World’s first ESG sukuk fund launched
KUALA LUMPUR: BIMB Investment Management Bhd yesterday launched the world’s first environmental, social and governance (ESG) sukuk fund and first syariah sukuk fund in Malaysia approved under the Sustainable Responsible Investing guideline. The guideline was introduced in December 2017.
BIMB targets the BIMB ESG Sukuk Fund take-up to hit RM150 million in the first year.
It is the first fund of its kind in the world that integrates the principles of ESG criteria into the investment portfolio strategy to determine company performance in order to select the best performing companies in both financial and non-financial performance, with respect to sukuk return and credit risk profile.
BIMB Investment CEO Najmuddin Mohd Lutfi said the fund has a potential annual income distribution of 5% per year, offering corporate and retail investors a potential stable annual income stream and an opportunity for capital appreciation over the medium to long-term by investing in local and global sukuk. This fund provides easy access to high investment grade sukuk through several currencies options such as US dollars and Singapore dollars.
He said the fund is targeting 50% corporate and 50% individual investors.
“This is the only ESG sukuk fund. There are other sukuk funds, based entirely on credit ratings, now we’re adding additional assessments, which is the ESG score and UNGC (United Nations Global Compact) score, that would give additional comfort to institutional (corporate) investors. The nature of sukuk is that it is lower risk than stock market. This is a high investment grade sukuk and should attract institutional investors,” he told a press conference after the fund launch.
The fund is suitable for investors seeking annual fixed income payout, exposure to local and global sukuk with a three to five years investment horizon, and a moderate risk tolerance level.
It is offered for subscription in the ringgit, US dollar and Singapore dollar at 0.25 cents per unit during the initial offer period from Aug 1 until Aug 21.
“In recent years, shareholders have suffered substantial losses following ESG risk events. The negative environment and social impacts on oil spills, mining explosions and unsafe products can be fatal, resulting in severe costs to shareholders. Additionally, poor governance and accounting controls can undermine the success of great business characterised by sustainable, competitive advantages and long term growth prospects. We believe that by incorporating in-depth ESG considerations, we can mitigate these risks,” said Najmuddin in his speech.
BIMB Investment chairman Nik Mohd Hasyudeen Yusoff said based on studies, ESG assets will comprise two thirds of assets managed by global funds by 2020, up from half in 2016.
“Sustainable and socially responsible investing remains a huge area of opportunity to be tapped on. Studies conducted in recent years show that positive and sustainable impact on companies’ long-term financial success, hence (resulting in) positive returns to investors in the long run.”