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Islamic financial market plays a role in helping global decarbonisation

21/07/2022 12:11 PM

KUALA LUMPUR, July 21 (Bernama) -- The Islamic financial market is expected to play a huge role in helping the world to decarbonise via the issuances of green sukuks, says Eastspring Al-Wara’ Investments senior fund manager Chow Kim Seng.

He said Malaysia, along with the rest of ASEAN, is fast-tracking sustainable and responsible investments (SRIs) to achieve positive impacts and positive returns. 

“Its global leader status in Islamic finance will thus pave the way for the green sukuk market to flourish,” he said in a statement today.

Chow said both Shariah and environmental, social and corporate governance (ESG) investments seek to promote responsible behaviour, and as such, have overlapping principles.

“This has led to their natural pairing and triggered a growing demand for Shariah ESG solutions in Malaysia and around the globe,” he said, adding that Malaysia launched its Shariah ESG index, the FTSE 4Good Bursa Malaysia Shariah Index, in 2021.

The Nasdaq also saw its first listing of Shariah-compliant and ESG-aware exchange-traded fund in early 2022.

“The sukuk market is important for ESG, given that it has grown larger than the conventional bond market owing to the various incentives given by the Malaysian government to develop the market, including preferential tax treatment for both issuers and investors,” he said.

According to Ernst & Young Consulting, Malaysia is leading the SRI sukuk issuance among the ASEAN+6 countries, accounting for US$3.9 billion (US$1=RM4.45) or 56 per cent of the total ASEAN SRI sukuk issuance as of November 2021 on a compound annual growth rate of 278 per cent between 2016 and 2020.

He said notable issuances include the world’s first green SRI sukuk by a Malaysian company to finance the construction of large-scale solar photovoltaic power plants in 2017 and the world’s first sustainability sukuk by the government in 2021.

“This maiden issuance via a special-purpose vehicle is in line with the government’s recently launched Sustainability Development Goals Sukuk Framework,” he added.



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