Green sukuk seen growing
Funding for solar power companies expected to drive segment
PETALING JAYA: The issuance of green socially responsible investment (SRI) sukuk in Malaysia is expected to grow in the next few years, predominantly driven by funding requirements of solar power producers or contractors, said Affin Hwang Investment Bank Bhd group managing director Datuk Maimoonah Hussain.
The Energy Commission has an allocated capacity of 1000 MW for large-scale solar programmes to be implemented in the next three years.
Inanemailinterview,Maimoonah said the Green SRI Sukuk is an excellent product to fund such projects due to its international endorsement and potential tax benefits via the deduction of issuing expenses against taxable income of the issuer.
Affin Hwang IB had issued a RM250mil Green SRI Sukuk for Tadau Energy Sdn Bhd in July, making it the world’s first green SRI sukuk.
“Tadau Energy’s green SRI sukuk is a historic milestone for the Malaysian capital markets.
“While there has been numerous Green Bonds issued internationally, there has not been any Green Sukuk until Tadau Energy’s.
“We certainly commend the Securities Commission (SC) for having the foresight to establish the SRI sukuk framework in 2014 and establishing a technical working group comprising representatives of World Bank, SC, and Malaysian International Islamic Finance Centre of Bank Negara to promote Green Financing,” she said, adding that the issuance of Tadau Energy’s green SRI sukuk marks an innovation that would spur growth in green and sustainable finance, strengthening Malaysia’s leading position in Islamic finance.
In addition, Tadau Energy, which is undertaking a 50MW solar power project, is the first company to tap into the capital markets for funding in Malaysia.
Tadau Energy’s green sukuk was well received with an over-subscription rate of more than two times.
Its long-dated series of 10 years and above were over-subscribed between 2.5 to 4 times.
“Another RM1bil of Green Sukuk has recently been issued.
“Awareness on the importance of climate protection has been growing across the globe, including Malaysia, and investors are also increasing their emphasis on investing in sustainable and environmentally friendly projects. “Therefore, we expect investors’ interest in Green Sukuk to grow going forward,” said Maimoonah.
Tadau Energy’s green sukuk was based on the principles of istisna’ (a contract whereby a party agrees to deliver an asset at an agreed-upon price within a set timeframe) and ijarah (an agreement that allows the lessee or tenant to use an asset owned by the lessor or owner at an agreed-upon price within a set timeframe).
It has a tenure of two to 16 years and has been assigned a long-term rating of AA3 by RAM Rating Services Bhd.
Meanwhile, the green certification was issued by the Norwaybased Center of International Climate Research (CICERO), after an evaluation on Tadau Energy’s project and sukuk.
With a dark green certification, the highest certification in CICERO’s range of green certification, investors are assured that they are truly investing in a green and sustainable project.
“Operating in an industry that is extremely competitive and dominated by large universal banks, we need to deliver on our service quality, value-add performance, and strive to be differentiated.
“Arranging the first Green Sukuk is an example of this and we hope to announce, in due course, a syariah-compliant product which we believe will be the first of its kind in Malaysia,” said Maimoonah.