Securities Commission Malaysia (SC) yesterday announced the issuance of Malaysia’s first green sukuk – an innovative channel to address global funding gaps in green financing - under its Sustainable & Responsible Investment (SRI) Sukuk framework.
Tan Sri Ranjit Ajit Singh, Chairman of SC said, “The launch of Malaysia’s first green sukuk marks another significant milestone in product innovation that strengthens Malaysia’s position as a leading Islamic finance marketplace as well as its value proposition as a centre for sustainable finance.”
“We believe that there is a significant opportunity arising from strong global interest in green financing where innovative fundraising instruments like green and SRI sukuk is a viable solution to address global needs for green and other forms of sustainable and responsible financing,” added Ranjit.
To complement SRI Sukuk framework and promote greater utilisation of green sukuk as a fundraising channel, several incentives are in place to attract green issuers including:
- Tax deduction until year of assessment (YA) 2020 on issuance costs of SRI sukuk approved or authorised by or lodged with the SC;
- Tax incentives for green technology activities in energy, transportation, building, waste management and supporting services activities [www.mida.gov.my and www.greendirectory.my]; and
- Financing incentives under the Green Technology Financing Scheme (GTFS) with total funds allocation of RM5 billion until 2022 [www.gtfs.my].
To be eligible for tax deductions under SRI Sukuk incentives, issuers utilising the SRI sukuk framework towards green projects must ensure that proceeds raised are used to fund eligible SRI projects in the natural resources, renewable energy and/or energy efficiency sectors. In accordance with international practices, issuers are also encouraged to appoint independent expert/s to undertake an assessment on the eligibility of the project prior to issuance of the green sukuk.
The framework underlying this first green sukuk is the result of collaboration between SC, Bank Negara Malaysia and the World Bank Group, in an effort to develop an ecosystem to facilitate the growth of green sukuk and to introduce innovative financial instruments to tackle global infrastructure needs and green financing.
“With the successful development of the framework for the first green sukuk, Malaysia is playing a pioneering role in harnessing capital markets, and in particular Islamic finance, for climate friendly investments,” said Faris Hadad-Zervos, World Bank Representative to Malaysia. “This is a crucial step in financing the country’s infrastructure investments and the World Bank Group is pleased to be a close partner with Malaysia in developing this innovative approach to climate finance. We congratulate Malaysia on this historic achievement.”
Malaysia’s Islamic finance marketplace is open to the world to collaborate with and mutually benefit from a highly conducive business environment of innovation, expertise and deal flow. Financial institutions and business communities are encouraged to capitalise on Malaysia’s Islamic finance ecosystem to further contribute towards a sustainable and more inclusive economy.