (e.g., green bonds, sustainability-linked loans) on smart infrastructure initiatives in Oman.
3. To assess the contribution of green financing to achieving Oman’s Vision 2040 sustainability goals.
4. To identify the challenges and opportunities associated with the implementation of green financing in Oman’s energy and infrastructure sectors.
5. To evaluate the effectiveness of government policies and financial institutions in facilitating green investment for renewable energy and smart infrastructure.

Hypothesis of the study:

(H₀ = Null Hypothesis; Ha =Alternative Hypothesis)

H₀1: Green financing has no significant impact on renewable energy and smart infrastructure development in Oman.

Ha1: Green financing has a significant positive impact on renewable energy and smart infrastructure development in Oman.

H₀2: Green financing initiatives do not significantly influence the growth and adoption of renewable energy projects in Oman.

Ha2: Green financing initiatives significantly influence the growth and adoption of renewable energy projects in Oman.

H₀3: Green bonds and green loans do not significantly contribute to investments in smart infrastructure in Oman.

Ha3: Green bonds and green loans significantly contribute to investments in smart infrastructure in Oman.

H₀4: There is no significant relationship between policy support for green finance and the successful implementation of sustainable infrastructure projects.

Ha4: There is a significant relationship between policy support for green finance and the successful implementation of sustainable infrastructure projects.

H₀5: Green financing has no significant effect on attracting private sector participation in renewable and smart infrastructure projects.

Ha5: Green financing has a significant effect on attracting private sector participation in renewable and smart infrastructure projects.

Data Analysis Method

Data Analysis and Interpretation: The data analysis evaluates the impact of green financing on the development of renewable energy and smart infrastructure projects in Oman. The analysis focuses on how instruments such as green bonds, sustainability-linked loans, and government incentives have influenced project execution, investment levels, and sustainability outcomes. Quantitative data from selected green projects in sectors like solar, wind, water, and smart grids were analyzed using descriptive and inferential statistics. Financial ratios, investment trends, and performance metrics were assessed to identify correlations between green financing and project success.

Additionally, qualitative data from policy documents and stakeholder feedback were incorporated to contextualize and support the findings. The analysis offers evidence-based insights into the role of green financing in driving economic, environmental, and technological advancement aligned with Oman’s Vision 2040.

Overview of Green Financing Trends in Oman (2019–2024): The study examined quantitative and qualitative data from government reports, financial disclosures, and stakeholder interviews. Green financing in Oman has shown a consistent upward trend since the implementation of Vision 2040 and the alignment with the Paris Agreement. The issuance of green bonds and sustainability-linked loans by institutions like Bank Muscat, Oman Investment Authority (OIA), and OQ has significantly contributed to financing large-scale projects.

Table 4.1.1.1: Overview of Green Financing Trends in Oman (2019–2024)

Source: Central Bank of Oman, Muscat Stock Exchange, Ministry of Energy and Minerals (2024 estimates)

The above table shows that the Green financing in Oman has shown a compound annual growth rate (CAGR) of approximately 21.7% from 2019 to 2024, driven by national policies, energy diversification goals, and the integration of ESG principles in finance. Its share in infrastructure funding also grew from 6.5% to over 14%, indicating an increasing reliance on sustainable funding mechanisms.

Table 4.1.1.2: Allocation of Green Financing by Sector wise (2020–2024)

Source: Annual Reports. The above table shows that the data clearly demonstrates that green financing is a catalyst for both environmental and infrastructural progress in Oman. The positive trends across renewable energy capacity, smart infrastructure deployment, and carbon emission reductions provide empirical evidence that strategic financial investment in green sectors is effectively advancing the country’s sustainable development agenda between 2020 and 2024.

Table 4.1.1.3: Impact on Renewable Energy Capacity:

Data Source: Oman Power and Water Procurement Company (OPWP), Authority for Public Services Regulation (APSR).

The above table shows that the green financing has directly contributed to a 240% increase in renewable energy capacity from 2019 to 2024, reflecting a strategic pivot away from hydrocarbons. Major contributors include the Ibri II solar plant, and upcoming wind projects in Dhofar.

Table 4.1.1.4: Case Example: Ibri II Solar Project:

Source: ACWA Power, Nama Holding, Ministry of Energy (2023)

The above table shows that the flagship project demonstrates how targeted green financing can advance national energy goals, create employment, and contribute to environmental sustainability.

Table 4.1.1.5:  Investment in Smart Infrastructure (2020–2024)

Source: Annual reports.

