This paper examines the motivations, use, and development of sustainable finance in GCC countries. We study the risk-return of ESG investments by considering cost of debt, investment/financial performance, stock returns, mean-variance optimized equity portfolios, and value. We survey the government actions proposed in the literature. We show that the main motivations behind the employment and the development of sustainable finance in the Gulf region are: the threat of decline in oil prices; the opportunity to use the available receipts to diversify the economies for an energy transition; the shared foundational principles between Shariah-based finance, ESG considerations, and the United Nations’ sustainable development goals; and the ambition to improve revenues. Our analysis reveals that superior ESG rating is correlated with: lower cost of debt; inferior short-term financial performance; superior long-term financial performance; better investment performance; lower volatility and lower returns; higher market value; and superior free cash flow and dividend payout ratio. The principal government actions proposed in the literature to develop sustainable finance are to: enhance environmental performance; prepare the environment and employ financial and economic instruments to raise capital, manage risks, and stimulate the private sector; and multiply actions to support the free market economy.