The “Greenness” of a Sukuk is verified through “Second Opinions”, currently provided by two organisations. They are:

  1. The Centre for International Climate and Environmental Research Oslo (CICERO) – An Independent Climate Research Foundation, Norway that has developed Second Opinions for 44% of all the 474 Labelled Green Bonds issued Globally since June 2007 
  2. RAM Consultancy Services Sdn Bhd (RAM) – Focuses its business in the Sustainability Ratings of Companies in the areas of Environment, Social and Governance.

Based on CICERO Definition on Second Opinions, Second Opinions are Independent, Research-Based Evaluations of Green Bond Investment Frameworks to determine their environmental robustness1. Although the provision of an Independent Review/Second Opinions/Certification is Voluntary, it is important for Issuance of Green Bonds/Sukuk in view of the following reasons:

In order to provide the Service, an Independent Reviewer Framework is to be developed based on the ASEAN Green Bond Standards (ASEAN GBS), developed by the ASEAN Capital Markets Forum (ACMF). ACMF is a forum comprises of Capital Market Regulators from ASEAN Countries namely Brunei Darussalam, Cambodia, Indonesia, Laos PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam2 whose primary task is to promote greater Integration and Connectivity of Regional Capital Markets. One of the key initiatives by the ACMF is the Development of a Green Asset Class in line with the importance of Green Finance in supporting Sustainable Growth in ASEAN, particularly in meeting ASEAN’s Infrastructure Needs.

Apart from ASEAN GBS, the establishment of the Independent Reviewer Framework shall also be based on Green Bond Principles (GBP) established by a Consortium of Investment Banks: Bank of America Merrill Lynch, Citi, Crédit Agricole Corporate and Investment Bank, JPMorgan Chase, BNP Paribas, Daiwa, Deutsche Bank, Goldman Sachs, HSBC, Mizuho Securities, Morgan Stanley, Rabobank and SEB. Currently, there are 55 members of the Principles. The ongoing Monitoring and Development of guidelines is managed by the Independent Secretariat and hosted by the International Capital Market Association (ICMA).

We at Greentech Malaysia are currently collaborating with a Consultant from Singapore, to come out with Methodologies and Frameworks of Second Opinion Provider of Green Bonds/Green Sukuk based on the Six Sectors of Malaysian Green Technology Master Plan (GTMP). The project will kick off tentatively by 1QFY2019.

1CICERO, Second opinions on green bonds (accessed August 8, 2018)
2ACMF, About ACMF (accessed August 8, 2018)

Written by:
Khairul Ikhwan Jamaludin

Read Part 1 of this article here: Green Bonds – Funding Positive Environmental Benefit