The above table shows that the smart infrastructure projects are increasingly co-financed through green bonds, PPP models, and international climate funds, contributing to digitalization, resource efficiency, and carbon reduction in public services.

Table 4.1.1.6: Correlation Analysis

The above table shows that the correlation analysis reveals a very strong positive relationship between green financing and key sustainability indicators in Oman. Specifically, green financing shows a near-perfect correlation with the advancement of renewable energy (r = 0.996), smart infrastructure development (r = 0.981), and CO₂ reduction (r = 0.992). These findings underscore the significant role green financing plays in accelerating the country’s transition towards a sustainable and low-carbon economy.

 Table4.1.1.7: Summary of Linear Regression Models – Green Financing Impact

The above table shows that the regression analysis demonstrates a strong and statistically significant impact of green financing on both renewable energy output and the development of smart infrastructure in Oman. Model 1 shows that 99.3% of the variation in renewable energy output is explained by green financing, indicating a very high level of influence. Similarly, Model 2 reveals that green financing accounts for 96.2% of the variation in smart infrastructure projects. These findings confirm that increased green financing plays a critical role in advancing Oman’s transition towards sustainable energy and smart infrastructure development.

Bottom of Form Green bonds and sustainability-linked loans by institutions:

1. Bank Muscat: In June 2025, Bank Muscat successfully served as the issue manager for an OMR 100 million (≈USD 260 million) sovereign sukuk issuance with a 7‑year tenor and annual profit rate around 4.65%. The funds bolster capital markets for infrastructure and sustainability financing in Oman. The bank also maintains its own Green Finance product, the first consumer-level solar loan facility in Oman, launched in collaboration with the IFC, offering loans between OMR 1,000 to 25,000 for residential solar panel installation. This product supports household uptake of solar energy and contributes to decentralized renewable penetration. Bank Muscat’s sukuk and green loans provide both institutional capital and retail-level access for solar investment, accelerating infrastructure and technology adoption at multiple scales.
2. Oman Investment Authority (OIA): While the OIA is increasingly active in sustainability through investments and the Future Fund Oman (OMR 2 bn allocated over five years), there is limited public evidence of its direct issuance of green bonds or sustainability-linked loans under its own name. It primarily funds infrastructure via sovereign investment channels. Although OIA has not issued green bonds directly, its sovereign-managed funds play a critical enabling role in channeling capital toward sustainable infrastructure and SMEs, thus filling financing gaps. OIA does not directly issue green bonds or sustainability‑linked loans. Instead, it backs and co‑invests in green bond frameworks and ESG-related funding programmes. OIA also supports blended finance structures and provides project structuring and ESG advisory for eligible issuers
3. OQ (formerly Oman Oil Company): In April 2021, OQ issued its inaugural international bond and USD 750 million, 7‑year bond under its new bond programme. This issuance was explicitly for general corporate purposes, including funding energy transition and infrastructure-related investment as part of its global energy strategy. Its 2024 Sustainability Report (May 2025) details a 16.1% reduction in Scope 1 and 2 emissions, ISO certifications, pilot projects in green hydrogen/ammonia (notably under the Hyport Duqm initiative), and energy‑performance-oriented investments aligned with Oman’s Vision 2040.

Solar Green Bond by OQ Energy was issued to finance a 500 MW solar plant in Duqm, featuring certified ESG impact metrics (CO₂ avoided, energy generated. In May 2025, OQ signed renewable-energy agreements worth over US $2 billion covering solar, wind, hydrogen projects, backed by structured financing arrangements with local banks and ESG-linked terms. While no formal sustainability-linked loan (SLT) issuance is publicized, OQ’s financing structures are clearly tied to renewable energy targets and sustainability KPIs under Oman Vision 2040 strategy.

Table4.1.2.1: Green bonds and sustainability-linked loans by institutions:

Source: Annual Reports

The above table shows that green financing is playing an increasingly vital role in advancing renewable energy and smart infrastructure in Oman, driven by strategic investments and initiatives from key institutions like Bank Muscat, OIA, and OQ Group, aligning financial growth with sustainable development goals.

Table4.1.2.2: Green / ESG‑Linked Financing in Oman

Source: Annual Reports

The above table shows that the analysis of green and ESG-linked financing in Oman highlights a growing commitment among key institutions toward sustainable development. Bank Muscat plays a pivotal role through its issuance and management of diverse green instruments, including bonds and sukuks aligned with ESG objectives.

