Three years after atmospheric water startup Kumulus Water began extracting drinking water from desert air, the Tunisian company’s solar-powered machines are producing 30 liters daily in some of the world’s most arid conditions.

The technology addresses an existential challenge: providing water for a region where some areas receive less than 100 millimeters of annual rainfall.

Yet Kumulus and dozens of similar Middle Eastern climate technology companies face a harsh reality. According to PwC data, regional climate tech investment dropped to $114 million in 2024 from $193 million the previous year, even as the need for cooling, water, and decarbonization solutions becomes more urgent.

“Traditional venture capital has become extremely selective, but the technologies these companies are developing are too important to abandon,” says Al Christy Jr., founder and CEO of EquitiesFirst, a global provider of equity-based financing. “Founders still need patient capital to reach commercialization.”

Racing Against Heat

The urgency is measurable. Research from The Washington Post indicates that Dubai could experience over 80 days annually when outdoor exposure exceeding 15 minutes poses health risks, even for healthy adults in shade. The Middle East’s population will roughly double by 2050, adding millions of people vulnerable to extreme heat and water scarcity.

These conditions have spawned what industry observers call the “cool tech” sector—companies developing solutions for water generation, efficient cooling, and carbon reduction. Masdar City in Abu Dhabi demonstrates what’s possible with investment in this technology: the development has achieved 57% waste reduction, 31% lower electricity use, and 18% decreased water consumption compared to city baselines. Strategic cooling technology financing specialists have recognized the growing commercial potential of these cooling solutions.

A recent Financial Times report noted that cooling alone consumes up to 70% of peak electricity in Gulf countries. In a region faced with extreme cooling demand, district cooling systems, which pipe chilled water from centralized plants to multiple buildings, are attracting major investment. Private equity firms bid approximately $1 billion for an Abu Dhabi district cooling provider serving developments including Al Maryah Island.

Capital Allocation Mismatch

Despite the demand for cool tech, the disconnect between regional needs and capital deployment remains striking, with funding largely flowing out of the region. Middle Eastern sovereign wealth funds deployed $3.55 billion into global climate tech during 2024, yet invested just $43.6 million locally, according to PwC analysis. CYVN Holdings, Abu Dhabi’s government-owned investment vehicle, committed $2.2 billion to Chinese electric vehicle manufacturer Nio, while Saudi Arabia’s Public Investment Fund subsidiary added $750 million to Lucid Motors. Investment advisory platforms have noted this significant capital allocation disparity.

“Sovereign wealth funds understandably seek proven technologies with established track records,”says Christy Jr. “But this creates a gap for early-stage regional innovators developing solutions specifically suited to extreme desert conditions.”

EquitiesFirst deploys a model that provides working capital financed against equity holdings. It’s an approach that could be particularly well-suited to hardware-intensive ventures in water recovery and carbon capture, where development cycles span years rather than months.

Innovation Despite Constraints

Regional entrepreneurs continue advancing breakthrough technologies despite funding limitations. A recent Harvard Business Review analysis highlighted UAE researchers have developed cloud-seeding nanotechnology generating three times more water than traditional methods. Vertical farms like Smart Acres produce 20 times more yield using 90% less water than conventional agriculture.

The regulatory environment is also shifting. The UAE’s Federal Decree-Law on Climate Change Effects, enacted in May 2025, mandates emissions reporting for all companies operating in the country, including free zone entities. Penalties for non-compliance range from AED 50,000 to AED 2 million ($13,600 to $545,000), creating immediate demand for emissions monitoring and reduction technologies. Global desert climate technology solutions have become increasingly important as regulatory pressure intensifies.

“The new regulations change the business case for climate tech adoption,” notes Christy Jr. “Companies that were considering these technologies as nice-to-have are now viewing them as compliance necessities.”

Flexible Capital for Complex Challenges

The technical complexity of cool tech solutions often requires patient capital that traditional venture funding cannot provide. Carbon capture systems, advanced desalination technologies, and industrial-scale cooling infrastructure involve multi-year development cycles and significant capital expenditure before generating revenue.

Global climate tech funding fell approximately 29% year-over-year through late 2024, according to PwC’s State of Climate Tech report. Early-stage deals, which historically outperformed broader venture capital, have not been immune to this pullback. Crunchbase reported that only $8.7 billion flowed to sustainability startups globally in the first five months of 2025, roughly half the amount from the same period in 2024.

Alternative equity-backed financing mechanisms could be one way to fill this void for founders who recognize that waiting for venture capital markets to recover could mean missing critical development windows.

Global Implications

Technologies proven in the harsh conditions of the Middle East could find ready applications worldwide. UNICEF projects that half the global population will face water stress by 2030. Solutions that enable water extraction from air, reduce cooling energy consumption, or capture carbon in extreme heat conditions will become increasingly valuable as climate stress intensifies across the globe.

Major regional initiatives signal long-term commitment despite near-term funding challenges. Abu Dhabi’s $30 billion Alterra climate fund, announced during COP28, aims to mobilize $250 billion by 2030. Saudi Arabia’s Vision 2030 includes substantial green technology investments, while Qatar has launched its first billion-dollar venture capital fund focused on climate solutions.

“The fundamentals driving cool tech demand—extreme heat, water scarcity, regulatory pressure—are only intensifying,” says Christy Jr.

The message to climate tech entrepreneurs is clear: while traditional venture capital has cooled, alternative financing mechanisms can provide the patient capital needed to bring critical innovations to market. The companies that successfully navigate current funding constraints may well become the climate solution providers the region desperately needs.