KUALA LUMPUR, Oct 6 — The Covid-19 pandemic had a severe impact on the global sukuk market in 2020, with green sukuk issuance falling by 44.4 per cent year-on-year (y-o-y) in the first seven months of 2020, said Khazanah Nasional Bhd independent consultant and former assistant vice-president Marina Mardi.
She said according to the World Bank Group’s October 2020 Knowledge and Research report, entitled “Pioneering the Green Sukuk: Three Years On”, the January-July 2020’s statistics mirrored the global sukuk market, which contracted by 9.1 per cent y-o-y in the first half of 2020.
“As of July 31, 2020, up to US$6.1 billion (RM25.3 billion) worth of green sukuk has been issued globally, including Indonesia, Malaysia and the United Arab Emirates,” she said during the virtual Sustainable and Inclusive Finance Forum, co-organised by Bank Negara Malaysia (BNM) and the World Bank Group here today.
The report showed that global sukuk issuance dropped sharply in March and April as the pandemic reached markets around the world, but had rebounded in May and June.
The report also cited Fitch Ratings’ expectation for global sukuk issuers to diversify their funding bases, continuing a trend in innovation in sustainable, green and hybrid sukuk.
Meanwhile, at a panel session held in conjunction with the virtual forum, Affin Hwang Asset Management Bhd fixed income head Esther Teo suggested for the government to take a proactive step by issuing green bonds or sukuk to fund ongoing infrastructure projects to encourage the issuance of green sukuk in Malaysia.
She said only a handful of green sukuk had been issued in the country, mainly involving projects such as solar energy and hydropower, adding that the government should tap into infrastructure projects by issuing green bond or sukuk for projects such as the Mass Rapid Transit (MRT).
“We know that we have a very established government guaranteed programmes for our infrastructure projects such as the MRT project. Perhaps these can be turned into green sukuk as well,” she said.
Teo said regulators in Malaysia should also provide more incentives to green bond or sukuk issuers in order to see a more diversified issuance in the country.
The World Bank Group senior financial sector specialist, Rozani Osman said the lack of awareness on green sukuk was one of the reasons for its low issuance in the country.
“When we look at green sukuk issuance in Malaysia, we can only see (that it only involves) green buildings, solar companies or one hydro company.
“We do not see the involvement of rail operators, water or waste management companies yet, although these are all ‘green’ companies,” he said.
Hence, Rozani said the development of green taxanomy — which identifies the activities or investments that deliver on environmental objectives such as the climate change and principle-based taxonomy that is currently finalised by BNM — could be useful to help Malaysia’s financial sector to classify green assets transparently and consistently.
“So that when we are moving forward, we can generate assets that are green,” he said.
AmInvestment Bank Bhd’s Capital Markets Group head Yeo Teik Leng said there is a bright prospect for green sukuk issuance in Malaysia, with government-linked companies like Tenaga Nasional Bhd (TNB) taking the lead by committing 20 per cent of its electricity to be generated via renewable energy resources by 2025.
“We are going to see more green projects in the future, be it in solar, hydro, or any other form of renewable energy,” he said. — Bernama