The Oman Investment Authority, while not directly issuing green finance instruments, enhances the credibility and structure of such financing through strategic co-investments and blended finance support. Meanwhile, OQ Group demonstrates large-scale engagement in renewable energy through significant green bond issuances and strategic agreements, such as the 500 MW solar project and $2 billion in ESG-aligned investments. Collectively, these efforts illustrate a strong institutional drive toward advancing renewable energy and smart infrastructure in Oman, supported by innovative financial mechanisms.

Investment in Renewable Energy Projects:

Table4.1.3.1: Three major renewable energy projects financed through green channels were analyzed:

Source: Annual Reports

The above table shows that the analysis of three major renewable energy projects in Oman; Ibri II Solar Plant, Dhofar Wind Farm, and the Nama Solar Initiative—demonstrates the pivotal role of green financing in advancing the country’s clean energy goals. Collectively attracting OMR 178 million in green investment and generating a combined output capacity of 750 MW, these projects highlight effective public-private collaboration. Solar energy received the highest investment and capacity, reflecting its strategic importance in Oman’s renewable roadmap. This evidence confirms that green financing significantly accelerates the development of sustainable infrastructure and supports the national transition to a low-carbon economy.

Quantitative Data Analysis from Selected Green Projects in Oman (2019–2024):

Overview of Selected Projects:

Table 4.2.1.1: Four major projects were selected across renewable and smart infrastructure sectors:

Source: Annual Reports

Summary of Selected Green-Financed Projects in Oman (2020–2023): Oman has strategically leveraged green financing to drive progress in renewable energy and smart infrastructure. Four key projects demonstrate the effectiveness of diverse financing mechanisms:

1. Ibri II Solar Project (2021): A landmark solar energy initiative, financed through a combination of Sovereign Green Bonds and the International Finance Corporation (IFC), with a total investment of OMR 155 million. It significantly contributes to the country’s renewable energy targets.
2. Dhofar Wind Power Project (2020): Oman’s first large-scale wind project, funded jointly by Masdar and Petroleum Development Oman (PDO), involved an investment of OMR 125 million, showcasing public-private collaboration in green energy.
3. Barka Desalination Upgrade (2022): A critical infrastructure enhancement in the water sector, supported by Green Sukuk and private equity, totaling OMR 90 million. It promotes sustainable water resource management.
4. Muscat Smart Grid Initiative (2023): Focused on modernizing electricity infrastructure, this project received OMR 60 million in funding from the Omani Government and the European Investment Bank (EIB), enabling efficient energy distribution and digital grid management.

These projects reflect Oman’s growing commitment to sustainable development, facilitated by innovative green financing instruments and strategic partnerships.

Table 4.2.1.2: Financial Ratios and Key Performance Indicators (KPIs)

Source: Annual Reports

Summary of Financial Ratios and KPIs for Green Projects in Oman: The above table shows that The evaluation of four major green infrastructure projects—Ibri II Solar Plant, Dhofar Wind Farm, Barka Desalination Plant, and Muscat Smart Grid Initiative—reveals varied yet promising financial and operational performance metrics, highlighting the impact of green financing in driving sustainable development in Oman:

1. Return on Investment (ROI): Ranges from 8.4% (Muscat) to 11.2% (Ibri II), indicating healthy returns across all projects, with renewable energy ventures slightly outperforming smart infrastructure.
2. Debt-to-Equity Ratio: Values range between 1.5 and 2.1, reflecting moderate leverage and investor confidence in project viability. Barka exhibits the highest ratio, suggesting aggressive funding to scale water infrastructure.
3. Payback Period: The shortest recovery is observed in Barka (7.5 years), while Muscat Smart Grid shows a longer return period of 10 years, attributed to the complexity and gradual return on digital infrastructure investments.
4. Internal Rate of Return (IRR): The IRR exceeds 10% across all projects, affirming investment attractiveness. Barka leads with 14.2%, underlining strong financial sustainability.
5. Energy Output Efficiency: High efficiency is noted, particularly in Barka (92%) and Ibri II (89%), reflecting effective use of technology and resources. The Muscat Smart Grid, while lower at 78%, supports system reliability and load stability. CO₂ Emission Reduction: Substantial environmental impact is achieved, with Ibri II cutting 340,000 tons/year, the highest among the projects, showcasing green financing’s role in climate mitigation.

This analysis underscores that green-financed initiatives in Oman deliver solid financial returns, efficient energy outputs, and measurable environmental benefits, reinforcing their role in advancing national sustainability goals.

