CIMB: Sovereigns to issue ‘green’ sukuk for first time this year
Market can be tapped to raise funds for climate-friendly investments, says CEO
CIMB Group Holdings Bhd expects sovereigns to issue “green” Islamic bonds for the first time this year, said a top executive at the bank.
More than one sovereign could tap the Islamic bond market to raise funds for climate-friendly investments, said Rafe Haneef, chief executive officer of CIMB’s Islamic banking arm.
“We predict about three to five sovereign sukuk issues to come to market this year and we expect some of them to be green issuances,” said Rafe. “Corporates are also eyeing green sukuk issuances.”
Indonesia’s finance minister said last month the country was working towards a US dollar-denominated green sukuk.
If Indonesia proceeds with the greek sukuk, it would be both the first sovereign to issue green Islamic bonds and the first Asian country to issue green bonds.
Green bonds are a growing category of fixed-income securities, raising capital for projects with environmental benefits.
Global green bond issuance hit a record US$155.5 billion (RM608 billion) last year, and could reach US$250 billion to US$300 billion this year, research from the Climate Bonds Initiative showed last month.
Poland issued green bonds in late 2016 to become the first sovereign globally to do so, but no country has yet issued a green sukuk.
Rafe said more and more investors were allocating funds for socially responsible investments (SRI) and Islamic bond issuers could benefit from that.
“By issuing a green sukuk, you are not only tapping Islamic funds, but also the (SRI) funds. There is a big demand for that. There would be more incentives for sovereigns and corporate to go the green route,” he said.
Green bonds make up a small fraction of the overall global bond market, but they are attracting more attention because meeting emissions-cut targets will require trillions of dollars of capital from public and private sectors.
Rafe expects the total number of Islamic bond issuances this year to be “slightly higher” than last year, driven mainly by infrastructure bonds in Southeast Asia.
“We expect more issuances in the first half, than the second half,” he said.
Rafe said he did not expect any “jumbo” sukuk issues this year, following Saudi Arabia’s US$9 billion international sukuk last year.
However, he expects some new issuers to enter the sukuk market, saying state-owned enterprises from the United Arab Emirates and Qatar were possibilities.