Green Bonds are Debt Instruments and it is created to fund Projects that have Positive Environmental and/or Climate Benefits1 while Green Sukuk are Bonds that are Syariah Compliant and it is backed by Specific Pool of Assets2.
The growing trend toward Green Bonds/Sukuk is mainly due to the growing awareness of Investors to invest in something Ethical, Islamic or Environmental Friendly3 and the Stricter Capital Requirements for the Banks to finance Infrastructural Projects. This growing market for Green Bonds/Sukuk is creating demand for Independent Reviews of the actual “Greenness” of the projects they financed.
In Malaysia, Three Green Sukuk had been issued amounting to about RM1.25 Billion with another RM2.2 Billion in the Pipelines. These can be summarised as below;
- First launch of the Green Sukuk in July 2017 by Edra Power Holdings Sdn Bhd’s unit, Tadau Energy Sdn Bhd, with an issuance of RM250 Million Green SRI Sukuk to finance a Large-Scale Solar Project of 50MW in Kudat, Sabah.
- Subsequently in October 2017, Quantum Solar Park Malaysia Sdn Bhd issued its Green SRI Sukuk worth RM1 Billion, the world’s largest to date, to finance the Construction of Three Large-Scale Solar Photovoltaic Plants, to be built in the states of Kedah, Melaka and Terengganu.
- In November 2017, Permodalan Nasional Bhd’s (PNB) unit announced to raise a 15-year tenure Secured Green Sukuk – Merdeka Asean Green SRI Sukuk Programme – via an Unrated Sukuk Programme of up to RM2 Billion. The Group’s Subsidiary, Merdeka Ventures Sdn Bhd (PNBMV) would use the proceeds to fund the 83-storey Office Space, which forms part of the Merdeka PNB118 Tower Project within the Warisan Merdeka Precinct in Jalan Stadium, KL.
- In December 2017, Mudajaya Group Berhad through its Subsidiary, Sinar Kamiri Sdn Bhd proposed to raise up to RM245 Million Green SRI Sukuk Wakalah to build a Large Scale Solar Photovoltaic (PV) Energy Generating Facility of 49MWac in Sungai Siput, Kuala Kangsar.
In the next article, we will take a look at how we can identify how ‘green’ a bond is.
1Climate Bonds Initiative, Explaining green bonds (accessed August 7, 2018)
2Climate Bonds Initiative, Green Sukuk (accessed August 7, 2018)
3TheEdge Market, Bonds: Growing need for retail bonds (accessed August 7, 2018)
Khairul Ikhwan Jamaludin
Read Part 2 of this article here: How Green Is a Green Bond?