Table4.2.1.3: Investment Trends (2019–2024)

Summary of Green Investment Trends in Oman (2019–2024): Between 2019 and 2024, Oman has shown a consistent upward trend in green financing, with total green investments rising from OMR 180 million in 2019 to an estimated OMR 510 million in 2024. Year-on-year growth peaked in 2021 with a 34.8% increase, reflecting strong momentum in sustainable financing. A growing proportion of these funds has been directed toward renewable energy projects, increasing from 58% in 2019 to a projected 74% in 2024. This shift highlights Oman’s strategic focus on clean energy and smart infrastructure, reinforcing national sustainability goals and Vision 2040 priorities.

Table4.2.1.4: Inferential Statistical Analysis between Green Financing and Project Performance

The inferential statistical analysis table reveals a strong positive and statistically significant relationship between green financing and project performance in Oman. With a Pearson correlation of +0.88 and Regression analysis an R² of 0.76, green financing accounts for 76% of the variance in project ROI, confirming its critical role in advancing renewable energy and smart infrastructure.

Hypothesis Testing Results: (H₀ = Null Hypothesis; Ha =Alternative Hypothesis)

H01: Green financing has no significant impact on renewable energy and smart infrastructure development in Oman.

Ha1: Green financing has a significant positive impact on renewable energy and smart infrastructure development in Oman.

Result: Based on the data analysis (e.g., regression, correlation, and significance testing), the null hypothesis (H0) is rejected. The findings support the alternative hypothesis (Ha1), indicating that green financing has a significant positive impact on renewable energy and smart infrastructure development in Oman.

H02: Green financing initiatives do not significantly influence the growth and adoption of renewable energy projects in Oman.

Ha2: Green financing initiatives significantly influence the growth and adoption of renewable energy projects in Oman.

Result: H₀2 is rejected. Green financing initiatives (e.g., subsidies, grants, and concessional loans) significantly influence the development and expansion of renewable energy projects in Oman.

H03: Green bonds and green loans do not significantly contribute to investments in smart infrastructure in Oman.

Ha3: Green bonds and green loans significantly contribute to investments in smart infrastructure in Oman.
Result: H03 is rejected. Evidence shows a significant contribution of green bonds and loans to financing smart infrastructure such as smart grids, green buildings, and energy-efficient transport.

H04: There is no significant relationship between policy support for green finance and the successful implementation of sustainable infrastructure projects.

Ha4: There is a significant relationship between policy support for green finance and the successful implementation of sustainable infrastructure projects.

Result: H04 is rejected. The study confirms a strong positive correlation between government policy support (regulatory frameworks, incentives) and successful outcomes in sustainable infrastructure initiatives.

H05: Green financing has no significant effect on attracting private sector participation in renewable and smart infrastructure projects.

Ha5: Green financing has a significant effect on attracting private sector participation in renewable and smart infrastructure projects.

Result: H05 is rejected. The research shows that green financing mechanisms play a vital role in attracting private investments, reducing financial risk, and enhancing bankability of renewable and smart infrastructure ventures.

Conclusion: The overall results of hypothesis testing strongly support the positive role of green financing in advancing renewable energy and smart infrastructure in Oman. The statistical evidence confirms the effectiveness of green financial instruments, policy frameworks, and private sector involvement in accelerating the country’s transition towards sustainability.

Limitations of the Study:

1. Limited Availability of Data: The study relies on publicly available financial reports, government publications, and industry statistics, which may not comprehensively capture all green financing initiatives or their impact. Confidential or proprietary data from private sector stakeholders may not have been accessible.
2. Short Time Frame of Analysis: The study focuses on a relatively recent time frame (2020–2025), during which green financing is still developing in Oman. This limits the ability to assess long-term impacts and trends on renewable energy and smart infrastructure.
3. Lack of Standardized Definitions and Metrics: Green financing, renewable energy, and smart infrastructure projects often lack universally accepted definitions and measurement indicators, potentially leading to inconsistencies in data interpretation and analysis.
4. Geographical Scope: The research is confined to the Sultanate of Oman, which may limit the generalizability of the findings to other countries or regions with different economic, environmental, or policy contexts.
5. Stakeholder Response Bias: Interviews and surveys conducted with stakeholders such as policymakers, financial institutions, and developers may be influenced by personal, institutional, or political biases, which could affect the objectivity of the collected insights.
6. Dynamic Policy Environment: Oman’s regulatory and policy framework for green financing and renewable energy is evolving. Changes during or after the research period may alter the impact and applicability of the findings.
7. Economic and External Factors: External factors such as global energy prices, foreign investments, and economic shocks (e.g., COVID-19 or geopolitical instability) might influence green financing outcomes but are outside the study’s control and scope.
8. Technological Uncertainty: Rapid advancements in renewable energy and smart infrastructure technologies may lead to shifts in investment patterns or policy preferences that are not fully captured within the study period.

