世界发展银行-Pioneering-the-Green-Sukuk---Three-Years-On_48页_7mb

Summary of "Pioneering the Green Sukuk: Three Years On"

Core Content

This document provides an overview of the development and current status of the green sukuk market in Malaysia and other countries, three years after the first green sukuk was issued in July 2017. It highlights the evolution of green sukuk as a capital market instrument, its alignment with sustainable finance principles, and the challenges and opportunities in its adoption.

Main Points

Definition of Green Sukuk

• A green sukuk is an Islamic bond (sukuk) that complies with green bond principles.
• The proceeds are exclusively used for environmentally beneficial projects, such as renewable energy, green buildings, and sustainable infrastructure.
• It is a shari'ah-compliant security, backed by a specific asset pool, and designed to meet both Islamic and environmental standards.

Key Components of Green Sukuk Issuance

• Green Framework: Defines the use of proceeds for environmental projects.
• Second Opinion Review: An independent assessment to verify the sukuk's green credentials.
• Impact Reporting: Post-issuance reporting on the environmental impact of the funded projects.

Market Development

• By July 2020, 12 unique issuers in Indonesia, Malaysia, UAE, and one multilateral development bank had issued green sukuk totaling approximately USD6.1 billion.
• The first green sukuk was issued by Tadau Energy in July 2017 in MYR250 million, supporting a solar power plant.
• The Islamic Development Bank (IsDB) issued the first euro-denominated green sukuk in 2017.
• Malaysia has been a leader in green sukuk innovation, with the introduction of SDG sukuk and sustainability sukuk.

Impact of the Pandemic

• The COVID-19 pandemic significantly affected the green sukuk market in 2020.
• Green sukuk issuance in the first 7 months of 2020 dropped by 44.4% compared to the same period in 2019.
• This decline mirrored the global sukuk market contraction of 9.1% during the same period.

Pricing and Performance

• Analysis of Malaysian solar green sukuk showed they were priced at a higher spread than similar conventional sukuk due to smaller size and higher liquidity premiums.
• The limited number of issuances and small sample size makes it inappropriate to draw definitive conclusions about the overall performance of green sukuk as an asset class.

Key Challenges and Opportunities

Challenges

• Limited adoption: Many issuers beyond renewable energy, green buildings, and sovereign entities have been hesitant to issue green sukuk.
• Lack of clarity: There is a need for clear green taxonomies to help investors and issuers identify eligible projects.
• Market maturity: The green sukuk market is still in its early stages and requires more education and awareness.

Opportunities

• Innovation: Green sukuk offers a platform for market-driven product innovation in sustainable finance.
• Global expansion: The blue sukuk (focusing on ocean-related projects) is a potential next step.
• Policy support: Initiatives like the Green Bond Grant Scheme (GBGS) and Green Technology Financing Scheme (GTFS) provide incentives for green sukuk issuance.
• Stakeholder engagement: Increased collaboration among investors, regulators, and environmental specialists is crucial for the market's growth.

Conclusion

• The green sukuk has shown tremendous progress in awareness, technical capability, and product innovation.
• The market is still evolving, and the small number of issuances limits comprehensive analysis.
• With greater policy support, clearer standards, and increased stakeholder involvement, the green sukuk could play a key role in achieving national sustainable development goals and climate action.

Key Information

• Total green sukuk issuance up to July 2020: USD6.1 billion.
• Currencies used: EUR, IDR, MYR, and USD.
• First green sukuk: Tadau Energy, MYR250 million in 2017.
• First euro-denominated green sukuk: Issued by the Islamic Development Bank (IsDB).
• Green Bond Principles (GBP) and ASEAN Green Bond Standards are used to guide green sukuk issuance.
• Impact reports are essential for transparency and investor confidence.
• External reviewers provide independent verification of the sukuk's environmental credentials.
• Green taxonomies are needed to standardize and clarify what qualifies as a green sukuk.
• Green sukuk attracts a broader investor base than green bonds, including shari'ah-compliant investors.

References

• The World Bank issued its first green bond in 2008.
• The global green bond market took off in 2014 with USD37 billion in issuance.
• The Sustainable Development Goals (SDGs) are the 17 goals outlined by the United Nations to promote global sustainability and development.

Appendices

• Glossary includes key terms such as Green Bond Principles (GBP), Green Technology Financing Scheme (GTFS), and Sustainable Development Goals (SDGs).
• Acknowledgements recognize the contributions of Marina Mardi, Mohamed Rozani bin Mohamed Osman, and Ahmad Hafiz bin Abdul Aziz, as well as external reviewers and technical guidance from the World Bank.