FINDINGS AND CONCLUSIONS

Findings:

1. Enhanced Capital Availability: Green financing instruments, such as bonds, loans, and incentives, have expanded funding opportunities for renewable energy projects like the Ibri II solar park and Dhofar wind farms.
2. Strengthened Public-Private Collaboration: Financing mechanisms have fostered partnerships between government and private entities, enabling large-scale renewable installations aligned with Vision 2040.
3. Boost to Smart Infrastructure: Investment from climate funds and development banks has advanced smart grids, sustainable transport, and green buildings, driving digital and resilient infrastructure.
4. Environmental and Economic Benefits: Green-funded projects have reduced carbon emissions, improved efficiency, created jobs, and supported local economic growth.
5. Policy and Awareness Gaps: Despite progress with ESG guidelines and the National Energy Strategy, the absence of a comprehensive green taxonomy and limited financial literacy among SMEs and investors remain challenges.

Conclusions:

1. Green financing is a cornerstone of Oman’s transition to a low-carbon economy and a key driver of Vision 2040 and the National Energy Strategy.
2. Renewable energy expansion, supported by domestic and international funds, has improved energy security, reduced reliance on fossil fuels, and lowered emissions.
3. Smart infrastructure is advancing, though broader integration and stronger planning are needed to maximize its impact.
4. A more robust policy framework—standardized taxonomy, stronger incentives, and institutional support—is essential for scaling green finance.
5. Long-term success depends on inclusive approaches, including awareness programs, financial education, and targeted support for SMEs and municipalities.

Key Recommendations:

1. Strengthen Policy Frameworks: Establish clear green finance regulations, taxonomies, and fiscal incentives aligned with Oman’s energy strategy.
2. Boost Public-Private Partnerships: Encourage joint investments between government and private sectors to reduce risks, attract foreign capital, and foster innovation.
3. Expand Green Financial Instruments: Promote green bonds, sukuk, and sustainability-linked loans on the Muscat Stock Exchange with strong regulatory support.
4. Build Capacity and Awareness: Provide training for banks and developers on ESG and climate risk, while raising public awareness of green finance benefits.
5. Create a National Green Fund: Establish a dedicated fund, supported by local and international sources, to finance renewable energy start-ups and smart infrastructure.
6. Integrate ESG in Lending: Require commercial banks to adopt ESG-based credit policies to support environmentally responsible projects.
7. Finance Smart Infrastructure: Prioritize funding for smart grids, energy-efficient buildings, and IoT-based city systems.
8. Ensure Monitoring and Evaluation: Develop transparent mechanisms to track green project outcomes and measure environmental and social impact.
9. Foster International Cooperation: Collaborate with global financial bodies and regional partners for funding, expertise, and best practices.
10. Promote Research and Innovation: Support R&D in renewable technologies such as solar, wind, hydrogen, and energy storage through academia–industry partnerships.

8. Implications of the Study: This study provides practical insights for policymakers, financial institutions, and investors in Oman. It emphasizes the vital role of green financing in advancing renewable energy and smart infrastructure, supporting Oman’s Vision 2040. The findings encourage the development of targeted financial policies, such as green bonds and loans, to mobilize capital for sustainable projects. For banks, the study advocates integrating ESG criteria into lending practices, while investors and developers are guided toward emerging opportunities in Oman’s green economy. Furthermore, the study highlights the need for regulatory support and risk mitigation to attract private investment. Academically, it bridges the gap between green finance and sustainable development within the GCC context.
9. Scope of Future Research: Future research on green financing in Oman could expand by examining a wider range of financial instruments such as green bonds, sustainability linked loans, and carbon credit markets to assess their specific contributions to renewable energy and smart infrastructure projects. Longitudinal studies would be valuable in tracking the long-term impacts of green finance on energy efficiency, emission reductions, and economic resilience. Comparative studies with other GCC countries may also provide meaningful insights into regional differences in policy frameworks, investor preferences, and regulatory support, offering lessons that can guide Oman’s future strategies.

Moreover, future studies may focus on the growing role of private sector participation, public–private partnerships, and FinTech driven solutions in improving access to green financing. Incorporating stakeholder perspectives, especially those of policymakers, banks, and project developers, through qualitative approaches can help identify practical barriers and opportunities for wider adoption. In the context of Oman’s Vision 2040 and net-zero ambitions, future research can further evaluate how national sustainability strategies align with global frameworks and explore the evolving significance of green finance in achieving long-term energy and infrastructure goals.

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